Applying for business loans isn’t exactly rocket science, but it’s not a trivial matter either. There are some details about it that can be confusing or misleading. If you are planning to take out a loan and you have some questions on your mind, then look no further. Here are some of the top FAQs regarding business loans.
What is an SBA loan?
This is a loan that is backed up by the United States Small Business Administration. The lending party will approve the loan for you, and the US SBA will partially guarantee the loan. This means that if you ever fail to make payments, the US SBA will step in to cover the fees for you. Do take note, however, that it’s not easy to get an SBA guarantee. It has a lot of requirements, and only a small percentage gets approval.
Do I need collateral?
Collateral can boost your chances of approval but do take note that this is not always required, especially if your business is turning in profits. However, if your numbers aren’t consistent, then it’s better to identify an asset to become your collateral, possibly.
Are loans considered as taxable income?
The funds you receive once you get your business loan approved is not considered as taxable income. In fact, according to the IRS, as long as you have a legal responsibility to the loan, you can use the interest on the loan as a business expense.
Can a loan solve my company’s problems?
No, this is not the solution to your company’s problems. Besides, if your business is in trouble, you may have a hard time getting approved. Business loans are designed to help companies grow, not to fix their problems. Remember, the stability of the business is one of the things that lenders investigate.