Post a new topic
    19 Replies Latest reply on Mar 17, 2008 12:54 AM by TJMorehead

    SBA Loan Requirments

    Online Wayfarer
      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.)?
        • Re: SBA Loan Requirments
          LUCKIEST Guide
          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
          1 of 1 people found this helpful
          • Re: SBA Loan Requirments
            moogrdotcom Wayfarer
            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.
            1 of 1 people found this helpful
              • Re: SBA Loan Requirments
                Online Wayfarer
                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
                  • Re: SBA Loan Requirments
                    moogrdotcom Wayfarer
                    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.
                  • Re: SBA Loan Requirments
                    frozenghost Newbie
                    Pardon me for asking, I am sure this question has been posted many times before, but the requirements you have mapped out here seem pretty geared towards an already existing business .. I thought SBA Loans were for people starting up a new business. I have no financial history and no college degrees in accounting or business, far as I know my credit is good but I have nothing to put up as collateral, no financial statements, no sales, no employees.
                    Should I be looking at a credit account or some other type of loan or does SBA have a program to help me get started?
                  • Re: SBA Loan Requirments
                    roscocpa Newbie
                    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!
                      • Re: SBA Loan Requirments
                        Online Wayfarer
                        roscocpa:

                        Great info, thank you.

                        Did the SBA portion require collateral?

                        Yes, the contact would be great.

                        Thanks.
                        Online
                          • Re: SBA Loan Requirments
                            roscocpa Newbie
                            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
                              • Re: SBA Loan Requirments
                                mlebovits Newbie

                                It sounds like the program Roscocpa is referring to is the 504 loan program which is typically used for the acquisition of fixed assets such as real estate and machinery.

                                The 7a program is more likely to be used to fund the acquisition of a franchise. For certain loan sizes, the SBA's collateral requirements can be flexible.

                                The SBA website (http://www.sba.gov/services/financialassistance/index.html) provides a lot of information on the official requirements for their various loan programs.

                                 


                                Marshall Lebovits

                                 

                                http://www.funding911.com/
                                  • Re: SBA Loan Requirments
                                    roscocpa Newbie
                                    This is correct about the 7a and 504 programs. Here is a fabulous website for those interested in learning more about SBA loans/lenders. As I said before, the key to success in these programs is selecting the "expert" lender who does SBA loans every day, and ONLY SBA loans. When you find one and talk to them, you will know what I'm talking about as to why this is critical. They will slide you right into the program and it will be painless. If you are with an inexperienced lender, it will be the most painful process you can imagine, and you should immediately consider altering your state of consciousness in some way to keep from pulling every hair on your body out. Remember that famous movie line "many have tried, and many have failed" - that's because they didn't go to the expert.

                                    Here's the website, www.nadco.org/nadco/welcome.html - just click on the CDC Directory tab on the left and select the state where your project is located and you will be off the the races. Keep in mind that ALL lenders must go through a CDC in order to process an SBA loan application, so you are merely cutting out the middleman and going directly to the source.

                                    Best of luck!
                            • Re: SBA Loan Requirments
                              Flipside Newbie
                              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,
                              • Re: SBA Loan Requirments
                                CorpCons08 Ranger
                                I have experience in getting financing for franchises.
                                You can email me at d.skolnick@skolnick-associates.com if interested.

                                CC08
                                • Re: SBA Loan Requirments
                                  fmartin09 Newbie

                                  Hi,

                                  I'm a commercial banker that specializes in conventional and SBA commercial loans. Depending on your needs, you might be a good candidate for a 7a or a 504 SBA loan. Send me an email and I'd be happy to point you in the right direction.

                                  fmartin@prudential-capital.com
                                  www.prudential-capital.com

                                  Best regards,
                                  • Re: SBA Loan Requirments
                                    TJMorehead Adventurer
                                    Hello Online,

                                    I know your question has been answered, but I wanted to make you aware that the SBA has several funding programs available. I can help facilitate a funding request for the program most suitable for your business financing needs.

                                    Feel free to email me at moreheadsconnections@gmail.com to discuss more in detail.

                                    Warm regards,
                                    TJ Morehead