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SBA’s Guaranteed Loan Program Advantages and Disadvantages



What are the advantages of the SBA’s Guaranteed Loan Program?

Some prominent advantages of the Guaranteed Loan Program are:

  • SBA loans generally have longer term which ultimately means lower payments.
  • Lower payments allow a business to retain and utilize more working capital, which is essential for a growing business.
  • There are no prepayment penalties on SBA loans and all SBA loans are fully amortized.
  • Businesses will not be impacted with renewal fees, interim appraisal costs or untimely balloon payments.
  • Banks and other lenders are more willing to finance risky ventures because of SBA’s guarantee program.



What are the disadvantages of the SBA’s Guaranteed Loan Program?

Some prominent disadvantages of the Guaranteed Loan Program are:

  • Some lenders include additional requirements than those used by commercial banks.
  • Businesses that borrow loans backed by the SBA may have to pay slightly higher interest rates during repayment.
  • The application and approval process may take longer than a direct bank loan (without SBA guarantee), which might lead to critical business losses and missed opportunities.