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Showing posts with label Debt Refinancing. Show all posts
Showing posts with label Debt Refinancing. Show all posts

Wednesday, March 10, 2021

SBA Loan Programs & Which One Is Best for You

The 2020 pandemic has greatly affected small businesses across America. As entrepreneurs prepare for the 2020 holiday season, they may need assistance for inventory, marketing, and more. The Small Business Administration (SBA) can help during these trying times.

Congress created the SBA in 1953 to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.”

Today, SBA loan programs are more important than ever to prop up small businesses in all areas. Specialized programs have been put in place for women, minorities, and veterans. SBA also provides loans to victims of natural disasters like flooding and wildfires along with specialized help in international trade. The government agency is looking out for business owners during the 2020 pandemic.

While the words “government agency” might make you balk, the Small Business Administration’s low-cost loan programs are helping small business owners across America reach their entrepreneurial dreams. Here’s what’s available, who qualifies, and how they work.

The CDC/504 Loan Program
This program is described by the SBA as a win-win-win for the small business, the community, and participating lenders. The CDC/504 Certified Development Company Loan program conserves your working capital by requiring only a 10 percent borrower contribution. If you do not qualify for conventional financing, the SBA-backed 504 loan may be right for you.

Certified Development Companies (CDCs) are nonprofit corporations that promote economic development within their communities.

The SBA authorizes CDCs to provide financing to small businesses with the help of third-party lenders (typically banks) 504 loans.

Maximum SBA loan amount: The maximum SBA loan amount for 504 SBA loans is capped at $5 million. Certain eligible energy-efficient or manufacturing projects may qualify for more than one 504 loan up to $5.5 million each. Interest rate
Below-market interest rates are fixed for the life of the loan. The SBA sets the maximum interest banks can charge on CDC/504 loans. As of August 2020, 20 and 25-year interest rates at 2.214% and 2.269%, respectively.

Required equity
A low down payment (10 percent in most cases) conserves your working capital.

10, 20 or 25 year terms. The longer the terms, the lower monthly payments will be.

Use of proceeds
Long-term, fixed assets for expansion or modernization (usually real estate or large equipment). Refinancing of large equipment and/or owner-occupied commercial real estate may also be possible.

The CDC/504 Loan Program: How It Works
The 504 Loan Program was created to give small businesses low cost funds for expansion or modernization.

Typically, up to 50% of project costs are funded by a lender backed by the SBA. CDCs (Community Development Corporations) typically fund up to 40% of the project cost. The final 10% is a cash down payment expected to come from the borrower.

SmartBiz Loans does not offer SBA 504 loans but banks in the SmartBiz network fund SBA 7(a) loans, Bank Term Loans, and more financing options.

Who are 504 Loans For?
A 504 SBA loan might be a good fit for small business owners interested in purchasing a commercial real estate property and if their unique business circumstances fit with the public policy goals of your local CDC.

Minimum 504 Loan Requirements
Your business must be for profit, you’ll need to present a comprehensive business plan and relevant management expertise is required. Additionally, you must meet the following conditions:

Operate your business in the United States or its territories. The business net worth must be less than 15 million dollars Your business must have an average net income less than $5 million You must have the ability to repay the loan on time based on cash flow

The Microloan Program
The Microloan Program is for very small businesses, including start-ups and provides loans of up to $50,000. (Although SmartBiz Loans does not offer microloans, we do offer SBA 7(a) loans from $30,000.)

Microloan Amounts
Borrowers can apply for up to $50,000 with the average loan size funded by the SBA just $14,215 in 2016.

Microloan Interest Rates
Microloans have interest rates between 8%-13% and must be fixed rate and fixed term with regularly scheduled payments.

Generally, intermediaries require some type of collateral as well as the personal guarantee of the business owner.

Loan repayment terms vary according to several factors:

Loan amount Planned use of funds Requirements determined by the intermediary lender Needs of the small business borrower The maximum repayment term allowed for an SBA microloan is six years.

Use of Proceeds
Proceeds from an SBA Microloan can be used for most business expenses such as:

Working capital Inventory or supplies Furniture or fixtures Machinery or equipment

You cannot use a SBA microloan to refinance existing debt or to purchase real estate. If you need to refinance debt or purchase real estate, you should consider other SBA loan programs, such as a 7(a) commercial real estate loan.

How It Works
An SBA Microloan is a loan of up to $50,000 from an intermediary nonprofit to the owner of a small business or startup. The money originates from the SBA, which initially lends the money at a discounted rate to the intermediary. In other words, there’s a multi-step process.

Who Are Microloans For?
These small loans help small business owners who need less than $50,000 to strengthen and grow their business.

Microloan requirements
Check with your individual lender as requirements can vary. In general:

Credit score of at least 640 is required.
The business owner will need to either put up collateral or sign a personal guarantee.

SBA 7(a) loans
An SBA 7(a) loan is generally known as the “gold standard” in small business funding because of low rates, long terms, and very low monthly payments.

Minimum amount
Banks in the SmartBiz network fund SBA 7(a) loans from $30,000 - $5 million

Interest rate
Interest rates are variable and range from 4.75% - 7.00%

A lien on business assets is required for SBA loans, but there is no minimum requirement for the value of those assets.

The term for an SBA 7(a) working capital loan is 10 years with low monthly payments. The term for an SBA 7(a) commercial real estate loan for purchase or refinance is 25 years with no balloon payment.

Use of proceeds
A big draw of SBA 7(a) loans is the wide use of proceeds. These include:

Debt refinancing
Working capital (includes operational expenses, marketing, hiring, etc. SBA loans can be used to fund new equipment purchases as well) SBA Commercial Real Estate loans from $500,000 – $5 million from banks in the SmartBiz network can be used for the purchase or refinance of commercial real estate that is 51% owner-occupied.

How it works
Here’s the application process for SBA 7(a) loans from banks in the SmartBiz network” We get to know you and your business Complete one online loan application through our advanced technology platform. No faxing or printing required. Discover if you’re pre-qualified in about 5 minutes with no impact on your credit score.* We help you understand your options

Once you pre-qualify, you are assigned to a team of dedicated professionals who help you every step of the way. Your team helps answer your questions and walks you through the loan application process. Receive recommendations for the best financing options based on your unique business credit and financial profile. We match you with the best lender

Using our sophisticated technology platform and experience, we match you with the banks or non-bank lenders most likely to approve your loan application. Your dedicated SmartBiz team helps you stay on track throughout the financing process. About 90% of the applications referred to our trusted network are approved.

We stay with you We’re here to help you finance your business today and tomorrow. SmartBiz Advisor*, our free online tool, helps you make sure your business is well positioned to apply for future financing when you need it.

Use SmartBiz Advisor to monitor the overall financial health of your business and get a Loan Ready Score with actionable insights to help improve your standing when needed.

Who SBA 7(a) loans are for SBA loans are good for established small business owners wanting to shore up finances or expand with new inventory, additional products, or another location.

7(a) loan requirements
Following are requirement from banks in the SmartBiz network. Note that a business plan is not required.

2+ years in business Business owners must be U.S. citizens or legal permanent residents Business owners’ personal credit score above 650 (675 for SBA 7(a) commercial real estate loans) Business and personal cash flow to service all debt payments demonstrated by tax returns and interim financial data No bankruptcies or foreclosures in the last 3 years No outstanding tax liens No delinquencies and/or default on government loans Real estate must be majority owner-occupied

SBA Loans: The Bottom Line From keeping up with your seasonal payroll increase to getting money to grow your business, there are a lot of good reasons to get financing. Small businesses serve as the backbone of the U.S. economy and SBA loans provide the low cost funds that hard working entrepreneurs deserve.

*We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.

SmartBiz - SBA Loans Made Easy - Up To $5,000,000, 4.75 - 7%! SBA, PPP, Term Loans, Grow Your Business. Refinance Business Debt. Hire Employees. Buy Inventory and More. Prequalify online in 5 minutes! Click Here To Apply!

Thursday, December 20, 2018

10 Must-Ask Questions Before Getting an SBA Loan With Your Bank

If you are set on working with your local bank, here is a set of 10 questions from industry insiders that you must ask your bank before committing to the SBA loan application process with them:

1.What percentage of applicants get a loan after starting the application process with you?

2.How many other businesses have you had experience working with in the industry I am pursuing?

3.Are you the one who makes the final loan approval decision? If not, can I get a pre-qualification directly from a credit decision maker?

4.How many SBA loans have you personally closed and funded?

5.Can you give me some recent referrals of clients you worked with?

6.What was the bank’s SBA loan volume in the last SBA fiscal year?What is the bank’s average SBA loan size?

7.How can I be sure that I get the best terms possible if I only submit my loan to you?

8.Do you do a hard-pull of my credit score for pre-qualifications? When is the hard pull done?

9.Will I have “restrictive covenants” in my loan agreement and will I be required to have my business deposit accounts at your bank? Will I be required to have personal accounts with your bank?

10.Will I be able to keep my business credit card accounts open?

YourSBA.com vs Your Bank

Why are we 5x more successful than your local bank?

YourSBA.com was founded to tackle some of the toughest challenges that come with trying to get SBA financing through a bank: piles of paperwork, vague answers, false promises, and lengthy waits, only to find out you won’t be getting the loan you were initially promised and pre-qualified for. At YourSBA.com, we have made significant changes that allow us to be over 95% successful in securing our clients’ loans, compared to the 15% success rate of a bank.

We discussed in detail the difference between applying for an SBA loan with your loan bank compared to applying with YourSBA.com, but here is a brief summary:

•A typical bank has about a 15% success rate after initial pre-qualification for a number of reasons:•banks freely give out pre-qualifications in order to get you off the streets,

•the person issuing the pre-qualification is not the credit decision maker,

•banks have very limited credit boxes,

•and banks leave it to you to prepare your application and convince them to lend to you.

•In contrast, YourSBA.com has made a number of changes that allow us to be nearly 100% successful in securing our clients’ loans after initial pre-qualification:•we only pre-qualify something if we are very confident in our ability to get it done,

•we only work directly with credit decision makers,

•we have partnerships and access to many different credit boxes,

•and we spend a lot of time elegantly preparing your application.


YourSBA.com offers a suite of loan calculators for SBA loans and other funding sources here. You can automatically estimate your down payment requirement, monthly loan payments, SBA borrowing limit, and more.

See if you qualify for an SBA loan by taking just a few minutes to give us some basic information here. The pre-approval process takes less than one day and does not require a hard credit pull.