Many of us have a misconception about the SBA and if it is good for their business to get an SBA loan. Often I hear ?I do not like SBA loans? but in fact , what they are saying is ?I don?t like the experience I had with the bank that tried to do an SBA loan for me.? The reality is that thousands of firms are financed annually by SBA backed financing.
Another fact is, some businesses are just not well liked by many SBA lenders, generally motels, restaurants and gas stations. Here?s another fact. The same asset groups that SBA banks avoid are disliked by the banks that are doing conventional commercial loans. ALL SBA banks love professional businesses like physicians, dentists and veterinarians. Many run cold and hot on other kinds of enterprises. You actually can?t tell when they are or aren?t as you can submit your deal to them and they can stop doing any asset type at any time whether directed by their own chief credit officer or if it is an SBA directive.
Lending institutions and banks can always be more conservative than the SBA?s guidelines but they cannot be less conservative. An example, if someone is looking for car wash loans, the SBA?s rules can dictate that a 90% advance can be made but the bank?s credit guide might only allow an 80% advance.
Then there is the issue of ?cash flow? vs. ?collateral? banks. Let?s say you are endeavoring to get a car wash business loan. In prinicple underwriting criteria are going to be similar for car wash loans, however ?collateral? lenders, which often are non-bank lenders, will look for more ways to make a deal work when there is sufficient collateral whereas ?cash flow? lenders will search for more methods to make a deal work then the business or property has extremely good cash flow.
It is beyond dispute the SBA in general will do higher Loan To Value (LTV) loans and frequently with a longer period. The final analysis is, the less capital invested, the higher your rate of return. While it?s correct that with the SBA 7 (a) loan program, most lenders will offer a floating rate, this still will frequently be balanced by the higher advance, the longer amortising period and the lower payment. With a SBA 504 loan with its fixed rate financing part, it even becomes more clear which will supply the lower cost of funds and higher rate of return on your investment (ROI).
Because it?s possible to finance car wash loans and inventory with a SBA 7 (a) loan and often times good will, for purchase financing, you frequently must bring in 15-20% more of the total project costs so as to get a conventional loan approved. Does that fixed rate look THAT attractive when you?re bringing in that much more capital? If it does, you may want to learn how to use your calculator better. If you only go by rate or origination fees, you may find yourself shortchanged in the long run and not keeping the working capital you want to run your business.
It may not be best for everybody, but SBA is the clear choice for financing in numerous circumstances.
Harold Jaynes has been originating gas station, vehicle lube and car wash loans since 1998 and has concentrated on this asset group. Contact him for more in-depth information on car wash financing.
Source: http://www.devaproperty.com/is-sba-financing-the-right-type-of-mortgage-for-your-commercial-loan/
domino red orchestra 2 matt damon tom brady rimm mubarak coe
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.