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    1 Reply Latest reply on Nov 13, 2009 3:51 PM by UncleLeon

    minimum owner injection, collateral, pfs, and sba loan?

    johnfla Newbie

      I am trying to obtain a business loan, preferably a sba loan. A lender stated that I need to inject 30% of the project cost. However, I have more than 30% in bank accounts but I only want to inject the minimum amount into the business and borrow the rest. Let's say, hypothetically, on my business plan my project is $300,000 and I planning to inject $90,000 (30%) and plan to borrow the rest which is $210,000. Let's say I have $145,000 in various bank accounts but since I am putting only $90,000 what would happen to the rest of the money in the bank accounts which would be $55K. Would the bank require me to inject more into the business or will they use that as collateral? If they use it as collateral, how would they do that? I don't own a home or have any collateral besides money in bank accounts. I would like to inject the minimum and keep the rest of my money in the bank as a safety net or use it for something else besides putting it into the business. How will they check that I have that money? Will they check my bank account balances (if so, how do they do that) or will they just ask for bank statements from me? Will they also check the recent account history/ activity on those bank accounts or just make sure that the money is there? I am wondering because I have several bank accounts and transfer money between accounts often (to pay bills, get interest rates, etc.). I am trying to fill out the pfs. Any advice would appreciated. Thanks.
        • Re: minimum owner injection, collateral, pfs, and sba loan?
          UncleLeon Scout
          The SBA is accustomed to dealing with businesses (obviously).

          Funds required to start a business is greater than just the funds needed for initial equipment, lease, etc.

          The SBA knows that you need operational funds to tide you over until you reach your "Break Even point. Include those funds in your loan application. This should all be indicated in the financial section of your business plan

          Remember, though...an SBA loan doesn't come from then SBA. The SBA only "guarantees" a large portion of the repayment. (perhaps 70%. - I don't know the exact percentage, currently). Therefore, the lender will be more conservative than then SBA, since; if you default, the SBA will be first to recover funds and the lender will be last.