For over a decade working with business owners seeking for SBA loan we found that there is a great deal of confusion regarding the qualifications and the loan fulfillment process. Business buyers usually have a very vague idea of what is required to get SBA loan for buying a business.
Most people do not know that the loans are provided not by Small Business Administration (SBA), which is government organization, but by private banks. SBA secures these loans in case of default, thus reducing the risk of lending money to small businesses. Ideally, lenders should generate loans left and right and ask you to take their money, however, in reality the picture is quite opposite. Since Great Recession, lenders are very cautious with lending money and it definitely hurts business selling market.
So, as a business owner, what you need to know about getting an SBA loan?
In order to get an SBA loan the deal should pass four qualifications.
- Business buyer shall be a qualified borrower, i.e. good credit score, no recent bankruptcies, etc.
- Target business should generate enough profit for providing to the buyer and re-payment of the loan.
- Lender should have high level of confidence that this particular buyer will succeed after acquiring this particular business. Lender will be reviewing buyers resume looking for relevant experience. In the best scenario the buyer should have both industry and business ownership experience. One of these experiences probably would help too. Having none of relevant experience will, most likely, lead to rejection of the loan application.
- The amount of down payment should offset all risks associated with providing a loan. Theoretically, 10% down payment may be enough for the loan approval. However in reality you-re looking at 25-30%. The less qualifications comes from first three items, the higher down payment will be required.
SBA loan programs are designed by the Small Business Administration (SBA) to lend to small businesses unable to secure financing on reasonable terms through normal lending channels. The SBA loan programs are operated through private-sector lenders that provide loans which are, in turn, guaranteed by the SBA — the Agency has no funds for direct lending or grants. For further information and assistance in the SBA loan application process, contact Peach Capital Advisors at 800-722-5956_ We offer SBA sponsored loans nationwide.
The Small Business Administration is a congressional mandated to assist the nation’s small businesses in meeting their financing needs. The agency’s small business loan programs enhance the ability of lenders to provide long- and short-term business loans to small businesses that might not qualify through normal business loan channels.
There are basically four types of Small Business Administration business loan and equity investment programs available: the 504 Certified Development Company Business Loan Program, the 7(a) Business Loan Guaranty Program, the 7(m) Microloan Program, and the Small Business Investment Company Program.
Here you will find brief descriptions of the primary loan programs available for funding from the U.S. Small Business Administration (SBA). For detailed information, including qualifications, allowable uses of funds and interest rates send us an email to firstname.lastname@example.org.
Although our main focus and core product is on the SBA 504 Loan program we also arrange loans using other programs offered by The U.S. Federal Government which is the nation’s largest provider of financial assistance for small businesses!
Since 1953 the Federal Government’s Small Business Administration has helped small businesses succeed, from start-up through the many stages of growth. Many big businesses whose names are now household words — FedEx, Intel, Nike, Apple, Ben & Jerry’s, Compaq and AOL, just to name a few — received money from the Federal Government along the way.
The Right-coice 504 SBA Loan Program
This program provides long-term, fixed-rate financing to small businesses to acquire commercial real estate or machinery or equipment for expansion or modernization. Typically a 504 project includes a transaction secured from a private-sector lender with a senior lien, a loan secured from a CDC (funded by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost, and a contribution of at least 10 percent equity from the borrower.
Certified Development Companies are designed to package, sell, and service the transactions.
- 504 Interest Rates
7(a) SBA Loan Guaranty Program
In order to get a 7(a) loan, the applicant must first be eligible. Repayment ability from the cash flow of the business is a primary consideration in the SBA decision process but good character, management capability, collateral, and owner’s equity contribution are also important considerations.
One of the SBA’s primary programs, 7(a) offers loans of up to $2,000,000. (The maximum dollar amount the SBA can guaranty is generally $1 million.)
- 7a Interest Rates
SBA Loan Express
The SBA Express Program is designed to deliver lines of credit up to $350,000. In general, businesses are expected to use the funds for development or expansion of for-profit companies-businesses with credit problems or a failure to consistently earn profits and pay bills will have a difficult time gaining SBA backing for any type of lending. The SBA-like any other concern involved in business finance-is not eager to support businesses that seem unlikely to succeed.
To have access to the SBA Express loan program borrowers must first meet the qualifying criteria for an SBA loan 7a. These criteria include limits to the size of the business, which types of businesses are eligible to apply and to the use of granted funds.
Now you understand why pre-qualifying business for SBA loan doesn’t make any sense. Target business may qualify for a loan with one buyer and doesn’t qualify with another buyer. Only passing all four qualifications listed above may reasonably guarantee obtaining SBA loan.
Want to maximize your chances of getting a loan? Knowledgeable business broker should be able to help.
P.S. As always, please take a minute to leave a comment on my blog. I want it to be a conversation rather than a rant from my soapbox.
P.P.S. And don’t forget my constant reminder: we’re still lending! Call 800-722-5956/email: email@example.com/fax 877-624-4455/live chat with us on the next wealth-creating commercial property ownership loan you know about.