SBA Loans – Are they worth the effort?

There are lots of things to like---SBAs offer:

1.????Competitive interest rates

2.????Long Terms

3.????Higher approvals than bank loans based on partial government guarantee

The problem, however, is that they have a bad reputation as being:

1.????Burdensome with documentation

2.????Confusing with process

3.????Slow to be approved and slower to be funded

I often hear about the problems from my clients when I suggest an SBA loan for either debt consolidation, working capital, equipment purchases, or other business expenses.?Many business owners have war stories about difficulties they had in the past applying for SBA 7a loans and the thought of trying again seems daunting.

I believe in this financial product because it is one of the few mainstream funding vehicles that small businesses can utilize to avoid the high interest rates in the alternative lending market.?Small businesses with high MCA debt (some with rates above 100%) or other high-interest obligations would be wise to consolidate these debts with an SBA loan.?Businesses that have equipment needs and working capital needs will also benefit.

I transitioned into small business finance from higher education where I spent years reading financial regulations and completing highly complex financial aid forms.?As a result, I wasn’t so impressed with the complexity of the documentation and pdf forms required for an SBA.?This enables me to help my clients understand the required documentation, complete the numerous forms, and get a quick “Yes” or “no” on their applications.

Being approved for an SBA loan, however, is more than merely submitting the documentation---it depends to a great extent on profitability.??As such, companies must demonstrate that either they:

1.????are currently running at a profit.

2.????would be profitable with a lower interest expense upon consolidation.

3.????have a clearly documented path to profitability.

One client owed about $300K in MCA debt and needed to purchase $75K in equipment.?Their MCA payments were $50,000 monthly and their monthly quote for their equipment finance was $2,000.?????The prospect of paying $52,000 monthly between these two items was clearly unaffordable.?They were approved for a $425K SBA loan with monthly payments of just $5,600---a savings of $46,400K that came with a bonus of $50K in fresh working capital.

It's time to file your SBA war stories away as ancient history.?I recommend that you give the SBA 7a program a fresh look.?I’d be happy to help.