SMALL BUSINESS BANKING IN RHODE ISLAND
SPECIAL PROMOTION lending package for a Warwick retailer . Its long-time owners were retiring and the new buyers needed financing to purchase both the business and the real estate it occupied . BankRI worked with Ocean State Business Development Authority on a $ 2.5 million 504 loan for the real estate portion of the transaction . Then they created a 7 ( a ) term loan for $ 1.2 million for the business acquisition and an Express line of credit as part of the 7 ( a ) loan for ongoing inventory purchases .
“ The SBA 504 loan program is a great product , it gives the borrower a good long-term , fixed rate , generally twenty t0 twenty-five years ,” Lajoie says . “ We ’ ve used it and 7 ( a ) loans to finance many business acquisitions and expansions , and provided SBA-guaranteed lines of credit to help businesses with working capital needs .”
The SBA is definitely an economic driver for the state , Hayward says . “ What we try to do is shore up those businesses having issues and those who want to get into business . In a down economy where people are laid off , people come in and say , ' I ' ve always wanted to do X , maybe this is my opportunity .' But you have to get
A knowledgeable people to help you .” That ’ s where the SBA comes in . They offer secure financing guaranteed by the federal government and a range of free technical assistance to help businesses confidently launch , grow , and expand .
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“ The SBA is an insurance program ,” Hayward explains . “ Because the financing is guaranteed , it gives both bank and borrower safety and soundness of that loan moving forward . A bank has shareholders and depositors they have to make whole . The SBA ’ s responsibility is to keep businesses up and running ; we want to see businesses continue to thrive and survive .”
SBA loans have many advantages over a traditional commercial loan : competitive interest rates ; the possibility of a fixed rate ; greater flexibility in repayment terms and required collateral ; and the ability to use funds for working capital . Perhaps the biggest advantage for both bank and borrower is the SBA guarantee . That means the bank is guaranteed that a percentage of the loan will be repaid and the borrower has the SBA ’ s assurance that they will work with them .
“ The guarantee enables businesses who wouldn ’ t typically qualify for a traditional bank loan to get financing ,” says George D . Duarte , Jr ., vp / director of business banking at Bank Newport . “ There are certain industries that present a little more risk to a bank than others or businesses who had a timeframe where they struggled . COVID impacted a lot of businesses who are now coming back , but most banks will look back at two to three years ’ worth of financials , and might see a gap that causes concern . That ’ s where we would suggest utilizing the SBA guaranteed funding because it relieves the bank of some of that risk .”
94 RHODE ISLAND MONTHLY l APRIL JUNE 2023