Achieve Your Goals with SBA Loan Speciailsts

SBA loans provide more flexibility in terms of collateral as opposed to traditional loans that often require collateral as a key component to securing the financing. The SBA does require all available collateral to be pledged, however if you do not have any collateral you can still be approved. It is actually very common. The primary driver of the loan approval is the historical cash flow generated by the company you’re buying to repay the loan. By not burdening borrowers with strict collateral requirements, SBA loans provide opportunities for entrepreneurs to pursue their dreams and make them a reality.

SBA loans provide borrowers with extended repayment terms which is a huge advantage when purchasing a business as this helps keep your monthly payments lower. Traditional loans often come with shorter repayment periods of three to five years, leading to higher monthly payments. For example, SBA business acquisition loans generally have ten year repayment terms. Additionally, if you are purchasing real estate, then the repayment period can be as long as 25 years. If real estate is being purchased in conjunction with a business, then the SBA will allow the lender to blend the term.

Loan covenants are financial restrictions imposed by lenders to maintain certain financial ratios or performance benchmarks throughout the loan term. They are a tool conventional lenders use to periodically check the health of a loan or restrict companies from growing too fast. A violation of one or more covenants may trigger an event of default, which allows conventional lenders the ability foreclosure on your loan or force you to contribute personal cash and/or sell assets to cure the default. With SBA 7(a) loans, borrowers are not subject to any such covenants, allowing them greater flexibility in managing their operations.

Another great benefit of the SBA 7(a) program is that if your loan term is less than fifteen years, which is generally the case unless real estate is involved, then you are not subject to any prepayment or early payoff penalties. Therefore, if your company is performing very well and you decide to payoff your loan you can do so very easily and without any negative financial impact.

As of the latest guidance from the SBA, any loan amount less than $1,000,000 will have its guarantee fee waived. This is a great incentive as this fee has historically been approximately 3.5% of the loan amount. This additional savings is just another reason why the 7(a) program is the optimal loan to use when acquiring a business. If your loan amount is greater than $1,000,000 you can still take advantage of the fee waiver incentive. There are some specifics related to this but is something our SBA lenders can easily walk you through.