Financing a Business? – What You Need to Know About SBA Loans

Photo by Vladimir Solomyani on Unsplash

Many people are often misled to believe the money from an SBA loan is essentially “free.” That the funds are provided with the help of government grants and no-interest offerings; however, that is not the case.

Financing a Business?
What You Need to Know About SBA Loans

By Gary Occhiogrosso – Managing Partner, Franchise Growth Solutions, LLC

Whether you’re taking the plunge and starting a small business, or you’re interested in purchasing an existing one, or buying a franchise, you may benefit from utilizing an SBA loan program.

What Is an SBA Loan Program?
The Small Business Association (SBA) 504 Loan, also known as the Certified Development Company (CDC) program, was created to assist small businesses with the financing of their startup or growth. SBA loans are used to purchase everything from franchises to equipment to inventory. The SBA loan program was also created to help eliminate the “risk” banks take.
Through an SBA loan program, applicants can take out loans at below average market rates, which makes it an affordable option for small business owners.
Because of the complexities, it’s crucial to speak with a lending officer at a local bank. They may offer many options. Often, SBA loan benefits go untapped because many people are unaware of the program. In some cases, the information is not generally provided upfront.

Who’s Eligible
Only small business owners are eligible for an SBA loan. Specifically, their business’s net worth must not surpass $7 million, and their income cannot be more than $2.5 million in the preceding years.
Applicants must be able to provide records from the past two years that show stability and income, and they must have a credit score of at least 650. However, it also helps if the applicant has a background in the field of business they wish to start.

Setting the Record Straight
Many people are often misled to believe the money from an SBA loan is essentially “free.” That the funds are provided with the help of government grants and no-interest offerings; however, that is not the case.
Like any loan, SBA loans are offered through banks, but only SBA-approved banks can offer the program. You do not pay the SBA back; you pay the bank back directly.

Undoubtedly, taking advantage of an SBA loan can be a game-changer in the world of small business. If your interested learning about funding your new business please contact us at [email protected]grow.com – We can schedule a call.

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Sources:
https://www.smartbizloans.com/requirements-eligibility
https://en.wikipedia.org/wiki/SBA_504_Loan
https://www.entrepreneur.com/article/79254
https://www.sba7a.loans/sba-7a-loans-small-business-blog/2017/12/1/sba-7a-loan-for-a-restaurant

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About the Author
:
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with it’s founders. He is the former President of TRUFOODS, LLC a multi brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast in New York City.
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Fulfill Your Dream of Business Ownership – Here are 5 Tips For A Business Loan

The U.S. Census Bureau’s 2012 Survey of Small Business Owners found that 2.52 million businesses in the United States (or 9.1%) are majority-owned by veterans. There are many resources available for veterans interested in starting or growing their business, including those from the U.S. Small Business Administration.

Dreaming of starting a new business? Remember these 5 things

(BPT) – If you’re dreaming about starting a business, or if you’re already a business owner looking to grow your business, chances are that you’ll need a loan at some point to help your vision become reality. And if you’re a veteran or active-duty servicemember, you already possess the skills and vital experience needed to make your business a success.

“From resourcefulness and determination to the ability to take smart risks, military experience teaches skills that translate well for business ownership,” said Tony Pica, vice president of business services at Navy Federal Credit Union.

The U.S. Census Bureau’s 2012 Survey of Small Business Owners found that 2.52 million businesses in the United States (or 9.1%) are majority-owned by veterans. There are many resources available for veterans interested in starting or growing their business, including those from the U.S. Small Business Administration.

What are lenders looking for? Here are five considerations to keep in mind before securing a loan for your business:

1. Do your market research and prepare a solid business plan.

Doing research on the industry and preparing a solid business plan is an important step to take when seeking financing for your company. If you can demonstrate to lenders that you’ve done your due diligence — created a detailed business plan, have a trusted team, know the demand for your product or service, and developed a sales strategy to show the viability of your business — you’ll be much more likely to convince them to take a chance on you and your company.

2. Review your overall financial profile.

“Your complete financial health demonstrates your creditworthiness to lenders, so it’s best to review your credit history before applying for a business loan,” Pica said. “You’ll also want to know the amount of money you need to borrow and what exactly it will be used for.”

Presenting your complete background, such as your education and experience, including whether you’ve worked at or managed a similar business in the past, can also make a big difference.

3. Be willing to invest some of your personal money.

Depending on the lending request, you might need to provide a cash injection or collateral. This may include your home, a vehicle, marketable securities or tangible inventory. The lender wants to make sure that you’re willing to put your own skin in the game. In many cases, a certain amount of capital may be required by law.

4. Expanding an existing business? Demonstrate evidence of continued success.

Lenders will want to see evidence of your past and projected cash flow as a result of expanding your existing company. If the loan is for a new business, you’ll need to show lenders your ability to repay it by providing a detailed explanation that includes projected expenses and income, based on solid research.

5. Partner with your trusted financial institution.

Once you’ve done your market research and developed a concrete business plan, talk to your trusted bank or credit union about the business lending products and services available to you.

For example, Navy Federal Credit Union Business Services provides more than just loans for equipment, vehicles and commercial real estate for its members. It provides a whole suite of options, such as business checking and savings accounts and business credit cards, as well as assistance with bill pay, payroll processing, insurance policies and retirement coverage for employees.

Financing your budding business can be a smooth process with these considerations in mind.


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