The Small Business Administration (SBA) is a government agency that helps small business owners through counseling, capital, and contracting expertise in their pursuit of starting and advancing their own businesses. The SBA can help provide capital to these small businesses through SBA-backed loans, making it easier for small businesses to get the funding they need. The SBA does not require small businesses to have insurance in order to get a loan, but many lenders will require it.
What is an SBA Loan?
SBA loans are Small Business Association-backed loans aimed at helping small business owners get the funding they need for their businesses. There are a few types of SBA loans, including:
- 7(a) Loans: consisting of a series of loans aimed at guaranteeing portions of the total amount, capping rates, and limiting fees.
- 504 Loans: longer-term with fixed rates to help the business finance or repair assets.
- Microloans: smallest loan program providing $50,000 or less to help small businesses start up and expand operations.
What are the Benefits of SBA Loans?
SBA loans generally carry competitive rates and fees – without the need for collateral – which is appealing for small business owners. Additionally, some SBA loans come packaged with counseling and support to help your small business operate effectively. you start and run your business.
Eligibility requirements
SBA loans have some eligibility requirements that small business owners should be aware of. For example, to be eligible for an SBA loan, the business must:
- Operate for profit
- Do business in the U.S.
- Have reasonable owner equity to invest
- Use alternative financial resources before seeking financial assistance from the SBA
What Types of Insurance Do Lenders Typically Require for an SBA Loan?
While having insurance is not required by the SBA to get an SBA loan, some of the lenders will require it. Some lenders will ask that you have hazard insurance, also known as business property or commercial property insurance. There are also other types of business insurance the lender may recommend a small business owner carries, including:
- Commercial property insurance: helps cover damage to business property, such as equipment, inventory, or the building itself.
- General liability insurance: can help cover damages caused to third parties, such as customers or employees.
- Professional liability insurance: helps cover damages that are caused by the negligence of a business or their employees.
- Workers’ compensation insurance: covers medical expenses and lost wages for employees who are injured on the job.
Do You Need Small Business Insurance to get an SBA loan?
As mentioned earlier, the SBA does not require small businesses to have insurance in order to get a loan. However, many lenders will require it. If you are applying for an SBA loan, it is important to check with the lender to see what their insurance requirements are.
Even if the lender does not require insurance, it is still a good idea to have it. Insurance can help to protect your business from financial losses in the event of a claim, and it can also give you peace of mind knowing that you are covered.
Where Should I Get Small Business Insurance
We recommend working with a licensed insurance agent to help find the right small business insurance. At BuyLiability.com, we’ve developed reviews to help point you in the direction of insurance providers that can help.
Check out our recommended small business insurance providers today!
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