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What is SBA lending?
SBA (Small Business Administration) loans were developed to provide financing to applicants who demonstrate repayment ability but lack adequate collateral to fully repay the loan, thereby excluding them from conventional commercial financing provided by banks. SBA lending is financing for businesses that are operated by their owners. A small business is generally defined as a business that grosses up to $6,000,000 annually.
There are eligibility requirements for SBA loans, but they are generally common sense, for instance, the business must be for-profit, located in continental US, not promoting a religion or political agenda, nothing controversial like topless bars or gambling joints or pyramid schemes. The owners must be here legally, not in jail or going to jail, not in the middle of lawsuit, or bankruptcy. Can't have defaulted or be in arrears on any government backed loan, for instance student loans. The business must generate cash flow. Speculative or Passive Income businesses are not eligible (example: self storage units, shopping centers, flea markets, oil wild catting, etc.)
There are two general categories of SBA lending, 7a and 504. 504 loans are cooperatively provided by a CDC (Certified Development Company) and a lender. CDC's are appointed by SBA and usually operate within a designated geographic region. The lender in a 504 transaction can be any lending institution who agrees to participate in the transaction. The 504 program was designed to encourage banks to participate in SBA lending, however its best to stick with lenders who are familiar with SBA programs and their requirements. 504 loans can be used for purchase of commercial real estate, construction or renovation, and purchase of equipment. When it comes to 504 loans, think big and long term, these are fairly complicated loans which make sense for long term financing of permanent assets. Most common use of 504 is for hotel start-up or purchase, or the purchase or construction of commercial real estate. Loan terms are usually 20-30 years, fixed rates are most common.
7a General program loans - SBA authorizes certain lenders to offer these loans. 7a loans can be used for most business needs:
Purchase of real estate, equipment, furniture, fixtures, inventory
Franchise fees, working capital, . . .
Ground up construction, renovation, leasehold improvements
Business acquisitions, start-ups, expansions
Refinance of business debt
Loan term is based on use of proceeds. Rates are based on use of proceeds, industry, and strength of credit. Terms up to 25 years. These loans are generally longer term than conventional financing. There are no balloons or calls. Loans are fully amortized. Unlike many companies who avoid or shy away from from SBA 7a loans we actively look for them.
Not all SBA lenders are created equal! Most will try to have as much collateral as they can and as little of the $ the borrower would need or want. Fax us any term sheet on what you are being offered and we will prepare a proposal and let you compare theirs against ours. We attend to the needs and goals of the client and the following 3 examples illustrate what I mean:
Example 1 - Our client was out of pocket $130K. He was previously told that they needed to bring $270K into the project.
Example 2 - The proposal from another lender was $550K cash injection into the project. We closed the loan with $135K cash injection.
Example 3 - The client had a proposal which required $382K cash injection into the project. We got the job done with $200K.
Prime rate is currently at 5.00% (May 22, 2008) It was 8.25% a year ago (April 27, 2007). A 3.25% drop in rate in 1 year. SBA loans are Prime based. Good to go with an SBA loan?!
NEED MONEY TO:
Purchase or start a business?
Restructure your business's financial standing?
Make capital improvements? Do renovations? Buy new equipment?
Pay off bills? Pay off liens? Need working capital?
You have a partner that wants to be bought out?
Currently leasing? Are you on land-contract? Why not buy it for practically the same monthly payment if not lower?
Aren't You Curious What Business Loan Terms We Could Offer You?
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The following are samples of many SBA programs:
- SBA Financing Highlights
- SBA Commercial Real Estate Loans - Purchase, Refinance, Construction/Perm, Expansion, Renovation
- SBA 100% Financing - Real Estate Acquisition or Refinance
- SBA 7a 100% Financing for Real Estate Purchase, Existing Businesses, Multi-Use Properties Only
- SBA Hotel Financing Programs
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