SBA Loans for Small Business.
SBA loans for small business start-up and expansion, with Mandy Kuxhausen. Mandy is an expert on Small Business Administration (SBA) lending and a Business Development Officer at TBank. We chat about everything related to SBA loans – from the different SBA lending programs available to the basics of credit worthiness – as an option for financing your business development. If you want to learn about how to get an SBA loan for your small business, this episode is for you.
Mandy is a Business Development Officer at T Bank and a expert on SBA lending. Her extensive experience with the SBA spans over 16 years and counting. Mandy’s comprehensive background in all facets of the SBA process, origination, structuring, processing, closing and credit underwriting gives her a diverse array of capabilities to pull from to get a transaction funded.
She’s a current member of the National Association of Government Guaranteed Lenders (NAGGL), a former member of the National Association of Development Companies (NADCO) and served on a local Certified Development Company’s (CDC) loan review committee.
T Bank is a nationally chartered bank headquartered in Dallas, Texas, doing business nationwide with SBA offices across the country.
Mandy and her husband currently reside in Denver, CO with her two dogs and cat.
NOTE: This is not a commitment to make a loan.
More about possible loan programs that may be offered by TBank:
Small Business Loan Programs:
These are some of the small business loan programs, including SBA backed loans, that TBank may offer.
SBA (7a) loans: The mainstay of SBA financing programs, 7a loans can be used to finance real estate construction or acquisition, refinance eligible business debt, equipment, working capital, expansion, business acquisition, inventory, etc., and intangible assets. 7a Loans may be used for startups, expansion, and business acquisition. Loan maximum is $5 million.
SBA (504) loans: 504 Loans, used to finance the construction or purchase of commercial real estate and equipment, are comprised of two loans: 1) A Bank senior mortgage of 50% to 60% Loan to Value (LTV), and 2) An SBA guaranteed Debenture in second position originated by a licensed nonprofit Certified Development Corporation (CDC). In general purpose property, the borrower may inject as little as 10% equity and the CDC lends the remainder (up to 40%). One of the benefits of the 504 program is that the Debenture is a 20 year term with the note rate fixed for the life of the loan. Pre-payment penalties apply.
USDA B&I Loans: The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry and employment and improve the economic and environmental climate in rural communities (generally, populations of 50,000 or less). This purpose is achieved by providing a guarantee for a portion of loans made by commercial banks and approved lenders. Loans may be used for owner occupied and tenant occupied real estate and for equipment.
More Information about SBA (Small Business Administration) Loans:
There are several reasons why you might consider an SBA (Small Business Administration) loan to start or expand a small business. Here are some key advantages of obtaining an SBA loan:
1. Access to Capital: SBA loans provide access to capital that may be otherwise difficult to obtain through traditional lending channels. SBA guarantees a portion of the loan, which reduces the risk for lenders and increases your chances of approval, especially if you have limited collateral or a shorter business history.
2. Favorable Terms and Lower Down Payments: SBA loans often offer more favorable terms compared to conventional loans. They typically have longer repayment terms, lower down payment requirements, and more flexible collateral requirements. This can help ease the financial burden on small business owners, especially during the startup or expansion phase.
3. Lower Interest Rates: SBA loans often come with lower interest rates compared to other types of financing, making them more affordable in the long run. The SBA sets a maximum interest rate that lenders can charge, ensuring that small business owners can access financing at reasonable rates.
4. Working Capital and Cash Flow Management: SBA loans can be used for various purposes, including working capital needs. If your business requires additional funds to manage cash flow, purchase inventory, or cover operating expenses, an SBA loan can provide the necessary capital to bridge the gap.
5. Business Expansion and Acquisitions: SBA loans can facilitate business expansion or acquisitions. If you plan to grow your existing business or acquire another business, an SBA loan can provide the financing required for the expansion or purchase, allowing you to take advantage of new opportunities.
6. Building Credit and Establishing a Relationship with a Lender: Successfully obtaining an SBA loan and repaying it on time can help establish or improve your business’s credit history. It also allows you to establish a relationship with a lender, potentially opening doors to future financing opportunities as your business grows.
7. Resources and Support: The SBA offers resources and support to small business owners beyond loan programs. They provide educational materials, counseling, and assistance through their network of Small Business Development Centers (SBDCs) and SCORE chapters. This support can help you navigate the challenges of starting or expanding your business.
It’s important to note that while SBA loans offer several advantages, the application and approval process can be more involved compared to traditional loans. There are specific eligibility criteria, documentation requirements, and regulations to comply with. It’s advisable to work closely with an SBA-approved lender or a financial advisor who can guide you through the process and help you determine if an SBA loan is the right choice for your small business.
Qualifying for an SBA (Small Business Administration) loan involves meeting certain criteria and going through a thorough application process. While it may require more effort compared to obtaining a conventional loan, the specific difficulty level can vary depending on various factors. Here are some considerations regarding the qualification process for an SBA loan:
1. Eligibility Requirements: The SBA has general eligibility requirements that must be met to qualify for their loan programs. These requirements include being a for-profit business, operating within the United States, and falling within the size standards set by the SBA for your industry.
2. Good Credit History: Like any loan, having a good credit history is important. SBA lenders typically look for a solid personal and/or business credit history. A credit score above 680 is generally considered favorable, although some programs may have more flexibility regarding credit requirements.
3. Business Plan and Financials: SBA lenders typically require a comprehensive business plan that outlines your business’s purpose, market analysis, financial projections, and repayment strategy. They also consider your business’s financial statements, tax returns, and bank statements to assess its financial stability and ability to repay the loan.
4. Collateral and Personal Guarantee: SBA loans generally require collateral to secure the loan. However, the SBA may use its loan guarantee to reduce the collateral requirements. Additionally, the SBA may require personal guarantees from business owners with a significant ownership stake.
5. Adequate Cash Flow and Debt Service Coverage: SBA lenders assess the cash flow of your business to determine its ability to meet the loan repayment obligations. They typically look for a debt service coverage ratio (DSCR) of at least 1.25, which means that your business’s cash flow should be 1.25 times higher than the loan payments.
6. Industry and Business Specific Requirements: Certain industries or types of businesses may have additional requirements or restrictions when applying for an SBA loan. For example, businesses involved in lending, gambling, or speculation may face additional scrutiny.
While the SBA loan qualification process may involve more documentation and requirements compared to traditional loans, the SBA aims to support small businesses and promote entrepreneurship. They work with a network of lenders and provide resources to assist small business owners in navigating the loan application process.
It’s advisable to consult with an SBA-approved lender or a financial advisor who can guide you through the process, help you determine your eligibility, and assist you in preparing a strong loan application. Additionally, the SBA’s website offers valuable information and resources to help you understand the requirements and increase your chances of qualifying for an SBA loan.
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