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