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Getting Loans For Your Small Business

11/29/2018

10 Comments

 
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Starting and growing a small business in is not an easy task. As a lender dedicated to helping small businesses it is absolutely humbling to hear stories about how people have sacrificed in order to achieve their dream of owning a small business. Whether it is a retail store, new service business or manufacturing a product, each business has its unique challenges.  As most business owners know, the #1 issue small businesses face is getting access to capital.

In the United States, we have an amazing government program called The SBA (U.S. Small Business Administration) The SBA works with banks in order to provide a loan guarantee to assist banks in making certain loans to small businesses when businesses do not qualify conventionally. The SBA does not directly lend money to business owners, the SBA partners with the bank to do so.

There are two main SBA lending programs.

SBA 7(a) – This program allows small businesses to finance inventory, working capital, vehicle and equipment purchases, business acquisitions and more. An average SBA 7(a) loan term (that doesn’t rely on real estate) are up to a 10 year term with market rates typically in the 5-9% range. SBA 7(a) can also be used for real estate with terms up to 25 years.

For borrowers who are seeking loans under $350,000, the SBA has the SBA Small Loan and SBA Express program that has increased overall efficiency with less paperwork the borrower needs to fill out and quicker turnaround times.  With an average 7(a) loan amount around $350,000 this small loan program can really assist businesses get capital that they need quickly.

SBA 504 - This program is great for business owners looking to purchase large equipment or owner-occupied commercial real estate.  An average SBA 504 Loan allows the borrower to have as low as a 10% down payment which keeps more capital in the business. The SBA lender then provides the funding for 50% of the loan and a Certified Development Company (aka the SBA portion) finances 40%. The best part of this program is that the SBA/CDC portion of the loan typically has a 10 or 20 year fixed interest rate.
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When applying for SBA loans, banks still look for the 5 c’s of credit:

  • Character -Having good credit personally and for the business will always be a big deciding factor in getting a loan. It is important to check your personal credit free each year at annualcreditreport.com.
  • Capacity – Be able to show you have a financial plan or historical proof on how you plan to pay back the loan. Having multiple sources of repayment is always a plus.
  • Capital – Lenders will always look to see how much cash or equity you put into the project. There are very few 100% lending programs for businesses available.
  • Collateral – Even though the SBA can be flexible with collateral, having some collateral is still required.
  • Conditions – How you are going to use the loan funds is also important. Make sure you have a solid budget and business plan.

Original Source

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AUTHOR INFORMATION:

Paul T. Long

​VP Business Banking & SBA Lending
​Timberland Bank
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10 Comments
Linda Banks
1/2/2019 04:26:23 pm

Hello my name is Linda,i just came from inventhelp and they have made me a an information summary pack and prelimainary patentability search and opinion packet and a hard cover bookon my invention i need a loan for $3000 to get started call me 253-287-7772

Reply
Kate Welling link
3/22/2019 02:58:30 pm

It's nice to know that they look for the 5 cs of credit when applying for an SBA loan. My husband wants to start his own business. I'll let him know this so that he can start taking care of his credit before visiting a finance company.

Reply
Bargain Business Plan link
12/30/2019 04:59:01 am

You said right that Starting and growing a small business in is not an easy task. Before starting any business we should have right experience for our business. I follow your blog for long time. You share right topics. I would like to say thanks.

Reply
Zachary Tomlinson link
6/18/2020 12:48:24 am

I find it interesting to learn that there are SBA lending programs for budding businesses. My friend is interested in starting a smartwatch brand and he's curious if there's a way for him to get additional funding. I'll share this with him and recommend that he look into SBA lending programs for small businesses.

Reply
moneybrighter link
6/26/2021 05:46:10 am

Starting and growing a small business is not an easy task. As a lender dedicated to helping small businesses, it is humbling to hear stories of how people have made sacrifices to achieve their dreams of owning a small business. Whether it's a retail store, new service business, or manufacturing a product, every business has its own set of challenges.

Reply
fundingcapitaldirect link
8/27/2021 09:42:38 pm

Getting a loan for a business is a difficult process. This post helped me to learn about two types of SBA lending programs for business. It was really useful.

Reply
Tex Hooper link
4/8/2022 02:42:26 pm

I appreciate what you said about how small business need to be hyper efficient with their capital. That makes sense considering they can't just waste their loans. I'll have to get a small loan that I can pay off in 5 years to start.

Reply
small business equipment loans link
6/25/2022 11:29:24 am

nice information business loan

Reply
Finance link link
7/14/2022 07:39:48 am

I think this post proved that your are my best friend

Reply
Daniel Sebastian link
11/8/2022 08:12:14 am

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