The Small Business Administration (SBA) has been in existence since 1953 and, as a US Government agency overseeing government funded programs, there is no wonder that there are a million different stories (myths!) surrounding this long lasting and successful government agency and its many programs!
Were you aware the SBA offers the following services?
- LENDING PROGRAMS – SBA 7(a) loans*, SBA 504 loans*
- EDUCATION/TRAINING/TECHNICAL ASSISTANCE – Score, Small Business Development Center (SBDC), US Export Centers
- FINANCIAL ASSISTANCE – Surety Bond Guarantee Program, 8(a) Program for government contract procurement, Small Business Investment Corp offering venture capital (SBIC)
As small business owners, many of these services can provide tremendous help to your company.
Does your company need a loan? Here is a breakdown of the two primary loan programs:
SBA 7(a) LOAN PROGRAM (multi programs)
- REGULAR TERM LOANS* – For all business lending needs, up to $5,000,000
- SBA EXPRESS PROGRAM* – Up to $350,000 for all business lending needs, term loan or revolving line of credit
- INTERNATIONAL TRADE LOANS – For businesses involved in international trade that have been hurt by foreign imports
- EXPORT LOANS – Short term working capital for exporting
- CAPLINES – Monitored Working Capital lines of credit, Builder’s spec, Contract and Seasonal lines of credit
- MICROLOANS – Under $50m, run through non-profits, not banks
- DISASTER LOAN PROGRAM – Loans to businesses or individuals, direct from SBA
- SBA VETERANS ADVANTAGE
SBA 504 LOAN PROGRAM* (single program)
- 20 year term financing for real estate purchase or construction
- 10 year term financing for large capital/equipment purchases
- Emphasis on job creation (1 job per $65,000 of SBA loan funds received)
Maybe you have heard these stories from people who tried to obtain an SBA loan:
“It takes forever to get approved for an SBA loan and the paperwork is a foot high!”
“SBA loans are small and only for “ma and pa” type businesses or new start-ups!”
“The SBA will want your house as collateral, along with your first born child!”
“You have to be turned down by a Bank three times before you can get an SBA loan!”
Well, since 1953, the SBA has made miraculous strides in streamlining its SBA 7(a) and SBA 504 loan programs. Required documentation has been significantly reduced and applications are now submitted electronically. Banks can be designated as a “Preferred SBA Lender”, giving that bank the authority to approve a loan on behalf of the SBA. This results in faster decisions and quicker turnaround. In addition, material legislative changes have been made to the programs through the years, especially since 2008 and the Great Recession, when President Obama instituted changes to the rules with the hope of getting loans out to help stimulate the economy. The biggest changes?…increasing the maximum size of a SBA 7(a) loan from $2,000,000 to $5,000,000 and, instituting an alternative size standard allowing Banks to lend money to much larger companies (Tangible Net Worth up to $15,000,000). Although SMALL is in the name of Small Business Administration…the size of loans allowed to be made and the size of company’s allowed to receive them are certainly not small! Most companies in our Hillsborough/Pinellas/Pasco/Manatee/Sarasota market area are eligible for SBA financing!
Prospective borrowers with strong liquid cash positions can now retain most of their liquid assets and still be eligible for SBA financing. Along with that, personal assets that may be called upon for additional collateral on a SBA loan is now limited to personal real estate holdings reflecting greater than 25% equity…and this is only when business assets are inadequate to cover the loan being requested.
What are the benefits of obtaining an SBA loan versus a conventional bank loan?
- Longer terms resulting is lower payment and improved cash flow
- Less collateral required to secure the loan
- More liberal underwriting criteria (allows financing of good will, longer terms on working assets, repayment based on projections)
- Lower cash injection required in purchase transactions, protect your liquidity
- No balloon maturities
- No prepayment penalties if loan has less than a 15 year term
- Allows the business to grow, prosper and/or get back on its feet
- Solid banking relationship established for future funding needs
- Small business can obtain a loan it would not have been able to get through typical bank channels at reasonable rates
No, you don’t need to be turned down 3 times to apply for an SBA loan! SBA lending is a viable financing opportunity for all businesses. Check out SBA.gov for more information on the SBA programs or, contact your Banker!
Please contact Diane McKelvey at firstname.lastname@example.org if you have questions about lending solutions for small businesses
*These SBA services are provided by American Momentum Bank, a Preferred SBA Lender. All loans are subject to credit approval.
© 2016 American Momentum Bank Equal Housing Lender Member FDIC