As most of the lenders are daily changing their lending parameters there is one steady light in the sea of confusion; and that is the Small Business Administration or SBA Lender. The SBA lending program has not changed as drastically as most of your conventional lenders. Every day another conventional lender is changing their parameters, rates, terms and approval criteria. The problem is that they are changing these parameters while loans are in the final stages of underwriting, so most brokers' confidence level have been very much affected, even after a loan has been submitted to final underwriting with a vote of confidence from the Business Development Officer that the broker has worked competently with.
On the other hand this month alone I got four SBA 7A loans approved exactly as we put them into underwriting. I'm not trying to say that my loans are better, or that I'm smarter, but what I am saying is that the select lenders that I work with regularly have not stopped doing what they do best, making SBA Loans. SBA Loans the mainstay of the financing world for non-real estate transactions are still closing in record numbers. Why, you may ask? The answer is the SBA Guarantee Fee. The lender not the borrower is protected in case of default up to 75% of the loan amount borrowed. This is not an essay on the SBA Guarantee program, but is mentioned here to add validity to my premise.
Once we are aware that the lenders are protected, credit risk is diminished it only makes sense that SBA Lenders want to lend their money to good quality prospects. AND that is exactly what is occurring throughout the United States.
As a financial broker, I implore you not to overlook SBA lending when you are looking at options for your borrowing. SBA has numerous programs for you the owner of an occupied business to get capital for either acquisition or to refinance an existing property.
In today's economic environment with prime being so low it only makes sense for you to seriously consider SBA as a financing option. So if you have the requisite 10% of the total project cost you should be utilizing SBA programs rather than conventional loan programs due to the low down payment as well as the current low rate.
Most lenders are prime based plus something, so for example if a lender is prime +.75 that rate at the time of writing this article is 6.00% or 5.25% + .75% = 6.00%. Amortization for the loan will vary between 20 and 25 years depending on the lending program adopted for commercial real estate. For working capital most loans will be amortized between seven to ten years depending on how the ultimate loan is structured.
The only SBA product that would allow you to finance working capital or debt consolidation is the SBA 7A loan.
Now, let's take a typical example if you are renting a 10,000 square foot building for your business. You occupy most of the current building footprint, but you are paying for the entire use of the premises that you rent. Current rent is $1.50 NNN per square foot that translates to $15,000.00 per month. Using that same $15,000.00 per month for a purchase would equal a present value of approximately $2,300,000.00. So with a down payment of 10% you could buy a building of almost $2,500,000.00. Also you could also lease out some of the "dead" space that is not being used and therefore lower your monthly debt service even more. Most importantly you are now building equity rather than throwing money down the proverbial rent chute. Granted, I've made many assumptions in this quick calculation. But the purpose is to expose you to the possibilities because of the current low interest rates and the "consistent" underwriting standards of the SBA lenders.
As a caveat not all the lenders are going to provide this type of financing arrangement. We have made arrangement with our nationwide lender to provide you a loan at 90% loan to value which means that for 10% down payment you can have a fixed rate for five years with a 25 year amortization at the rate of prime + .75%.
So in summary, don't overlook this consistent source of money for your business that needs to acquire capital.
Call today for details at 858-592-0659 x 101.
Harlan A. Friedman, J.D., is president of Lightning Commercial Funding Inc., a California Financial broker. He has more than 25 years of experience as an investment banker and financial consultant. Lightning Commercial Funding specializes in Small Business Loans and Commercial Financing exclusively, throughout the United States from the startup of new business to large commercial transactions. Reach Harlan A. Friedman at (858) 592-0659 x101 or feel free to e-mail him at harlan@loanforbiz.com.
