As a small business owner, there will be times when you need some additional cash. Whether you're expanding into a new area or just trying to stabilize your existing business, loans are often the way to go. But what's the difference between small business loans (SBA) and conventional bank loans?

SBA Loans Are Usually Better

In most scenarios, an SBA loan is ideal. SBA loans have lower interest rates, higher amounts, and better terms. Part of an SBA loan is guaranteed by the government: it's intended to help small business owners keep their businesses open and functioning.

To underscore the difference, an SBA loan can be repaid over as much as 25 years. A conventional loan will usually max out at 5 years. This is a tremendous difference.

Since part of the loan is guaranteed by the government, the bank doesn't need to underwrite the entire thing. The less risk the bank has to take on, the lower the rate it can offer. If you can get an SBA loan, you usually should.

You May Not Qualify for an SBA Loan

With SBA loans being so ideal, why would anyone ever go for a conventional loan? Well, SBA loans do have some qualifications. For a start, your business is going to need to make more than $180,000 a year and maintain a credit score above 680.

However, it's another qualification that usually stops business owners. SBA loans are only open to businesses that have been open four years or longer. If your business is relatively new, you won't be able to get an SBA loan. Instead, you'll need to get a traditional loan to carry you through.

Still, you should keep SBA loans in your mind for the future.

Both Conventional Loans and SBA Loans Are Available Through Banks

SBA loans are subsidized by the government, but they're still given out through the same banks that conventional loans are. You can go to a bank and apply for both types of loan. A loan officer at your local bank or credit union can give you information regarding which loan type is better and which loan you'll likely be approved for.

You can get both conventional loans and SBA loans that will work well for your business; it's just a matter of looking around. Small business loans vary significantly in terms, so you may need to compare multiple loan products to find the best solution.