SBA ...

… is a superb way for a bank to extend you longer terms than are available under conventional programs ( conventional is usually limited to 3 years).

… allows the bank to rely on projected income as a repayment source.  Conventional lending requires that historical business operations generate sufficient cash flow to repay the proposed loan, ignoring cash flow improvements created with loan proceeds.

… allows the bank to make loans that are not fully collateralized.

 

It is helpful to understand there are two distinct aspects to SBA lending. SBA Eligibility and the banks credit decision to lend you money. Both must be satisfied in order to grant a loan. This results in a complex loan program with bulky awkward requirements. Preferred Financial Consulting (PFC) can help guide you through the negotiable bank requirements versus the rigid SBA program rules.

 

What term can I expect?

A blended term based on how the proceeds are used: 10 years on the portion of the loan proceeds used to purchase a business, and subsequent inventory and equipment purchases; 7 years on working capital, 25 years for real estate or real estate improvements.

 

What rate can I expect?

SBA sets the maximum rate at Prime plus 2.75% (variable with Prime). Banks generally charge this rate on loans under $200,000. Discounts are available with full banking relationships, larger loans and highly collateralized loans.

 

What will it cost?

The SBA charges a guaranty fee based on the loan amount:

0                to     $150,000             2% of guarantied amount

$150,001  to     $700,000             3% of guarantied amount

$700,001 and above                  3.5% of guarantied amount

             The bank will charge for out of pocket costs, such as:

Appraisals, title, escrow, tax lien service, lien search, recording, and lien filing.

A loan packaging fee of $1,000 is typical. If an independent loan packager is used, banks generally do not charge a loan packaging fee. If an independent loan packager is not used, banks typically do charge a packaging fee.

 

What are the typical down payment requirements?

	Historical cash flow sufficient to repay this loan	Loan based on projections
Fully supported by Real Estate	20%	25%
Franchises	20%	30 - 40%
Non Franchise	30% - 33%	40%
Weak Valuation or excessive intangible assets	30% plus amount of intangibles	50 % plus amount based on intangibles

 

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FAQ — SBA Lending

To contact us:

Preferred Financial Consulting or

Preferred SBA Packaging

8863 Greenback Lane #210

Orangevale, CA 95662