Should I Get an SBA Loan or Fund My Business with My Personal Savings?

SBA Loan

Starting a small business is an exciting adventure that requires determination, perseverance and, above all – money. Although it would be nice to be able to start a business based solely on ambition and determination, your new startup is guaranteed to go nowhere unless you have the appropriate funding.

Unfortunately, few lenders will fund a business if you don’t have some of your own capital or collateral to use as well. So what is the best way to pay for your new business? Should you raid your personal savings account or apply for an SBA loan?

One of the first thoughts of many new business owners (or existing ones that need funding to expand) is to dip into a personal savings account. Whether that personal account is an investment account, retirement account or a rainy day account, you are risking your personal funds for a business that may or may not succeed. Although you certainly hope it does, if it fails, you’ll be left with no business income and no personal savings to fall back on.
Funding Your Business with an SBA Loan

Instead of putting all of your own money on the line, try applying for a Small Business Administration or SBA, loan. Although the loan is not distributed directly by the SBA, it is federally backed cash disbursed by lenders partnered with the SBA. Those lenders are more likely to approve an SBA loan over a traditional business loan, because there is less risk involved with an SBA loan. The SBA encourages lenders to approve applicants who would otherwise be ineligible for a business loan – perhaps due to a lack of credit or collateral.

Keep in mind, however, that just because an SBA loan is federally backed, it does not mean you do not have to repay it if your business goes under. The federal backing is designed to protect the lender in case you default. Failing to repay an SBA loan will harm your credit in the same way defaulting on a regular loan will. Unless your loan is fully discharged in bankruptcy, you will remain legally liable for it until you have fully satisfied its terms.

For more information, go to SBA Loan at

Should I Get an SBA Loan or Fund My Business with My Personal Savings? was last modified: February 6th, 2012 by Amit Kraidman
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