Looking for Credit? Tap an SBA Loan

By Paul Diamond, Web Editor

(March 19, 2009) Did you know you can get a Small Business Administration loan for up to $4 million with a payback period of 5 to 25 years? Additionally, the recently passed stimulus bill makes it easier for companies to get loans and refinance debt.

“SBA lending, including 504 financing, will be a significant and integral part of the American small business recovery effort.” says Vistage member Kurt Chilcott, CEO of CDC Small Business Finance. “It’s going to be easier and less expensive for small businesses to get loans, grow their businesses and restore jobs and create new jobs.” Chilcott’s company provides SBA loans to California, Arizona and Nevada businesses.
Here are some of the details of the new SBA loans available.

How do I apply for an SBA loan?

You can apply for an SBA loan at any participating bank or commercial lender. The SBA does not loan directly to companies. Non-profit Certified Development Companies (CDCs) are also a good place to start.

How much do I need to put down on an SBA loan?

Those starting or buying a business typically need to come up with a down payment of 10 to 30 percent, depending on the loan.

What are the different types of SBA loans?

7(a) guaranteed loans:  Loans made through this program range from $25,000 to $2 million with maturities ranging from 5 to 25 years. The stimulus bill included a provision that allows the SBA to raise its loan guarantee to as much as 90 percent. This increase guarantee means you may qualify for a larger loan than previously. It also means that you may be able to refinance an existing higher interest loan.

504 Certified Development Company loans: Loans with long-term, fixed-rate financing are available to businesses purchasing a building, land and large equipment. These loans, done in partnership with your bank, can go as high as $10 million and require only 10 percent down.  The interest rate is consistently below market.  The stimulus bill provisions call for eliminating several borrower fees normally associated with this loan and may allow refinancing with the 504.  The 504 loan is provided by Certified Development Companies, which are nonprofit organizations.

SBA Express loans: These loans of up to $350,000 are backed by an SBA guarantee of 50 percent and can be approved within 24 hours.

Business stabilization loans: Created by the stimulus plan, this deferred-payment loan of up to $35,000 is available to small businesses that need money to make payments on an existing, qualifying loan for up to six months. Repayment is required 12 months after the loan is fully disbursed. This loan can help a small business pay back other creditors, buy inventory, or get through a tight period.

Patriot Express loans: Loans of up to $500,000 are available to veteran and members of the military community.

Microloan program: Small-scale financing of $500 to $35,000 are bundled with technical assistance.

Export working capital loans: Loans of up to $1.5 million to finance export sales.

Disaster loans: Those in declared disaster areas are eligible for specific loans, the terms of which vary depending on the disaster and the region.

Can I refinance an existing bank loan with an SBA loan?

Yes. The stimulus plan gives the SBA the power to refinance existing loans (both SBA and non-SBA loans) for fixed assets. For more information on refinancing your existing SBA loan, contact your bank or lender.

What are the interest rates on SBA loans?

SBA sets a maximum interest rate on its guaranteed loans. Those rates are:

  • Prime plus 2.25% for loans under 7 years
  • Prime plus 2.75% for loans over 7 years

The SBA-504 rate for March (thru April 6) is 5.6% for a 20-year loan.

Additionally, lenders have the option of charging an additional 1 percent on loans under $50,000 and 2 percent on loans under $25,000. Also, the SBA can charge a fee from .25 percent to 3.5 percent, depending on the size of the loan.

Can the SBA help me obtain a bond?

The SBA helps companies obtain bid, performance and payment bonds. The stimulus bill recently raised the maximum contract amount that can be covered by an SBA-guaranteed surety bond from $2 million to $5 million, and, under certain circumstances, up to $10 million. Many small businesses need surety bonds in order to bid on and obtain federal and municipal contracts. SBA guarantees surety bonds to small businesses that private surety companies often are not able to extend.

Is there a deadline to apply for these loans?

No.

I have more questions. How can I contact the SBA office in my area?

If your bank or lender can’t answer your questions, you can contact your local SBA office. Find your local SBA office here.

We encourage your participation and comments.

Also, please feel free to forward this blog to your friends and colleagues and to come back often.

The JK Consultants Team

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