That's right, major improvements to the Small Business Administration loan programs have been recently announced. Two of the most important changes:
- The SBA will increase it's guarantee to 90% on certain loans, reducing lender risk. What this means is that lenders will be more likely to approve SBA applications than they were just a few weeks ago.
- The SBA is waiving the guarantee fees for all SBA 7(a) loans with maturities exceeding 12 months. This is big.....SBA fees range from 2% to 3.75% of the guaranteed portion of the loan. So while the SBA interest rate is usually acceptable, the SBA fees, on top of the lender's fees, are expensive. Think of this as a one-time sale on SBA financing!
So if you're worried about your company's financing or maybe you were recently turned down, it's a good time to take another look at SBA financing.
Frequently Asked Questions:
1. Why SBA? With the current economic recession and increasing bank capital and regulatory pressure, SBA financing has become one of the strongest remaining sources of financing for small businesses. Loans that would otherwise be turned down under traditional lender guidelines may qualify under the frequently more lenient SBA loan guidelines. SBA loan programs also allow longer terms....an important factor in today's uncertain economy.
2. Who offers SBA financing? Many local banks and financial institutions participate in the SBA lending programs.
3. How do I begin? You should begin by determining what your short and medium-term financing needs are. A cash flow projection which can be stress-tested under different scenarios is a good place to start. Once you know what your financing requirements are, it's time to approach the appropriate lender. You need to be ready to prepare a full application package (streamlined SBA loan programs are available in certain limited instances) including a business plan and financial projections (while the SBA lending guidelines may be more lenient, the documentation standards are generally higher than with traditional bank financing).
4. Is there any help? Glad you asked! At Ghirardo CPA we specialize in SBA financing for our clients. If you need help calculating your financing needs, selecting the appropriate lending source, preparing/presenting your application package or negotiating the rates and fees, we have experienced professionals ready to help. Contact our Director of Business Consulting, Paul Breimayer at 415-408-5021 for more information.