Rob P
Owner/CTO of Boulder Valley Computer Services. Visual Object Modelers and The Computer Geekz
SBA Loans
Have any of you tried to get an SBA loan (< $250K) to start or acquire a small business? I've heard its long, costly, painful and little chance of success. Please share your thoughts, suggestions, recommendations, etc. In case it matters, I'm in the Denver/Boulder, CO area.
Good Answers (4)
Leni S
Artist and Lighting Designer: Transforming Urban Environments with Light
Best Answers in: Government Contracts (1), Government Services (1), Business Development (1), Professional Networking (1), Small Business (1)
I am looking into SBA loans for working capital and for a new venture- I had not expected the forms to be as difficult as the answers here suggest. But in case it helps here is a direct quote from a banker on qualifications and costs:
The Fee structure for a $250,000 credit line will be:
1. $250 origination or renew fee, this will be incurred every three years.
2. $3750 SBA guarantee fee will be incurred every 6-year ($625/year or 0.25% per year)
3. The payment will be interest only and will be $1458/month @ Prime +2% assume prime stay at 5%
4. Owner's personal guarantee is required.
5. if the business has a growth trend, then less collateral will be needed. Otherwise, owner's personal assets may need to be pledged.
6. 20% of Account Receivable with less than 90 days can be used as collateral. In additional, equipment or inventory can be used as collateral as well.
Regards to your company's new venture, it can go thru SBA route as well:
1. Must be for-profit entity
2. Have 3 years projection
3. Have owners' personal guarantee and company's inventory, A/R, equipment as collateral.
Good luck!
Leni
Aric R
Experienced multi-branch executive with entrepreurial background specializing in business growth consulting
Best Answers in: Small Business (12), Customer Relationship Management (2), Risk Management (1), Business Development (1), Lead Generation (1), Sales Techniques (1)
Yes, I've had 2 SBA loans, together about $250K, to fund new coffeehouses.
The first was for a new startup and the 2nd was for a business expansion to open a second location. There is a lot of paperwork - I mean, a LOT. The first loan had to be with collateral (my house, gulp), but the process was smooth, took about 2 months and the rates were competitive through a local bank that did a lot of SBA lending.
The second loan was able to be collateralized on the equipment of the first location, still a lot of paperwork though.
There is no reason why you won't find success using the SBA process if: you have collateral and a thought-out business plan.
Good luck,
--aric
Susan O
Banker
Best Answers in: Professional Networking (4), Using LinkedIn (4), Public Relations (3), Mentoring (1), Personnel Policies (1), Sales Techniques (1), Organizational Development (1), Wealth Management (1), Starting Up (1)
Work with a local bank that is listed as an SBA Preferred lender. That title signifies the bank makes the initial credit decision which speeds up the process considerably.
It can be lengthy depending on whether you are purchasing commercial real estate or not.
You will need a business plan to accompany your loan request. If you are acquiring a business which is a franchise, look them up on the Franchise Registry (link below) to see if they are already SBA approved. That will also speed up the process.
Good luck in your new venture!
Susan
Links:
I have obtained an SBA loan and I heard the same horror story.
In my case it was not really difficult or true.
The hardest part of the paperwork was the writing my business plan and developing financials. I think any company should have these documents anyway. You will need two years of tax returns, a brief bio, a personal financial statement and other items that are not difficult to get.
There are three SBA types of loans, the SBA Express program for loans of $350,000 or less and a repayment schedule of seven years, the regualr SBA loan which is upto $2,000,000 and can be repaid in ten years and the SBA 504 program which is for loans with realestate and a repayemnt scheduel upton 25 years. All of these loans can be fixed or variable rates.
The governemnt regualtes the fees which banks can charge. There are also SBA "packagers" who can help you assemble the documents but will change you a fee.
Banks love SBA laons because the government guarentees the loan to the bank. Therefore there is little risk. With the express program, the governemnt guarentees 50% of the laon to the bank, with the regualr program, the governemnt guarentees 75 to 85% to the bank. I am not sure of the 504 guarentee. Because of this guarentee it, "beat up" the bank to obtain the best rate possible. This is where the banks make their money.
Colorado Business Bank is a great local institution and you should start with them.
Another resource which chould be helpful is SCORE which is the Society of Retired Business Executivies.
Please feel free to shoot me an e-mail if you have more questions. It really in not as difficult or time consuming as you may have heard.
