Securing an SBA Loan
Image by thekirbster via Flickr
Securing an Small Business Administration loan is often
painted as an incredible frustrating task.
This can be true when the borrower is using a lending institution which
is not familiar with the process and has not informed the borrower of their lack
of experience. Borrowers desiring an
efficient process should always seek preferred SBA lenders or a loan broker
specializing in securing SBA loans.
The
nice thing about a loan broker is that they only get paid when they place your
loan and will shop your application nationally.
While the SBA itself does not make loans, they
guarantee up to 75 percent of a loan that a traditional lender will make under the
SBA's 7(a) program. The maximum loan amounts change periodically and your
lender can provide you with the current amounts.
As I'm sure you can appreciate, there are numerous conditions attached to SBA loans and some points to note about them which are as follows.
1. The business must demonstrate that it can
support the debt based upon prior year's tax returns (usually 3 to 4 years of
returns).
2. The buyer's required down payment can vary,
but generally is around 20% to 40% depending upon the business.
3. Almost all SBA loans will require the seller
to participate in the financing and be in second position to the bank.
4. The SBA wants to have as much security as
possible for the loan through a combination of the business' and your personal
assets including your house.
5. Loan fees are quite steep; however, the SBA will finance them over the term of the loan (how nice!). Nevertheless, the fees are generally meaningless relative to getting the financing and completing the acquisition.
For more information, click here to visit the SBA's website.
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