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SBA Loans

Expert Recommendations for Your Startup
  • Ask for at least 30% more than you really need. Collateralize to match as much as you can, but at least 70% of the loan amount you request. Why? Quite a few SBA loan packages I've done, either for my own businesses or clients, have resulted in loans less than what was requested. What can be collateral? Don’t put your home up as collateral. I make this recommendation to everyone. You can do it without risking your home. You can borrow the collateral as well.

  • In your package, both the bank and the SBA will look for equity investment from sources other than you and any partners. Certain family members and friends can help you qualify here. My experience with the SBA and loans from $75,000 to $750,000 are that they like to see equity investment of 20% already made or made contingent upon receiving the loan. I have borrowed or engaged investors in pledging collateral to help get a loan. Examples of things that can be pledged are stock, bonds, insurance policies, land, investments, and property.

  • While in recent years the SBA and the banks have attempted to make the process easier and faster, you can only expect a positive result if you are completely prepared when you apply. If you have a good relationship with your bankers, they can be a good resource to help you. I have had bankers tell me exactly what they want to see to say yes. It doesn’t hurt to ask. If you get a "no", don’t accept it, ask why and what you can do to bolster the package to make them say yes.

  • Tenacity can be a great ally as well. If it's feasible, make personal contact with the "loan chief" at the closest SBA district office and get to know each other. This serves the same purpose as having a good relationship with your bank. If both the bank and the SBA can put a face and a feeling with your loan package, you’ll have a very strong leg up in the process.

  • Don't wait until you’re hungry before you start planning to eat. In other words, prepare well in advance of needing the money you’re asking for. The process can take a great deal of time or a relatively short time. I’ve seen loan packages take as long as a year to get approved, and I’ve seen large loans approved and funds dispersed in thirty days. It all depends on the deal, the loan request, collateral, the business, and the management. The better prepared you are, the better armed with the right information and all the elements that you know in advance will be required, the better your chances will be.

As to your inquiry for sources to forward your business plan to, I'd suggest you look for your local Department of Commerce Small Business Assistance contractor. Your SBA office will be able to direct you to this firm. The DOC funds contractors in most major cities whose function is to help small businesses obtain SBA loans. Generally, they charge minimal fees, as they are provided funding by the government for the services they provide. Most charge $25 per hour or less. If you don’t have a relationship with the local SBA, they do and they’ll likely help you with introductions and their insight into what is required to get your loan.

Lastly, look into Small Business Investment Companies (SBICs). SBICs are approved by the SBA to make loans to small businesses. Most SBICs are investment banks set up by regular banks to help people with SBA loans.

Hope this helps.

Kent Capener of Capener Consulting

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