The Small Business Administration (SBA) provides the best financing available for many small business owners. The SBA provides government-backed business loans through banks and credit unions as well as some non-bank lenders. SBA loan programs offer small businesses great flexibility in how they utilize their loan proceeds,
Although the process can sometimes be difficult, most borrowers find that the benefits of an SBA loan worth the effort.
History of the agency
Founded in 1953, the Small Business Administration (SBA) is a government agency dedicated to supporting small businesses and entrepreneurs in the United States.
The agency mission statement is to “aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.”
The SBA lives up to its mission in many ways. Through educational initiatives, government contract distribution, disaster lending, and the 7(a) and 504 programs, the agency promotes diversity and provides access to entrepreneurship and the pursuit of the American dream..
What are the types of SBA Loans?
The SBA offers a variety of loan programs specific to business needs. The flagship program, the 7(a) small business loan, is widely used for working capital, business expansion, and equipment, inventory, and real estate acquisition.
Between the 7(a), and the three other loan programs, CDC/504, Disaster, and microloan programs, businesses can find funding most purposes. Loan proceeds can be used for working capital, fixed assets like equipment, machinery, or real estate, inventory purchasing, and debt refinancing. While there are great merits to the other SBA programs, we focus on the SBA 7(a) program.
A widely held misconception is that the SBA itself originates and funds loans. While the agency guarantees a portion of loans offered by partner banks, credit unions, non-profits, and non-bank lenders, it does not lend directly itself.
Equally important is that a small business select an institution or a packager that has a high success rate and that they feel comfortable communicating with. Ponte Investments has mastered the application process, having streamlined it as much as possible. You need a fairly strong borrower profile and a willingness to work closely with our credit analysts. If you have emergency funding needs, Ponte Investments has mezzanine financing available to our clients. Want to know more?
What are the interest rates ?
The SBA sets limits on the rates and fees their partners are able to charge on a loan. Rates for our program are currently 6% adjustable based on the prime rate plus 2.75%.
While you will be charged other fees by the SBA and its partners, such as guarantee fees, processing fees, and packaging fees, the SBA limits them.
What are the terms can I expect?
Just as interest rates and fees, the SBA sets limits on the length and repayment terms. Usually, SBA loans have the longest term lengths available. For 7(a) loans, you can expect a term length of 10, and 25 years if there is real property collateralized. Payments are monthly, and on loans up to 4150,,000.00, there is no penalty for prepayment.
How much of a down payment or capital injection is required?
The collateral that will be required depends on the loan purpose and type. In short, on smaller loan requests, you can be under collateralized. Larger requests with real estate involved, typically require a 10% capital injection or down payment.
On all SBA loans, the agency requires business owners sign a personal guarantee. A personal guarantee is an agreement where you acknowledge and accept personally responsible for repaying the loan , even in the event your business no longer can.
Do I meet the program requirements ?
In addition to meeting the requirements mentioned above, you will have to prove your business is capable of making the required payments
to begin with, you’ll have to submit your business tax returns, and interim financials statements and bank records. In addition to passing the credit score requirement, these documents will establish your ability to make the required payments.
How Can I Apply for an SBA Loan?
As we said before, you’ll have to show your business is willing and able to repay your loan. Ponte Investments LLC has closed thousands of SBA loans for their clients. Our collective experience will make the process a lot easier for you and your business.
Though documentation varies according to your business and loan purpose, the following documents are required:
- Federal business tax returns
- Federal personal tax returns
- Balance sheet
- Profit & loss statement
- AR / AP aging reports
- Business debt schedule
- Personal financial statement
- Explanation on use of funds and narrative about your business’ history.
- Your resume
- Business bank records
The purpose of your loan request dictates what additional documentation to be required.
It is our job to process and package all the information required and confirm that you meet the program requirements.
Upon review, we will submit your loan package to our SBA Preferred Lending Partner institution, facilitating your loan funding in as timely a manner as possible.
How long until an SBA loan funds?
Larger, more complicated loan applications can take up to six months before funding. On smaller loans with no collateral requirements, SBA loans can fund within 30 days.
Ponte Investments will help you to prepare, review and process your loan package. We will work with an SBA Preferred Lending Partner lender to ensure the timely approval and funding of your SBA loan.
My SBA application was denied. Now what?