By Jeff Rauth. Email Here or 248 885-8797. SBA Loan Officer at a Bank That Lends Nationally. 15 Years Commercial Real Estate Experience. Past Commercial Mortgage Broker.
The SBA 7a loan program is one of the most reliable and flexible loan programs in the industry for small business owners. The underwriting parameters are lenient and high leverage is available. You can use the loan to finance virtually any business related purpose, such as real estate, goodwill, working capital, equipment, partnership buy outs, construction, etc.
The benefits of the SBA loans for business owners are numerous. Up to 90% loan to value financing and long amortization schedules, up to 25 years, are a few of them. Another is that this loan has some of the most aggressive underwriting guidelines available. For example, debt coverage ratio’s of 1.15 are still allowed. Most commercial mortgages, in contrast, require a minimum debt coverage ratio’s of a 1.3. So with a 7a loan, your business can have lower cash flow and still get your loan closed. Credit scores as low as 600 (sometimes lower depending on the situation) are acceptable as well.
The use of the loan proceeds are another major benefit. Borrowers can use the loan to rehab or do ground up construction, refinance existing business debt (which often results in drastically improved cash flow) buy equipment and roll in working capital. All within the same loan…
The interest rate is normally the Prime Rate + 2.% – 2.75%. Amortization schedule on commercial real estate transactions is 25 years with minimal prepayment penalties (5% year 1, 3% year 2, 1% year 3), all this with the highest level of financing in the business.
It is important to understand that the underwriting standards vary greatly from one SBA lender to the next. Some borrowers have the wrong perception that all SBA lenders underwrite and approve loans under the same credit criteria, this is not the case. Just because you have been declined by one or several SBA lenders does not mean that another SBA lender will not fund your loan.
SBA 7a Loan Terms Details:
- Can use program to refinance existing business debt.
- Up to 25 year amortization schedule.
- Receive working capital.
- Projection based loans.
- Up to $5,000,000 loan amounts.
- Up to 120% loan to value, cash out or rate and term refinance…
- No small town population restrictions.
- Need 51% or more owner occupied.
- Due to the Small Business Jobs Act, a PERMANENT increase to the maximum tangible net worth of up to $15 million, and an increase two-year average net income (after Federal income tax) of up to $5 million.
- Minimum 600 credit score.
Take advantage of the SBA 7a loan program designed for business owners.