Top Advantages of an SBA Loan
The Small Business Administration (SBA) guaranteed loan programs are set up to handle a full range of small business needs for any industry.
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The Small Business Administration (SBA) guaranteed loan programs are set up to handle a full range of small business needs for any industry. An SBA loan can be used to construct new or purchase existing commercial owner-occupied real estate; to expand or modernize facilities; to purchase machinery, equipment, fixtures, or leasehold improvements; to finance business acquisitions and business start-ups; or to finance inventory and accounts receivables. Our expert, who finances SBA deals and is an SBA Preferred Lender, offers reasons why small businesses may want to consider this choice for raising needed cash.
- Keeps cash in your business
Longer terms equal lower monthly payments. SBA loans are usually long-term and could be as long as 7 years for working capital, 10 to 15 years for equipment, and up to 25 years for real estate. Higher loans for the value of collateral equal lower down payments. SBA loans allow for up to 90 percent financing for new purchases and offer solutions for financing soft assets such as goodwill. In addition to this, SBA loans give you the ability to finance closing costs versus paying them out of pocket.
- Preserves management flexibility
SBA loans have options for interest-only periods. They have lines of credit with 7-year commitments (non-SBA lines typically are 1 year). Balloon payments are not necessary. There are limited pre-payment penalties. Pre-payment penalties exist only on loans longer than 15 years, and the prepayment penalty only applies to the first 3 years. There are also limited call features and financial covenants.
- Minimal costs
Their loan packaging fees are minimal, typically from $250 to $1,000. The SBA guarantee fee is based on the amount of the guaranteed portion of the SBA loan. There are no points or origination fees, and interest rate caps are based on deal size.
Source: Cleveland-based KeyCorp (www.key.com) is one of the nation’s largest bank-based financial services companies, with assets of approximately $93 billion. Contact them at 800-539-2222.
