My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.

Starting a Business

Tight-Lipped Banks

Are SBA loans a big secret?
Magazine Contributor
2 min read

This story appears in the July 2000 issue of Entrepreneur. Subscribe »

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 doughood@mindspring.com
.

More from Entrepreneur

New York Times bestselling author Nicole Lapin can help you pitch your brand to press and strengthen your media training.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Create your business plan in half the time with twice the impact using Entrepreneur's BIZ PLANNING PLUS powered by LivePlan. Try risk free for 60 days.

Latest on Entrepreneur