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Advisors, Private Equity

Seeking Capital? Take a Fresh Look at SBA’s Loans


The Small Business Administration (SBA) is often not a first choice for small business owners looking for financing, but the long-time lending giant has recently made significant changes that should bump it up your list when it comes to finding smart capital for your business.

I won’t dispute that the SBA has a reputation of being laboriously measured and overly bureaucratic, but then again, what government agency isn’t? For business owners seeking quick capital, the turn-around times and legwork for an SBA loan are often prohibitive, even if the money is available at a lower rate and with more attractive terms that its competitors. But the truth is, if you have the right lender working diligently and effectively to pair you with the right SBA loan for your needs, the process can be as timely and painless as applying for a conventional loan.

The advantages of the SBA’s 7(a) and 504 programs over conventional lending have become even more apparent over the past few months as the Obama Administration has recognized the need to increase small businesses’ access to capital, create new jobs, and support economic recovery. The most notable changes include:

  • Raising lending limits on SBA’s 7(a) and 504 programs:
    – From $2 million to $5 million;
    – Up to $5.5 million for manufacturing companies under the 504 program;
  • Raising lending limits on the Microloan program from $35,000 to $50,000
  • 10 year amortization periods for businesses buying equipment
  • 25 year amortization periods for real estate loans

With these changes, the SBA expands its reach to larger businesses while also increasing support to smaller banks. Small banks with assets less than $1 billion provide 56% of loans to small businesses as a percentage of all business loans. The combination of more accessible money and more refined lending practices is a win-win for small business owners.

Nonetheless, navigating the SBA loan process can be tricky for even experienced lenders. Small business owners considering an SBA loan should do ample research into lenders that have experience (and results) obtaining SBA loans for small businesses. If one lender tells you that you aren’t a match for an SBA loan, seek a second opinion from a lender who may be more creative with solutions and experienced in dealing with the SBA’s loan programs and their caveats and rules.

Over the years our firm has had tremendous luck working SBA lenders to create positive outcomes for our clients. In one example, we recently helped a trucking company obtain a $5,000,000 SBA loan. They used the proceeds to refinance their building as well as about $2,000,000 worth of their truck fleet. They were able to obtain a 25 year amortization on the loan, and improve their cash flow by hundreds of thousands of dollars a year, which was critical for a major new project they are undertaking.

If a business is in need of a dose of working capital, the SBA Express offers an appealing alternative. Many of our clients use this program to receive up to $150,000 on a 10 year amortization at 6 percent interest rate – without the entrepreneur having to put up any personal collateral. This program is very helpful in allowing the business time to pay off their loan, and maintain their cashflow.

The SBA has also made exceptional improvements in progress in their CAPLINE program over the last several years which offers companies ABL facilities, often at dramatically cheaper rates then the private markets.

Whatever your situation is, don’t rule out the SBA at the starting line. It might just be the perfect solution for your needs.

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