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Updated: May 21st, 2021
You’re probably already familiar with SBA loans — competitively-priced loans for prime small business owners that are backed by the U.S. Small Business Administration. We think it’s a fantastic program, helping to enable the growth of thousands of worthy businesses every year.
There is, however, one small catch: the application and funding process can take quite a bit of time. And while you may be as patient as the next person, we know that time can be of the essence for business owners, who might need the money much sooner than several months down the line.
“I’ve applied for an SBA loan, but I need the capital now!” This is a lament we’ve often heard from business owners — many of whom are over the moon at the prospect of an SBA loan, but are tight on cash now.
That’s where bridge loans come in — as the name suggests, they help you bridge the gap between now and when you get the SBA money. But how do you evaluate what the best choice for your business is?
Here are three key things to keep in mind when looking for a good SBA bridge loan:
Sure, in an ideal situation you’d have unlimited access to funds — but calculate out how much you really need (and can pay off). What amount will tide you over while you go through the SBA process? Is it just $25,000 to help meet inventory demands, or is it more to the tune of $300,000 so you can sign that new lease or get the new equipment you’re eyeing? Having a strong idea of how much you need will help you narrow the scope of what lenders you should look at.
We know: yesterday would have been ideal, but when do you really need the money? If you have a looming rent payment due tomorrow, or a pipe just burst in your office, an MCA (merchant cash advance) might be the best choice. But borrower beware: cash advances can come with a hefty price tag, so it will take careful budgeting to help carry you through. If you have a little more leeway, a term loan is likely the most cost effective option.
Consider what you’re willing to pay to get this money. MCAs can get you the money fast, but that can come with a hefty price tag. And there isn’t much point in sinking all of your SBA dollars into paying back a loan with a steep cost.
In many cases, you may find that a Funding Circle small business loan is your best option. We lend with flexible terms, can get you a decision in as little as 24 hours, and our interest rates for our 6-month term (perfect for holding you over until you get your SBA!). Curious about what you may qualify for? Apply today — our application costs nothing and comes with no obligation. Not ready to apply? Learn more about SBA financing here.
Louis DeNicola is the president of LD Money Media LLC and an experienced finance writer who specializes in credit, personal finance, and small business finance. Within the small business sphere, he helps business owners understand their financing options, cash flow management, business credit, and taxes. In addition to Funding Circle, you can find his work on BlueVine, Credit Karma, Experian, Wirecutter, and Lending Tree.