What Are SBA Loans For An E-Commerce Business?

An SBA loan can be your best bet to secure the funding that you need to grow your e-commerce business. But it all depends on your business objectives.

You need to understand that not all e-commerce companies can qualify for this, and the application process is challenging for short-term goals. Under this guide, you can learn more about SBA loans and how they work.

What do you mean by SBA loans?

Once you know what is e-commerce funding, you can decide if you want to go for SBA loans or not.

SBA loans are basically loan programs that the Small Business Administration banks. They offer the business owners the capital that they need, and they cannot get otherwise. They are basically used for buying equipment, startup expenses, and working capital requirements. These loans can provide you with a lower interest rate capital. SBA loans are also offered through SBA-approved lenders like banks and credit unions, besides online lenders.

How can you qualify for the SBA loan?

If you want to be eligible for an SBA loan, you have to meet some eligibility criteria, which are mentioned here

Your company must have at most 500 employees.
Your company should be in operation for around 20 years.
Your business should have an excellent credit history, and there should be no dues from the past of at least 90 days.
The SBA loans must require you to provide some type of collateral in most cases.

Different types of SBA loans available for e-commerce

The SBA offers different programs, especially for e-commerce businesses. SBA cap lines and SBA export working capital programs are the two essential programs available under SBA loans. The SBA cap line program helps you to get access to $5 million in terms of lines of credit so that you can get the working capital required over a given timeline. SBA loans can be used through this program for a given timeline, and you can use it for buying inventory besides accounts receivable purchases and other expenses.

At the same time, the SBA export working capital program is here to help your company if you are into exporting goods or services. They can help you to increase your international sales. They provide you with access to a low-interest rate loan and extended repayment term as compared to the typical finance options.

7A loans by SBA

These loans are entirely different from PPP loans as they are specially designed to help you acquire the type of capital that your huge companies get from the banks. The majority of lenders ignore small businesses when it comes to lending because they feel that it is risky and also a lower loan amount is involved. But that is not the case with 7A loans, as they are guaranteed by SBA. It encourages the lender to approve all types of loans. 7A loans are different from PPP loans, and they require you to go through a strict application process. The interest rate and the terms depend on the e-commerce business you run, besides the loan amount that you are seeking.

Uses of 7A loans

7A loans allow for a vast range of uses that includes refinancing your existing debt or buying another business. E-commerce businesses can receive a 7A loan to cover the working capital, which has a loan maturity of around seven years. It means that you have about seven years to repay the loan. The loan maturity, which goes below seven years, and the interest rates for standard 7 A include 4.25% for loan amounts below $25,000. If the loan amount is from $25,000 to $50,000, then the interest will be around 3.25%. Lastly, if the loan amount is more than$50,000, then the claim will be about 2.25%.

To assist e-commerce business owners, there are different types of SBA loans. Additionally, there are micro-loans that you can seek to establish a new business that generally requires capital amounts of less than $50,000.

If you have excellent credit and a solid business plan, you are running for the SBA micro loan. Interest rates for these micro-loans are likely to vary, but they basically fall anywhere between 8% to 13%, and the repayment term is around six years.