Why should SBA lending matter to you? We sat down with Kevin Morrissey of Lewis Kappes and speaker at the upcoming program, SBA Lending: Everything You Have Ever Wanted to Know to get some exclusive information. Want to know more about SBA Lending? Register for the August 1 program here!
What makes SBA Lending different from conventional loans?
Small Business Administration (SBA) loans are different from conventional loans because the government backs the loans available through commercial lenders who follow SBA guidelines. The SBA provides a partial guarantee for the loans, which reduces the lenders’ risk. As a result, there is an increase in small business lending. SBA guidelines, set forth in the SBA’s Standard Operating Procedure, offer small business longer loan terms and lower down payments. Certain small businesses can inject as little as ten percent of the title project costs and loan terms can be as long as 25 years.
What can SBA loans be used for?
SBA loans may be used for purchasing land as part of an eligible project; purchasing, constructing or renovating buildings; improving a site (e.g. grading, streets, parking lots, landscaping); acquiring and installing fixed assets, inventory, supplies, raw materials (including work-in-progress), working capital; refinancing certain outstanding business debts; energy conservation loans and change of ownership/business acquisition.
SBA loans cannot be used for payments, distributions or loans to an associate of the applicant, a loan to an applicant for the benefit of an ineligible affiliated business, refinancing certain outstanding business debts, floorplan financing, investments in real or personal property acquired and held primarily for sale, lease or investment, payment of delinquent taxes, or to finance certain relocations of the applicant business out of a community.
How long does it take to get an SBA loan?
The length of time it takes for a borrower to get an SBA loan depends on may factors. By utilizing an experienced lender part of the SBA’s Preferred Lenders Program (PLP), the turnaround time can be substantially shortened. PLP lenders have been delegated authority from the SBA to process, close, service and liquidate most SBA guaranteed loans without prior SBA review. Other factors that may play a role include how long it takes the borrower to fill out the application, provide a business plan, generate financial statement, and provide the lender the necessary documentation to fulfill the requirements set forth in the standard operating procedures (SOP). Overall, SBA loans can take between 30 and 90 days to be approved and fund.
What is the biggest misconception about SBA loans?
A lot of small business owners do not understand that the SBA does not actually lend. Rather, the SBA provides a 50 to 90 percent guaranty of the loan extended by lenders. Another misconception by small business owners is that the SBA loan closing process requires an unreasonable amount of documentation. However, it can be very easy for applicants to provide the documentation required by the SOP if they keep thorough business records. Working with an experienced lender can also make the loan closing process much easier.
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