SBA business loans are one of the most popular commercial mortgages in the nation, and for good reason.  They boast flexible underwriting, high leverage and the ability to roll real estate debt, equipment, debt consolidation as well as working capital debt into one loan.  They have been created specifically for the needs of small business owners. 

One of the major benefits to the SBA business loan programs are the high level of financing offered.  For example, 90% on purchases and 85% on refinances.  Conventional commercial financing in contrast is capped at 60-65% loan to value.  This can be a huge difference for a small business owner that needs to keep as much cash on hands as possible.   

SBA Business Loan Guidelines

As far as the SBA guidelines are concerned, the borrower must fit their restrictions as well.  Repayment ability from the cash flow of the business is vital.  Typically borrowers will have to show enough net income off of their last 2 years of tax returns to cover the proposed loans payments.  So again, cash flow is critical.  In addition, good character, meaning decent credit scores, and management experience are important.  The collateral’s condition and value are also important and reviewed.  The borrowers “equity contribution” in the case of purchases is also considered.  The SBA also requires a personal guarantee from all borrowers with a 20% or more ownership. 

The SBA guidelines have been written to be as broad as possible, though a few more restrictions include that the business must be for-profit, and not already have the internal resources to do the loan, are required to get the requested financing.

SBA Business Loan

A major misconception with borrowers is that all SBA business loans and lenders are basically the same, i.e. “if we get declined from one source, we must not be eligible.”  This is not the case, as mentioned above most loans get declined from banks, not the SBA.  So it pays to keep looking. 

Watch the video related

www.bplans.com – Business planning expert Tim Berry explains how to develop your business by developing a business plan in this 8-part web seminar was cosponsored by the Small Business Administration and Palo Alto Software.

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Are SBA small business loans easier to get then other loans?
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