SBA Loans-Business Banking Advice
As a business banking advisor, SBA loans are going to be a great way to finance your banking needs for the near future. The best business banking advice I could give is that you check out the specifics of this program.
- The guarantee on the SBA 7a loan increased from 75% to 90%. Why should I care? Because the $500,000 loan you may request has a capped risk to the bank of only $50,000 vs $125,000 before the program. The risk reduction makes a bank more likely to approve a loan because their loss is mitigated.
- The 7a program limit has been increased from $2 million to $5 million. This is great news for small business loan borrowers. Many banks are not lending money outside the SBA loan program. Here’s why. A bank that makes a $1 million loan counts the full $1 million against their capital. However, a $1 million loan that has a SBA 90% guarantee only counts $100,000 against their capital, the non-guaranteed portion. A bank can do 10 SBA loans to get to $1 million vs only 1 conventional loan. The combination of the ability to do larger loans plus the leverage the banks get with SBA guarantees is huge for banks and borrowers alike.
- I saved the best for last. Historically, the 504 program (90% real estate financing) has only been for purchases. However, under this legislation, the 504 program can be used for refinancing real estate. If you need to restructure your amortization or combine equipment or acquisition debt with real estate, it can now be done.
Fees for these SBA programs have typically been between 2-3%. However, they have been waived through the end of the year. The ability to have a higher percentage of your small business loan guaranteed, coupled with a higher loan amount with no fee is significant. Plus, you can use the SBA 504 program for refinances and purchases. These benefits are a real game changer for small businesses.
To learn more contact Bill McDermott at 678-597-8184 and visit www.bankingsolved.com