Q: I recently applied for a loan to expand my building. My banker suggested an SBA loan, but didn't answer my questions about government loans and didn't have the program available. Can you help me?
A: If your banker says an SBA loan might be better for you but can't offer the program, quite frankly it could be a polite way of saying no. Many banks use this line when they don't feel comfortable lend-ing to you but still wish to maintain a relationship because of your deposits or the referrals you send its way. It's an easy out for them. It means you'll have to seek financing elsewhere.
The SBA offers guaranteed funds to banks, allowing them to grant customers longer terms than traditional loans allow. The entrepreneurial advantage to you is a smaller monthly payment with no balloons or prepayment penalties down the road. The advantages to the bank are twofold: a higher premium than traditional loans permit when the guaranteed portion of the loan is sold in the secondary market, and an immediate recoup of its capital investment, letting the bank lend again to other customers. This is especially important to small, start-up banks with limited capital-it can help level the playing field and allow them to compete with the big boys. So, try several of the smaller banks in your area first. They are often willing to take a risk on local borrowers because they're committed to reinvesting dollars in their own communities.
Seek a lender with a good track record for funding and closing SBA loans. A bank's SBA program is only as good as its lender. The appeal of accelerated profits sometimes results in improperly trained personnel being slotted into loan officer positions to quickly improve the bank's final bottom line.
To find a reputable lender, contact your local SBA office or visit www.sba.gov and ask for a list of Certified or Preferred lenders. They'll know who the real players are.
Who can answer the business-financing questions that keep you
up at night? Starting this month, consultant, ex-banker and
co-founder of Rainmaker Capital Corp. Doug Hood can.
Rainmaker Capital Corp. co-founder Marilea S. Hood also contributed. Send questions or personal anecdotes via e-mail to email@example.com.