Business owners are constantly thinking about how to grow their business — either by growing the size of their staff, acquiring a new building or simply upgrading their equipment. The costs for growing their business can add up quickly, so how can business owners help cover the needed costs?
Backed by the Small Business Administration, an SBA loan is available to help cover costs for specifically those types of needs. From $500 to $5.5 million, business owners may use SBA loans for a variety of business purposes.
“The SBA program has continued to be broader and more flexible,” says Jeff Kopco, commercial loan originator at First Federal Lakewood. “An SBA backed loan can be used when a business is growing rapidly.”
Smart Business spoke with Kopco about what business owners need to know about SBA loans when choosing a banking partner.
How will a banking partner assist with SBA loans?
The perfect banking partner will work to find the best loan for you by understanding what your business needs are.
Not all business owners understand the different types of loans available for them when they go to a bank looking for financing. They often rely on business bankers to recommend loan products that would be a good fit for the business. It is possible that given a business’ size or loan amount requested not all options may be recommended due to the options or expertise a particular bank offers. The perfect banking partner will do what’s best for you and your business on an individual basis.
Doing research about a lender is the first place to start. It’s important to look for a bank that is committed to the process and will be able to help find the best fit for your business. Once a bank has been chosen, your lender will be able to walk you through if an SBA loan is a good option.
What are the benefits of SBA loans?
There are a number of benefits of SBA loans. An SBA guaranteed loan may be the right fit for your business by offering longer loan terms to repay, lower down payment, allowing for a potential lack of collateral, or inconsistent earnings. Talk to your lender about the rates and fees associated with these loans compared to others. Your lender will also be able to walk you through any down payments, documents and flexible overhead requirements needed to apply for the loan.
The program is evolving to be more flexible and to provide more options for small business. Some even have permanent maximum limits for loans and potentially reduced fees as well. The Small Business Administration has flexible repayments when it comes to an SBA loan, which your lender will help guide you through.
What advice do you have for businesses that are interested in SBA loans?
Since there are multiple programs for SBA loans — lines of credit for working capital, term loans for equipment and real estate loans for owner occupied properties, for example — it is important for businesses to do their due diligence when finding a banking partner. Look for someone who is committed to a variety of SBA programs who will be able to help maximize the probability of getting the financing and structure you need.
Also, know that the term ‘small business’ is relative. The SBA has size standards that are larger than many would-be applicants assume. Businesses should be sure to check the qualifying criteria before pursuing an SBA loan to see if they’re a good candidate. Depending on the industry, qualifying sales could be as high as $15 million or $5 million in net income. Those criteria cover a high percentage of the businesses in the country.
Be aware of all terms when looking for a loan. Make sure you’re doing as much research as possible, talking to a variety of lenders and consulting with a financial advisor, accountant or attorney before making a decision. ●
INSIGHTS Banking is brought to you by First Federal Lakewood