Is your company growing faster than you can financially keep up with? It might be time to consider SBA lending. Check out these signs.
Book a Consultation Call20% of small businesses in America fail in their first year. A critical contributor to this failure is the lack of adequate funding for operations.
As a small business owner financing can make or break your firm. The government through the Small Business Administration (SBA) seeks to support the growth of small businesses through SBA lending.
The SBA guarantees loans given to entrepreneurs by its partners to reduce the risk of default.
If you are looking to support the growth of your small business here are signs that SBA loans might be what you need.
Small businesses are usually seen as high-risk borrowers by banks and other alternative lenders.
As a result, the interest they charge can at times be higher than those they levy on more mature firms. A high cost of debt ends up making things much more difficult for your company.
As a small business owner, the SBA can help you remedy this situation. Since the government partially backs a lender facilitating an SBA credit facility, they can offer relatively lower rates.
SBA Loan
The 7(a) loan program will be the most suitable option for you when refinancing expensive debt.
When your small business begins to grow there are times when acquiring another existing company can become a viable option.
Through the 7(a) loan program you can get up to $5 million through the SBA’s lending partner to help you expand.
Although you may have begun your business on a small scale, its success can call for expansion of operations.
As a result, you might need to buy significant fixed assets to grow the firm's operational capacity. These assets can include:
If your cost-benefit analysis shows that purchasing a significant asset is better than leasing it the SBA can help you. Its 504/CDC program can lend you up to $20 million for the purchase.
The 504/CDC loan program will involve an SBA-certified Development Company and a bank. Since there's more than one lender involved you may need to fulfill some additional qualification criteria.
Sometimes a small business might be too small or too new for an SBA lending partner to work with due to the low limits. Despite this fact the company might be experiencing robust growth and in need of financing.
SBA's microloan program helps such firms tap into the resources they need for growth. In partnership with non-profit organizations and community lenders, the SBA can finance you up to $50,000.
Since borrowers taking on microloans are still small and not established, they can pose a higher risk. The interest rate will, therefore, be slightly above market.
When a small business experiences tight cyclical cash flow problems it will need some working capital. The SBA helps small firms at various stages to improve their working capital situation to facilitate their multiple needs which can include:
Newly formed companies or those that are too small to work with typical lenders can tap the microloan program. The 7(a) program will help more established small businesses to assess working capital in line with their needs.
The CAPLines of credit program is especially useful for builders and other small firms contracting with the government. They can access it to get money from short term contracts.
If your business requires an SBA loan, you need to find out what the conditions are. SBA funding can take longer than typical small business loans to get approval.
It takes up to 90 days to go from application to getting the funds in your account.
You, therefore, need to know all that will be required of you so that your application doesn't take more time than it has to.
Here are the things you need to fulfill to apply for SBA financing successfully.
Any business that desires to seek SBA financing must be located in the USA or its territories. Besides, its operations must also be in the USA or its territories.
To qualify for any SBA funding your business must be a for-profit one. It should also be officially registered in the USA.
For a business to successfully raise SBA funding its owner must have equity in it. The stake can be in the form of money that the owner has invested or their time.
The SBA requires that any business desiring to approach it for funding first seek alternative capital avenues. Only after it has failed to get funding from other financiers can it make its application.
The SBA will also require your personal background information as the owner of the business.
If you own more than 20%, the SBA’s lending partner might ask you to sign a personal guarantee on loan.
As you prepare to apply for SBA funding ensure you look up the full list of requirements to increase your odds of success.
Keep in mind that as part of the SBA guaranteed loan you will need to sign a personal guarantee. This means that in the event of default, the bank and the SBA will look to you to pay any balance personally. The SBA guarantee provides an incentive for the bank to lend to you, it does not absolve you of liability.
Contact us today for more insights on and SBA loan default and how you may be able to settle your debt with the SBA. Our SBA attorneys are experienced and aggressive and will provide assertive representation.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Clients personally guaranteed SBA 7(a) loan balance of over $300,000. Clients also pledged their homes as additional collateral. SBA OIC accepted $87,000 with the full lien release against the home.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
Clients personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
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