If you’re looking for funding your small business with a loan, you’ll most likely come across the term “guaranteed business loans.” People often misunderstand this term as business loans that are guaranteed to be approved. But, this is not what guaranteed business loans means. To clarify the confusion, let’s understand what the term actually means, and discuss the most popular types of guaranteed business loans. What are guaranteed business loans? In simple terms, guaranteed business loans in the world of small business loans refer to loans that are secured or backed by a guarantee. The guarantee can be in the form of collateral, deposit, or an agreement. This essentially means that the lender is guaranteed to receive their money back even if the borrower fails to pay. When we talk about guaranteed business loans, we refer to loans with a personal guarantee or, more commonly, loans guaranteed by the small business administration (SBA). Let’s take a look at both these types. Personally guaranteed business loans As you understand from the term “personal,” when you make a personal guarantee on a business loan, you essentially agree to sell your assets to pay off the loan, if your business is unable to do so. This means your lender now has the legal right to right to collect your assets to recover their losses. SBA-guaranteed business loans SBA backed loans are the most common type of guaranteed business loans. However, you must know that these loans are not directly offered by the Small Business Administration (SBA). The loans are provided by their lending partners, mostly banks, and SBA guarantees a portion of the offered loan. This is how SBA assures lenders that they will receive a large percentage of loan back, even if the borrower fails to pay. Typically, SBA guarantees a payback of up to 85% of the loan amount to the lenders. SBA offers guaranteed business loans to small businesses through a variety of programs. Of them, the most popular and common type is SBA 7(a) loans. Let’s understand more about it. SBA 7(a) Loans A person or a small business group can get SBA 7(a) loans of up to $5 million. This can be used for various business purposes, such as buying another business, renovating the office, or using it for other business-related issues. The loan term on SBA 7(a) loans are variable and depend on the way you’re planning to use the funds. According to SBA, loans for working capital or daily operations have a 7-year term; loans for new equipment purchases have 10-year terms, and loans for real estate purchases have a term of up to 25 years. The interest rates on SBA 7(a) loans primarily depends on who your lender is and your qualifications. And the good part is that the lender is not allowed to charge a rate beyond the SBA’s mentioned limit. It can take anywhere from a few weeks to months to get an SBA loan. You can visit the SBA website to check if you qualify for the loan and how to apply. Your chances of getting qualified are substantially higher if you have a strong personal and business finances.