The
validity of SBA loans an article for our LA-Times 1998- recap 11-24 Business
Challenge about SBA-loans
November
1999 – After months of review and investigation David Turkin “Talks” SBA 7-a loans which were developed to
provide small businesses a government backed guarantee so that businesses could
obtain loans for a broad scope of business purposes. These loans were designed for both new
businesses and established businesses.
It is easier for established businesses to obtain loans because they are
usually less risk and have a proven track record. One of the misconceptions is that the SBA
does not issue loans but provides a guarantee to the lending bank.
The
fees incurred related to SBA loans include two points closing costs plus other
costs that could incur such as accountant costs, business planning costs, loan
packaging fees appraisals or evaluations as well as other miscellaneous fees
that are charged prior to loan acceptance.
As a
borrower you should be aware that the SBA is going to add restrictions to the
loan which include personal guarantees, collateral, and ability to future
borrowings or indebtedness. The time
period for approval can be lengthy since your request has to be approved by the
bank or lender as well as the SBA. Like
any loan request, past credit history (usually FICA Score of 700+), past
performance of debt coverage of at least 1.2 times. If you are acquiring a business or starting a
business the rule of thumb is a minimum capital injection of 30-35% of the loan
amount. Any person that has more than
20% equity in the business must be disclosed and will have to provide financial
information, collateral and guarantee the loan.
If the business defaults the bank and SBA will go after the collateral.
I do
not recommend SBA guaranteed loans to my clients specifically because of the
restrictions involved, the necessary collateral requirements, costs involved,
covenants and restrictions on both the business and personally. The process can take months and months and
months for the approval and funding.
Business
owners and business people are looking for results, they may not need immediate
results but still waiting in excess of 30 days+ is the kiss of death to many
fast moving deals. Conventional and unconventional loans for most business
people have a timeline attached to them. Our clients come to us with specific
goals and outcomes and asking them to wait weeks can be a challenge so asking
them to wait months is near impossible. Our resource library for lending
institutions is large and we can in most cases give our clients a realistic
funding date and if that date is not met it is usually something our client is
missing at the moment and not the institution.
We
assist all our clients with either preparing their loan package for their bank
or preparing their loan package and presenting it to our lenders. We get the
job done, call us if you are seeking funds to purchase a business, expand your
current business, build your inventory or update your equipment. We can secure
realistic funding for most all your business needs and we are always
accessible. Call David
Turkin 800 490-8362
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