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23 Replies Last post: Dec 23, 2008 1:11 PM by johnnyjoy

SBA Loan Requirments

Jan 10, 2008 8:49 AM

Click to view Online's profile Authority Online 16 posts since
Jan 7, 2008
I am considering purchasing a franchise as a second business. I've done the research, due diligence and preliminary numbers and feel reasonably sure about the opportunity. I'm going to need funding - does anyone have any experience in what specific requirements SBA loan's carry (i.e. credit score, is collateral a must, owner contribution, etc.)?
Tags: business, ideas, teen, entrepreneur, opportunities, home, based, business, teenagers Report as inappropriate
Click to view LUCKIEST's profile SCORE LUCKIEST 7,933 posts since
Aug 6, 2007
1. Re: SBA Loan Requirments Jan 10, 2008 8:53 AM
in response to: Online
Online, You have come to the right place. You will be getting many answers to your funding needs.
Do you have a Business and Marketing Plan?? It is one of the first items lenders will want to see.
Good luck, LUCKIEST
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Click to view Online's profile Authority Online 16 posts since
Jan 7, 2008
2. Re: SBA Loan Requirments Jan 10, 2008 9:23 AM
in response to: LUCKIEST
Luckiest, thank you for your post. I do, the business plan (includes a marketing plan) and are...as ready as they'll ever be.
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Click to view moogrdotcom's profile Mogul moogrdotcom 82 posts since
Dec 16, 2007
3. Re: SBA Loan Requirments Jan 10, 2008 11:04 AM
in response to: Online
To Qualify for an SBA Loan you will need the following:

1. Business Profile - A document describing type of business, annual sales, number of employees, length of time in business and ownership.
2. Loan Request - A Description of how the funds will be utilized.
3. Collateral - A Description of your assets available
4. Financial Statements - Usually 3 years worth.
5. Personal Financial Statements - For those holding 20% or more

Generally you will need a percentage of matching funs - say 10%. So if you want to borrow 25000 you need 2500 collateral.

Local banks are always preferrable but if you have a good contact with an SBA lender use 'em.
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Click to view Online's profile Authority Online 16 posts since
Jan 7, 2008
4. Re: SBA Loan Requirments Jan 10, 2008 11:26 AM
in response to: moogrdotcom
moogrdotcom:

Thank you for your insight, the information provided on these forums has been invaluable.

So, silly question, if SBA backed loans require things like home equity as collateral and are typically 2 points above prime what would motivate someone away from simply using a home equity loan?

Can the franchise itself be considered collateral? Would the loan be seen differently if the business owner was matching the loan, that is, 50% SBA, 50% owner funded?

Thanks again.
Online
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Click to view Online's profile Authority Online 16 posts since
Jan 7, 2008
5. Re: SBA Loan Requirments Jan 10, 2008 11:48 AM
in response to: youwhippedguy
youwhippedguy:

That's good advice. I think a strong educational background and work experience are pivotal to success.

My college career includes City University of New York, Hofstra University, Miami-Dade College and Florida International University with degrees in Business Administration, Accounting, and Management Information Systems. I am currently working on my Masters at Florida International University and while attending school in the evenings, I've been able to put together just over 15 years of experience and hold several certifications, including the MCSE (Microsoft Certified Systems Engineer), MASE (Master Accredited Systems Engineer) and PMP (Project Management Professional).

School has prepared me for employment and a very comfortable safety net. Unfortunately, Entrepreneurial Spirit 101, was not an available course.

Thanks.
Online
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Click to view moogrdotcom's profile Mogul moogrdotcom 82 posts since
Dec 16, 2007
6. Re: SBA Loan Requirments Jan 10, 2008 11:51 AM
in response to: Online
In my experience SBA lendors want to see a cash equivilency
on the loan - By that they want to see that you already have some vested interest/leverage against the loan as a cash asset. So if you need 80k to startup they would request an 8k match/deposit. You can pull that from anywhere you want.

Typically assets will help you get a larger loan but the largest limit on startup sba loans is how much you can match yourself. Most SBA loans you can't leverage the franchise itself unless you have alrady funded it and own it.
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Click to view Online's profile Authority Online 16 posts since
Jan 7, 2008
7. Re: SBA Loan Requirments Jan 10, 2008 12:01 PM
in response to: moogrdotcom
moogrdotcom:

That is very good news.

Thank you for sharing your knowledge on the topic and your counsel.

Online
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Click to view roscocpa's profile Professional roscocpa 7 posts since
Jan 9, 2008
8. Re: SBA Loan Requirments Jan 10, 2008 12:11 PM
in response to: Online
Hello,

My personal experience with finding good SBA programs is to FIRST seek out a lender who is extremely knowledgeable in SBA financing for your particular deal (this is only the first major hurdle of course). I had great luck with one deal that I helped a client close about a week ago where the lender was based out of San Francisco (it was a CA deal). We obtained for my client, a loan for 90% of the purchase price (40% of it was actually funded using SBA funds), at extremely reasonable rates. 7.5% on the first loan (50% LTV) through a commercial lender, and 6.5% on the 2nd loan (40% LTV) - this was the SBA financed portion. SBA is extremely specialized lending that requires someone who does SBA's ALL the time and FULL TIME to help you navigate through all the different available programs. Although my San Francisco banking contact can't lend in other states, he may be able to give you some "standardized" SBA information about which specific SBA program may best fit your needs. There are literally hundreds of different programs that the SBA offers and almost nobody (including the SBA) knows everything about all the programs. You will need to be resourceful and probably spend alot of time on the web and on the phone, but, the rewards to you are huge if you can perservere through the process (perservere is probably an understatement). Just like when dealing with ANY government agency or program, you will get ALOT of mis-information before you get the answer you want or need. Be persistent, and be sure you don't believe everything you are told until you've verified it from several RELIABLE EXPERT sources.

Best of luck!
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Click to view Flipside's profile Start-up Flipside 6 posts since
Jan 10, 2008
9. Re: SBA Loan Requirments Jan 10, 2008 4:45 PM
in response to: Online
Hello 'Community',

I'm new to this and have been perusing the different Forums. I'm one that has to 'test the waters' before diving in and finally decided to submit a question.

In reviewing the requirements for a SB Loan, how does this type of loan benefit someone that has a new business w/ no financial history, etc.? I have an entertainment company (LLC). My goal is to promote shows featuring National Acts. I need a loan for my first show and not sure of what's available. FYI, my debt-to-income ratio is pretty high on my personal credit, but my scores are o.k. With no financial history, what are my chances of obtaining a loan? Any/all advice is WELCOME!!!

Thanks,
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Click to view mlebovits's profile Mogul mlebovits 42 posts since
Oct 10, 2007
10. Re: SBA Loan Requirments Jan 10, 2008 7:59 PM
in response to: Flipside

Online,

You might want to make sure that the franchise you are buying is on the SBA's list of approved franchise concepts.

Marshall
www.Funding911.com
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Click to view CorpCons08's profile Mogul CorpCons08 1,128 posts since
Nov 14, 2007
11. Re: SBA Loan Requirments Jan 10, 2008 8:09 PM
in response to: Online
I have experience in getting financing for franchises.
You can email me at d.skolnick@skolnick-associates.com if interested.

CC08
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Click to view Online's profile Authority Online 16 posts since
Jan 7, 2008
12. Re: SBA Loan Requirments Jan 10, 2008 10:06 PM
in response to: roscocpa
roscocpa:

Great info, thank you.

Did the SBA portion require collateral?

Yes, the contact would be great.

Thanks.
Online
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Click to view Online's profile Authority Online 16 posts since
Jan 7, 2008
13. Re: SBA Loan Requirments Jan 10, 2008 10:09 PM
in response to: mlebovits
mlebovits:

Yes, I found an outdated list:

http://www.franchiseregistry.com/Registry/

and it is present. Very good news.

Thank you.
Online
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Click to view roscocpa's profile Professional roscocpa 7 posts since
Jan 9, 2008
14. Re: SBA Loan Requirments Jan 11, 2008 1:46 PM
in response to: Online
online:

The SBA portion of the loan did require collateral.... sort of. The 1st lender actually funded the entire 90% of the LTV in order to close the deal. Then, upon completion of certain items, the SBA will be reimbursing the commercial lender on the back end for the "bridge" loan (the 40% 2nd that the SBA committed to funding). A little complex to describe here. Like I said, these things are complicated but very rewarding/beneficial if you are willing to put in the time and effort it takes to jump through the various hoops. Nothing good comes easy they say, and that is especially true when trying to get into any government program. As for my banking contact in San Francisco, you can contact me directly via e-mail and I will give you his info. as I'm not sure he is ok with me posting it without his knowledge. mcrauschkolb@yahoo.com.

roscocpa
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