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#1 - Benefits of SBA Borrowing
§ The 2009 National Recovery Act provides lenders a 90% Government Guarantee and temporarily eliminates the government loan fees (used to be upwards of 3%)
§ Reduces lenders' risk, making them more likely to approve a small business loan application
§ Provides a longer loan term/maturity, with all SBA loans fully amortized (no balloon payment).
#2 - Types of SBA Loans:
SBA 7a Loan
§ Permanent working capital
§ Business expansion & acquisition
§ Real Estate
§ Business debt refinance / consolidation
SBA Express Lines of Credit
§ Short term working capital for receivables, seasonality
§ Extended maturity without an annual renewal
SBA 504 for real estate & equipment purchases
§ CDC provide 20 year fixed second on 40% loan to value
SBA offers a variable option for businesses that have experienced a cash flow 'hiccup' in the previous fiscal year. Some of the things they look at in this scenario are:
§ Organization must demonstrate that adjustments have been made to stabilize the business such as reducing expenses and leveling off and/or increasing sales
§ Company can provide a business plan and projections supporting continued stability and positive trends
§ Bank looks at company's three year track record to determine previous stability in performance
#3 - Be Prepared When Going to the Bank
§ Complete application thoroughly and provide all requested documentation upon submittal
§ Have financial reports that are accurate and well prepared.
§ Ensure that your projections and business plan assumptions are well supported.
§ Disclose derogatory credit information if it exists before the bank finds it when running a credit report.
§ Have a clear purpose of what the funds will be used for and how they will be paid back.
§ Don't make your request at the last hour - plan ahead and figure about 4 weeks before you will actually get funded.
#4 - Benefits of working with a Community Bank
§ They are more inclined to want to build a relationship than merely treat you like a bank account number.
§ You will interface with the decision makers vs. some person 'behind the curtain.'
§ They tend to give broader consideration to collateral and cash flow sources from guarantors and provide more favorable terms, rates and fees than larger banks.
If you would like some help preparing a package for your bank, feel free to call me - this is one of the services I provide my clients.
Vicki:415-884-0288
NOTE: much of the above information on SBA borrowing was provided by John Connelly of Circle Bank. Thank you John!
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