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I thought about a catchy title for this article like “SBA
Loans Made Easy”… but let’s face it, there is nothing easy
about financing in our post-recession look-under-every-
rock-and-double-document-everything world in which
we live. The best we can do is manage expectations, have
some knowledge about the process up front and be diligent
about handling the unexpected. That is the role of a good
lender; make sure that the customer is qualified so we do
not waste time and we all have a reasonable assurance of
success. Then keep everyone informed and heading in the
right direction.
With that said, SBA financing is not that much different
than conventional commercial lending. When we say
commercial in relation to an SBA loan, we mean business
purposes and property, not investment such as apartments
or commercial rentals. Most business purposes fall into real
estate (purchase, re-fi or construction), business enterprise
(purchase, re-fi or leasehold improvement), equipment or
working capital.
In short, the SBA lender underwrites a more aggressive
conventional loan than they would normally extend.
They then back it up with either a SBA guarantee (7a loan
program) or SBA subordinate financing (504 program).
These are the two main SBA programs. The 504 program is
a fixed asset financing vehicle. The 7a program, in which
ReadyCap specializes, can be used for any and all valid
business purpose.
The first step is to find a lender that knows what they are
doing…there is a big difference between lenders not only
in credit appetite, but also in expertise. The lender can help
you determine if the deal will work based on the credit
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