SBA Loans are often misunderstood. We want to clarify what they are, how they work and what they should be used for. Entrepreneurs can take advantage of SBA loans to grow their businesses. Typically SBA Loans are the cheapest long term loans available to business owners.
There are certain banks that are approved to give/write SBA loans. Sba loans are 80% guaranteed by the SBA but are approved and funded by the bank writing the loan. They are guaranteed as long as they are written within SBA Guidelines.
These loans should be used to consolidate debt, purchase a building, acquire a business, buy equipment and sometimes even to start a business. They are a great way to consolidate debt because they go out 10 years and are very cheap. They are based on the prime market rate plus 2.75% unless it’s a fixed rate loan.
SBA Loans are a great way to consolidate debt because they are cheap and go out to 10 years. This allows entrepreneurs to lower their monthly payment and interest rates which increases cash flow and saves the business owner money. The most important thing to any business is cash flow. When cash flow is high it gives the business flexibility, stability and options for growth.
An SBA loan can be used to purchase a building.When purchasing a building the minimum down payment is 10% of the loan and sometimes as high as 20%. In the case of a building purchase the bank will usually structure the loan on a 25 year term. This helps keep the monthly payment low and affordable. One of the things the bank will look at in the underwriting process is comparing the current business rent to what the loan payment will be. If the loan payment is lower or equal to the rent it helps in the approval process because the business will save money each month and own an asset(the building).
Starting a business with an SBA Loan is a little more complicated. Over the past few years I have only seen SBA approved franchises get approved and funded through the SBA. If you are opening a SBA approved franchise and have the credit, assets and meet all the other qualifications it’s a great way to start as it will keep your cost of capital and monthly payments lower. The process still takes around 30-120 days to complete.
SBA loans are based on credit, profitability and risk. In order to qualify for an SBA Loan the applicant needs a credit score of at least 680, strong business credit and have run a profitable business for at least the past 3 years(as shown on their tax returns) along with strong year to date financials. The SBA loan process usually takes 30-120 days from application to completion.
There is a beta program now with only two banks that can complete the process in 15 days. It is structured as a traditional SBA 7A(10 years and prime +2.75%) that goes off of the prior year’s top line revenue if the entrepreneur has been in business at least 2 years and has 700 credit with strong business credit. You can receive 30% of the prior years top line revenue up to $150,000. An entrepreneur can apply every 6 months for a total of $450,000 if the business revenue qualifies. This is the quickest and easiest SBA loan I have seen.
If you are interested in working with a credible company that specializes in SBA loans, Integrated Business Financing is offering a free review. Please go to https://info.integratedbusinessfinancing.com/free-business-review
Original Post by Jonathan Fodera | President
Integrated Business Financing