SBA Loan Programs

Posted on: June 20th, 2012
The SBA, or Small Business Administration, was established in 1953 under President Eisenhower.  SBA loans are made through banks, credit unions and other lenders who partner with the SBA. The SBA provides a government-backed guarantee on part of the loan.   The guarantee varies from 50%, 75%, 85% and 90% except for the 504, which is 50% loan to value rather than a guarantee.  There are a variety of different SBA programs available and I will highlight only a few. 
 
The Patriot Express loan program is a simplified loan program for a Veteran, Reservist and National Guard Member, current spouses or widowed spouses of the above, who is 51% or more owner of the business.  Patriot Express loans are available up to $500,000 and have a 75% to 85% guarantee to the bank.  This can be in the form of a term loan or a line of credit and can be used for most business purposes, including start-up, expansion, equipment purchase, working capital, inventory, etc.  In addition to our loan application, the borrower fills out a 6 page SBA questionnaire, 4506T tax transcripts and provides a copy of their military discharge paperwork. 
 
The 504 is a loan program for the purchase, renovation and refinance of owner occupied commercial real estate.  The borrower must plan to occupy 51% of the square footage of the property.  Some equipment purchases are permitted with this program.  Until September 2012 refinancing is permitted and anyone with rates over 4.50% should consider this.   For refinance, they need to be current on the existing mortgage for 12 months and need to have owned the property for 2 years.    For a purchase, the price can be up to $12 Million or $12.5 Million for manufacturers.  The existing business has a down payment of 10%; post debenture, the bank finances 50% and the Certified Development Company, or CDC, who lends on behalf of SBA, finances 40% at a fixed rate for 20 years.  An additional 5% down payment is required if it is a new business or a special use property.    The attraction for the borrower is the 10% down payment vs. a traditional 20-25% down payment, the fixed rate for the 40% portion of the loan, and the fact that they can roll in project related costs and soft costs.
 
The 7A is the SBA’s primary business loan program and accommodates a wide range of financing needs.  The 7A is a term loan program and can be up to $5 Million.  There is a 75-85% guarantee to the bank.  The 7A can be used for a variety of business needs including equipment purchase, leasehold improvement, to expand and renovate facilities, business acquisition, refinance of existing debt under certain conditions, business start up, etc.  There is significant paperwork involved with this loan program.    The Small Rural Lender Advantage  and Small Loan Advantage are types of 7A loans with simplified paperwork, the SRLA up to $350,000 and the SLA up to $250,000. 
 
The SBA Express  is a simplified loan program, with a cap of $350,000.  This has a 50% SBA guarantee.  This can be in the form of a term loan or a line of credit and can be used for most business purposes, including start-up, expansion, equipment purchase, working capital, inventory, etc. In addition to our loan application, the borrower fills out a 6 page SBA questionnaire and 4506T tax transcripts.    
 
There are additional loan programs if you export or if you have a contract and wish to lend against the contract.
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