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SBA Loan Process

Published Monday, June 27, 2016

If you are a small business owner looking for a loan to expand your business, the Small Business Administration offers numerous loan programs depending on your business profile, financing needs, growth plans and so on. When closing a SBA loan, you need an attorney certified in SBA loan closings.

Jenifir Dimo, a real estate attorney at Stewart Melvin & Frost, is certified to close SBA loans and is with us this morning to talk about the process.

Question: For those of us unfamiliar, tell us about the history of the SBA.

Jenifir: Well, must like many different arms of the government, the catalyst for the SBA was the Great Depression. The government realized the need for a federal lending program for small businesses who couldn’t secure a long term loan when there were larger corporations in the arena – and even if they could obtain a loan, almost always, their rates were much higher. Knowing small businesses were the backbone of this Country, the government assisted small businesses with affordable, long-term financing to spur economic and entrepreneurial development- giving rise to the SBA. It is inherently an economic development program. It gives business owners affordable capital to invest, which helps the community by creating more jobs.

Question: Who qualifies and how?

Jenifir: There are different types of SBA loan programs- but one of the most prevalent is the 504 Loan. If you own a healthy, expanding business, and need to purchase real estate or other long-term capital equipment for your business, a 504 loan will give you up to 90% financing, with below-market interest rates fixed for up to 20 years. I don’t know about you, but 90% financing is unheard of. The "small" factor of the small business loan is fairly easy to meet because your tangible net worth must be less than 15 million or net profit is less than 5 million.
So, if your business is healthy and you want to expand, you could be purchasing real estate that is adjacent or across town for a second location. OR you could be purchasing a long-term capital equipment- like a machine to help your business. You could also be doing improvements, like grading, parking lots, landscaping. Many possibilities of a growing business.

Question: How does one get a 504 Loan?

Jenifir: You would contact Small Business Access Partners. They are right in town, and the best resource for SBA loans. Melinda Coker from their office would start you off in the right foot. The SBA doesn’t lend to businesses directly, because they would partner up with a local bank, which makes the loan, then the SBA guarantees it. This allows the bank to take more risk than they otherwise might.

Currently the rates are 4.23 percent for a 20-year SBA 504 loan.

Question: Could one refinance existing debt?

Jenifir: Yes, through the SBA 504 Debt Refinance Program.
The 504 Debt Refinance Program allows small business owners to finance up to 90 percent of the current appraised property value, plus 504 eligible refinancing costs without the requirement of expansion.

This may be especially valuable for entrepreneurs and small business owners who want to get rid of high-cost debt, including adjustable-rate debt, as well as those who have assets that have appreciated and want to take out some cash for expansion.

Under the 504 refinancing program, eligible small business owners can borrow up to 90 percent of the value of a property, with 10 percent down. That is less than would typically be required for a commercial loan.

 

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