SBA FAQ
Frequently Asked Questions about SBA Loans
What are
the advantages of SBA financing for my business?
Simply put, a longer term means lower payments. Lower payments allow you to
retain and utilize more working capital, which is essential for a growing
business. Additionally, there are minimal prepayment penalties on SBA loans. All
SBA loans are fully amortized. Therefore, your business will not be impacted
with renewal fees, interim appraisal costs or untimely balloon payments.
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Is my business eligible for SBA financing?
Over 95% of the nation's companies are classified as "small
businesses" by SBA standards. Limitations are set by total revenues and
number of employees according to industry. Almost every type of business
qualifies for SBA financing: manufacturing, wholesale, service, franchises, retail. Business loans cannot be made to speculative businesses, media businesses or businesses engaged
in gambling activities.
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How much can I
borrow?
Goldman & Klein offers SBA 7(a) financing up to $2 million
and SBA 504 loans up to $5 million.
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What
can the funds be used for?
Loans can be used for virtually any legitimate
business purpose. Examples include: Purchase real estate, make improvements to
your business property, purchase equipment, expand a business, consolidate debts,
purchase another business, construct a new facility and finance a franchise. Goldman & Klein works with Small Business Development Centers (SBDC's) to assist you further. In addition, Goldman & Klein provides information about government contracting opportunities.
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Will I be able to get an SBA loan if I have bad credit?
No, SBA financing will not be extended
to any business that does not demonstrate the ability to repay debts. The longer
terms allowed with SBA financing can enable your company easier debt
qualification based on lower payments.
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What amount of equity will I be expected to have in my financing request?
For an existing business, borrower equity can be as
little as 10%, depending on creditworthiness. Start-up businesses are required
to contribute at least 30% of the total project costs. Equity injection is
typically cash.
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What else
do I need to know?
- Sufficient cash flow to meet proposed debt service
- Personal guarantees are required
- Hazard insurance is required
- Current appraisals are required on real estate collateral
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Will the Small Business Administration be looking over my shoulder for the duration of my loan?
As with any commercial loan, your lender, rather than
the government, monitors and services your loan. The government’s
involvement relates to the guarantee only in the event of default.
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What are some common
myths about SBA financing?
- It does not take 6 to 9 months to get funded. On average, it
takes 60 days to process an SBA loan from submission to final funding.
- You do not have to be "turned down" by a bank prior to
applying for an SBA loan.
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Can SBA loans be used to refinance existing business debt?
Yes, but certain criteria applies.
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Can SBA financing be used for construction?
Yes, as long as the business will occupy at least 60%
of the new building. The construction loan will convert to a fully amortized
loan at the end of the construction. If an existing building is financed or
refinanced, your business must occupy at least 51% of the facility.
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What costs are associated with an SBA loan?
By statute, the maximum rate charged is 2.75% over the
National Prime Rate for loans with maturities of seven years or more, and 2.25%
over national prime rate for loans with maturities of less than seven years. The
SBA itself charges a guarantee fee based on the loan amount, which is the only
cost associated with the benefits of long term SBA borrowing. This fee can be
financed as part of the loan proceeds. In addition, as with any other loan, the
borrower will be responsible for direct processing costs such as title insurance,
appraisals and other closing costs.
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How long will I have to wait for a decision on my application?
Qualified applicants are given a pre-qualificiation
letter (letter of interest) outlining major points of the loan, if requested.
Upon receipt of all required information from the borrower, a formal request is
submitted to our underwriters, with a decision usually within 5 business days.
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See SBA Loan Options ยป
Call 1-858-602-7800 for an SBA loan consultation
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