An insider’s guide to getting an SBA loan

Library | 9/25/2019
By Chris Kneer
Senior Vice President
Division head, sba lending



At Valley, we talk with people every week about the benefits of a Small Business Administration (SBA) loan. In many cases, the business owners we work with have heard about SBA loans, but don’t fully understand the details associated with the program. 
We’ve discovered that many business owners have preconceived thoughts about SBA loans that are based on misconceptions created from lack of information. SBA loans are a valuable financial tool for the small business owner.
If you’ve considered an SBA loan for your business, or are just learning about the program for the first time, here are some of the common misconceptions and what you really need to know.

The SBA lends money directly to business owners

The SBA works with qualified lenders, like a bank or credit union, that lend small businesses the money. The SBA guarantees a portion of the loan, allowing the lender to assume more risk and make loans that they would approve conventionally.


SBA loans are only for purchasing inventory

Although SBA loans are commonly used to purchase inventory to start a new business, there are many other ways to use the funds. SBA loans can be used to purchase owner-occupied real estate, upgrade facilities, purchase machinery, finance payroll, and finance receivables. They can also be used for strategic business expansion, including the acquisition of a complementary business, buying out a business partner, or launching a new location.


SBA loans are only for startups

Approximately 25 to 30% of SBA loans are used to start a new venture. That means over 65% of SBA loans were used to improve or expand an existing business. In fact, many professionals take advantage of SBA loans to purchase real estate or grow their practice.


SBA loan interest rates are higher than other loans

Since the financial institution is making the loan, they are the one who sets the interest rate. The rate is reflective of the risk that the loan presents within the institutions portfolio. Although slightly higher interest rates are not uncommon, rates can be negotiated between the borrower and lender, but they are subject to SBA regulated base rates and spreads.


SBA loans take a long time

Many business owners assume that obtaining an SBA loan will take several months. Over the past few years, the SBA has made decreasing the processing time for an SBA loan a priority across the organization. They have invested in technology and modified forms to make the entire process more efficient.
As you can see there are many myths that surround the SBA lending process. SBA loans can truly make a difference in the life of a business, and securing the right SBA loan will put you well on your way to accomplishing your goals.   
If you want to learn more about Valley’s SBA loan program and their special September offer, go to