Small Business Adminstration (SBA) Loan Program Considerations
Specializing in 7a and 504 SBA Guaranteed Loans
If you have any questions, please contact John Coulter by telephone at (858) 350-0333 or email: jrcoulter@sbcglobal.net .
SBA loans are available for a wide range of business needs, including start up and expansion, debt refinance, commerical real estate, construction and purchase of equipment. SBA loans offer businesses many advantages over tranditional financing. Some of the highlights include 90% financing, fully amortized loans up to 25 years and competitive rates.
The American Recovery and Reinvestment Act of 2009 (Recovery Act) authorizes SBA to reduce or eliminate certain fees on 7 (a) and 504 loans. The Recovery Act also raised the guarantee on the 7 (a) loans to 90 percent.
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The Small Business Administration of the US government has set up SBA loan programs to help small businesses. These programs may offer more favorable loan terms than banks. The government aims to help businesses grow and be more profitable. In return these companies become more beneficial to our economy, and they pay more taxes. Consequently, many believe the program indirectly funds itself.
SBA real estate loans can be used to purchase, build, rehab or refinance commercial properties. While this site will limit its information to real estate loans, keep in mind that you can use SBA loans to purchase or refinance businesses and equipment, to start a business and for working capital in growing businesses.
Three key features make SBA real estate loans desirable.
- They usually require only 10% down (bank loans require 25%)
- Most loans are fully amortized (bank loans tend to have balloons payments due)
- Certain loans have rates that are fixed for 20 to 25 years (banks seldom lock for longer than 10).
If you want to put 25% down anyway, you should consider a conventional. Their lower fees will probably make them your preference.
Eligibility
The vast majority of American businesses are eligible for SBA loans. The rules on eligibility are found in a government publication know as the Lender and Development Company loan Programs. To be eligible, your business must meet standards for size, occupancy, business type and American presence. Likewise, the SBA has eligibility rules for the owners of the business and the property. Borrowers are measured financially, morally and by their residency. The SBA imposes eligibility rules on all loans. They are generally clear cut.
Qualifying
Once you pass the eligibility screen, you need to make sure you qualify. SBA rules govern eligibility, but each lender has its own rules for qualifying. Even if one SBA lender turns you down; another might say you are qualified. So don't give up too early. We help you find a lender that will say "yes!"
Two SBA Loan Programs
The SBA program offers two different types of real estate loans. While some lenders only offer one or the other program, We present both programs and an objective evaluation on the benefits and drawbacks of each. Besides being very different in structure and features, each program has its own eligibility rules.
SBA 7a Loans
These loans offer lower rates and lower payments, so they are easier to qualify for. The 7a loans are always variable, based on Prime rate plus a spread that varies from lender to lender. They only have a prepayment penalty for a very short time. They can be used to purchase, build, rehab or refinance real estate. SBA 7a loans cannot exceed $2,000,000, but by placing a 7a loan in a "piggyback" position behind a bank loan, they can finance very large purchases.
SBA 504 Loans
A borrower can use 504 loan funds to purchase or construct a building, but not to refinance one. With this program a borrower actually gets two loans: a 20 year fixed rate loan from the SBA and a fixed or variable rate loan from a bank or finance company. The SBA loan has a prepayment penalty for 10 years. SBA loans can provide 90% financing for purchases up to and slightly over $6,000,000.
Determine if your business qualifies?
Find out the loan parametesr?
See what types of propertis qualify?
We search among the dozens of SBA lenders to find the one that will offer you the best possible rate and program to meet your needs.
If you have any questions, please contact John Coulter by telephone at (858) 350-0333 or email: jrcoulter@sbcglobal.net .
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