Why smaller SBA loans are having a moment

If you’ve considered getting an SBA loan for your small business, you probably pictured using it for one big move like buying a building, acquiring a business, funding an expansion, or purchasing equipment. While these larger loans will always be available through the SBA, a growing share of SBA lending covers financing for smaller day-to-day business needs, like working capital and inventory purchases.

We’d need a few hands to count the number of small business owners who mistakenly think that they have to put these smaller, more immediate expenses on a credit card or take out a short-term or personal loan if they don’t have the cash to cover them. In reality, SBA loans in small sizes are available, and they may better fit your needs and end up saving you money in the long run. 

Here are some stats to prove our point: over the past several years, SBA 7(a) loans between $50,000 and $500,000 have grown 86%. Half of these loans are now under $150,000 and 80% are under $500,000. At RBAC, we even offer SBA Microloans starting at just $5,000 to provide a range of funding options. 

The trick is understanding how and when to use these loans to your advantage. In this article, we’ll walk you through why smaller loans are becoming a bigger part of the lending conversation and how they can cover daily business expenses as well as fund plans for growth.

Smaller loans are growing in popularity

Smaller SBA 7(a) loans and microloans are oh-so helpful for small businesses because they offer an inflow of cash when you need it most. Of the loans offered by the SBA, smaller 7(a) loans are the fastest-growing product for a few reasons. 

• Higher interest rates over the past few years have given owners a reason to think twice before borrowing large amounts. Even though that’s reduced deal sizes, the demand for funding is still there. 
• Changes to the SBA program opened the door wider for smaller loan amounts. This is especially helpful for business owners who don’t need or don’t yet meet the criteria for a larger loan.
• More owners are building step-by-step and testing their ideas rather than saving up for one big loan and launching everything at once. 

All of these factors have created an environment that’s ideal for smaller lending, and SBA loans can be used across just about every stage of running a business.  

A small 7(a) loan or Microloan works for a range of needs

While SBA loans have traditionally been used for real estate or acquisitions, smaller loan amounts now cover many of the everyday costs required to run a business, including:

• Marketing to fund a specific push to drive immediate sales
• Smaller equipment upgrades that don’t need the scale of a 504 loan
• Inventory purchases to stock up for a busy season rather than running a tab on a credit card
• Payroll expenses to cover a slow stretch or hiring ahead of a demand
• Refinancing higher-cost debt into SBA terms for a lower payment

If any of these needs sound familiar, it’s worth looking into an SBA loan for your business. 

Why a small SBA loan deserves a second look

If you’re one of the small business owners who looked into an SBA loan once and then wrote it off as being too large for your needs, it's worth taking a second look. Rather than putting expenses on a high-interest credit card or taking out a merchant cash advance, you can get better rates and terms with an SBA loan, regardless of the loan amount. 

Because things have changed in recent years to allow more smaller-scale SBA lending, an SBA loan can step in to fill a financial gap. Though approval may take more time than other options and still depends on revenue, credit, and time in business, the paperwork has gotten faster.

This is where a lender who listens matters. When you talk to RBAC about your business needs, we’ll take time to understand your goals and how much financing is necessary to accomplish them. Then we’ll match you with the SBA options that work for your situation.

Explore small SBA loans with RBAC

A loan that’s sized just right for marketing, smaller equipment, inventory, or a combination of a few needs is a common way to use SBA programs, and the smart move is to determine what your business might need money for this quarter and start from there.

With RBAC, you can explore smaller SBA 7(a) Community Advantage loans and microloans. We’ll talk about your plans and determine which loan fits your current needs, acting as your partner as you move your business forward with the right financing. Just reach out!