SBA preferred lender services

Customized loan packaging for small business

Profitable growth is the primary objective in today's highly dynamic and competitive business environment often requiring periodic infusions of lender capital. Some small businesses, however, cannot qualify for loans from traditional sources for a variety of reasons. For these situations, an SBA "Preferred Lender" authorized by the SBA to directly process loan applications can often be of help.

SBA Preferred Lenders assess several factors when evaluating loan requests including the historical and projected cash flow of the business. Cash flow measures the ability of business to repay its loan commitment. Another key element is the available collateral to secure the loan. Also, management and their experience in the industry is an important consideration.

All of the above factors are carefully evaluated during the underwriting process and each contributes to whether the loan is approved. The decision process can involve several tradeoffs for consideration.

One example is a business with a significant cash flow history. Because of its superior cash flow, it may not require as much collateral as needed by an early-stage company. Conversely, for an early-stage business, a strong management team, coupled with a strong equity position, can sometimes offset its lack of a long-time operating history.

An effective SBA Preferred Lender is skilled at matching and customizing each small business loan to the entrepreneur's specific needs. Their goal is to package a loan designed to provide the maximum financing possible with the least strain on the company's existing cash flow. One example of how this can be achieved is to provide loans that are fully amortizing up to 25 years to minimize a company's monthly payment.

Pre-qualification services

Some SBA Preferred Lenders offer a loan "pre-approval" service in advance of the transaction. Once the loan is pre-approved, the funding is in place ready for use as soon as an acquisition, construction project or other transaction targeted. This can greatly reduce valuable time that could be otherwise totally wasted if the loan applicant waits until the funds are actually needed and then, after a lengthy evaluation process, fails to meet the underwriting requirements.

SBA Preferred Lenders offer a variety of loan programs structured to tailor the right loan for a company based on its specific needs. These loan programs are each subject to periodic change and include the following:

SBA 7(a) Loans

The 7(a) Loan Guaranty Program is one of the SBA's primary lending programs. This program is designed to finance owner occupied small businesses with fully amortizing loans for up to 25 years. Many small businesses meet the SBA eligibility requirements for this government guaranteed program.

USDA business and industry loans (B&I)

The B&I Program helps stimulate rural economies by providing financial backing for rural businesses. Under this program, loan proceeds may be used to acquire land, purchase or construct a building, acquire machinery and equipment, refinance existing business debt and provide working capital.

The primary purpose of the program is to create and maintain employment and improve the economic climate in rural communities, which are broadly defined under the B&I Program.

SBA 504 loans

The SBA 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as commercial real estate. This program may permit a higher loan to value ratio and preferential pricing.

Conventional loans

This program is designed for small businesses that require long-term financing for commercial real estate and investor real estate.

Construction loans

Construction and major renovation financing is provided through SBA 7(a), SBA 504, and B&I loan programs, in addition to conventional loan programs for a variety of industries.

Mezzanine financing

Mezzanine financing provides capital to growing businesses with limited collateral sources. This financing program is available to existing businesses in need of additional capital to expand their operations.

Robert E Bunn is an acquisition and management consultant in Cape Girardeau. (573-335-3351 or email at rbunn@igateway.net)