SBA loans are the most readily available form of financing in the industry for small business owners.  The programs have received a considerable amount of press lately as well as a considerable amount of help from the government, via the Stimulus Package.  Bottom-line, despite the criticism anbd confusion around the program, SBA financing is a serious option to help entrepreneurs finance real estate, equipment, inventory, working capital, debt consolidation, renovations,  and construction.

Benefits include the highest level of financing in the business at 90%, long amortization schedules and low rates.  There are two main loan programs, the SBA 7a Loan and the SBA 504 Loan.  We have a considerable amount of information on both throughout this site.  Click on the links to read more.     

Meaning commercial mortgages that are offered and funded by conventional banks, and that the loans are not backed or guaranteed by the government.  These loans are funded and usually held onto by the same bank.  And they are not normally sold off onto the commercial secondary market (which is pretty much dead).   

Finding conventional lenders in this market is hard.  Most banks have stopped lending conventional.  They normally try to stir borrowers to either the SBA or USDA B & I program as they receive a such a large guarantee from them.  The few banks that is are lending conventional want "Top Shelf" deals and decline the vast majority of loan requests.  Loan to values rarely exceed 60% - 65% and amortization schedules are normally less than 20 years.  

This category of commercial loan programs is not nearly as reliable as the other programs described on this page.   Therefore we do not normally recommend this type of financing as we have seen many deals died in the middle of underwriting, which costs borrowers thousands of dollars and months of their time.   

#3 - USDA B & I  Loans

The USDA Business and Industry programis little known.  It was created to help rural communities create and retain jobs.  It is for both small business as well as investment properties where the town population is less than 50,000.   

Financing can go up to 90% loan to value, but is more commonly capped at 80% on commercial real estate.  Loan amounts can go up to $10,000,000, though most banks cap their funding at $5,000,000.   One of the other major benefits is that the amortization schedule on these loans is  normally 30 years (some banks do structure it on 25 years).  This is a well funded program and continues to perform. 

Entreprenuers in smaller communities should give this serious consideration.   

#4 - Private Money Loans

Private money loans or hard money span a wide range of financing sources, (from high net worth individuals, to groups of private investors, to institutional lenders that are non bank entities).  This money is almost always expensive and is based mostly on the assets value, and not dependant on the cash flow of the business or rents (historically). 

Due to the credit crisis, commercial hard money loans are ironically becoming much harder to get done.  Many industry professionals predicted this category of the business would win out, as banks and other sources of capital pulled out of the market.  But, this category has been hammered by dropping property values, lack of financing for new potential buyers of their foreclosed properties and there own borrower defaults.  Many of the nations most prominent private money lenders have gone out of business or have stopped looking at new loan requests until the market returns. 

Until property values stabilize the problems will continue.  Borrowers should be careful on which lenders they work with, making sure they are reputable, and that they are very realistic about their property values.  In other words, the private money lenders are going to beat up what you think the value of the property is and they will only really go to 50% of the discounted loan to value. 

If your property truely has that much equity than this maybe a decent option for you.  

#5 - Life Insurance Capital

This is money from life insurance companies.  They act as a bank and lend their own capital.  Historically these lenders only looked at Class A type projects, for extremely high net worth sponsors.  Loan amounts start at $5,000,000 and go up to the billions.  

Virtually all insurance capital dried up at the beginning of the credit crisis.  However, we are starting to see signs that this segment is coming back.  If you have at least 30% of post close liquidity, you should look into this loan program.