The Time is Right for SBA Financing

By now everyone has heard that the Fed cut its basic Federal Funds Rate by a half-point on September 18th.? Banks followed suit on September 19th and reduced their prime rate by the same half-point.? The rate that small businesses pay on SBA loans is built from the prime rate (typically prime + 2 or 3 points), so SBA rates came down as well.? The Forbes Advisor made this point in a recent issue:

“Anything indexed to prime, such as SBA 7A loans, will see a near-immediate adjustment in interest rate. For existing borrowers with variable-rate loans, that would likely be reflected on their next billing statement.” Forbes Advisor – September, 2024

Given the general view that this is the first of a series of cuts, small business owners should consider moving to variable rate financing like SBA 7A loans for any of the following needs:

·????? Working Capital - Obtain funds for either short-term working capital for day-to-day operations or long-term capital for growth.???????????

·????? Equipment/machinery - SBA loans can be used to buy machinery, equipment, furnishings, fixtures, and supplies.

·????? Debt Refinance - Pay off high-cost debts and reduce your monthly payments.

·????? Leasehold Improvements – SBA proceeds can be used to make improvements to a leased facility used for business operations.

·????? Real Estate purchase/refinance/renovation - SBA funds can be used to acquire, refinance, or improve real estate and buildings.

·????? Partner buy-out or business acquisition – Funds can be used to transfer business ownership or acquire a new business.

The bottom line is that opting for SBA financing now for any of these potential uses of funds will enable you to benefit from the long SBA terms (10 to 25 years) and low payments while you take a ride down to lower rates with decreasing payments along the way.

So, if the time is right for SBA financing, where and how should you apply?

Your neighborhood bank may not be the best idea – any bank can choose to participate in the SBA program but very few aggressively pursue that market.? As a result, many neighborhood banks turn down SBA applications despite the substantial government guarantee.? Some will approve very strong applications if they are within a small range of industries/credit profiles, but many business owners find that they end up waiting a long period of time just to hear “no.”

This is why you should consider an experienced SBA broker like Allen Capital Funding.? We help you to frame your application materials in the best possible way, mitigate any weaknesses, and submit only to lenders that actively participate in the SBA program---this gives you the best chance for approval.

Please feel free to reach out for an exploratory call.

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