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Below is some real world advice on SBA business financing in this market.  Specifically, advice on getting your loan closed. 

SBA financing and general banking industry is what it is.  You, nor I, can do anything about that.  What you have to focus on is doing everything in your control to increase your chances of closing your SBA loan.

And it has never been more important to prepare yourself and your loan request for the realities of current small business loan climate.  What this normally means is being totally upfront and dealing with your loans weaknesses head on.  You have to build your argument of why your business is credit worthy – and most specifically dealing with the issues that have or likely will get you declined if you don’t deal with them. 

SBA Financing, Rule #1

Never, leave your issues to chance or ignore them hoping that the underwriters will not notice.  They will notice!  They will discover the issues and you will lose.  Let me give you an example. 

We recently where engaged by a small business in Rhode Island to refinance his existing conventional loan (i.e. a local bank mortgage).  The borrower how is a great guy and an impressive 30 year veteran entrepreneur was facing a ballooning loan.  It was due 10 weeks from the time that he initially contacted us.  Though I was concerned about the timing and knew we couldn’t make any mistakes, I was confident that we could get the loan closed in the required time frame.  In addition, it is not uncommon for the existing bank to extend the loan if you can prove to them that you have a viable new loan on the table. 

The weaknesses of the file where that the business gross sales had declined for the last three years and fell more even more rapidity year to date.  This in itself is a huge issue.  Banks and their underwriters want to know and want you to prove that you have fit “bottom” and that the situation has been turned around. 

However, and this is a big however, the borrower had done a good job on eliminating his fixed costs and diversifying into other businesses.  He was still very much in the black and his cash flow, despite the huge drop in gross sales had only dipped slightly.  So my job and our argument to the underwriters was to highlight this.  I.e. that despite the declining sales the borrower was in a solid position as he was still making great income. 

Despite the well thought out and detail Letter of explanation that we put together the borrower failed to tell us the whole story – that he was served a foreclosure notice a week before he contacted us and that he stopped making payments on the loan, as the existing bank stopped sending him payment coupons. 

Bad move.  We had 45 days into the transition when we finally discover this.  It was a bad situation for us, as we wasted almost 2 months, but he ended up losing his property and app. $600,000 in equity. 

Jeff Rauth is President of Commercial Finance Advisors, Inc. They close SBA and other commercial real estate loans between $400,000 – $5,000,000 nationwide. Reach him at 248 885-8797 or at SBA 7a Loans or SBA Business Loan or SBA Financing

Article Source:http://www.articlesbase.com/mortgage-articles/sba-business-financing-general-advice-1749793.html

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How do you apply for an SBA loan?  It’s recommended that you do a phone interview first, than assuming you think there is a fit, provide the required information to the SBA bank or lender.

As far as the interview, you want to accomplish a copy of things.  Number one is to be completely upfront and honest with the loan officer.  Tell them the strengths of the request and it’s weaknesses.  Do not try to cover anything up that you may perceive as a weakness, as the underwriters will find out. Underwrites are basically professional detectives and will scrutinize every detail of the file.  If there are issues, you should try to determine if they can figure out a solution now, before you put months into the process only to get a decline. 

Some examples of common issues include, declining business trends, credit score issues, high loan to value, low liquidity, start ups or “young businesses” (less than two years), etc.  This is not to say you should be passive.  You should have arguments thought out and prepared.  For example, say your last tax returns shows that your gross sales declined by 10% compared to the previous years.  You should say something like “our gross declined in 2008 however, are year to date is back on track.  We believe we have turned the situation around.  This is due to our new marketing plans and an increase focus on …” 

You should have other strengths to point out where applicable, “in addition, despite the declining trends we feel the cash position of our business and our relatively low loan to value, should help you get over these issues.”  The banker on the phone will be impressed and will more likely be willing to work will you.

Also, try to figure out what the proposed terms would be, assuming the bank thinks you are credit worthy.  They should be able to give you an idea of the loan to value restraints, approximate interest rate and amortization schedules.  Most SBA bankers will hesitant to give you any hard quotes or specifics until they have a real comprehensive understanding of the loan but, they should be able to give you an idea.  If you feel you can do a lot better, than move on. 

Apply For an SBA Loan

When you believe you have found and decent match you will now have to roll up your sleeves, and provide the required documentation.  The list is thorough and comprehensive.  Keep in mind there is no getting out of this.  You play ball, or have no chance of getting a loan.  At a minimum you have to provide, resumes, 3 years of business tax returns, 3 years of personal tax returns, personal financial statements, and year to date profit & loss and balance sheet. 

They will be other required items, but the banker can at least give you a real quote and or a term sheet which will spell out the terms of the proposed loan after they review these items. 

Jeff Rauth is President of Commercial Finance Advisors, Inc. They close SBA and other commercial real estate loans between $400,000 – $5,000,000. Reach him at 248 885-8797 or at SBA 7a Loans or SBA Business Loan or SBA Lenders

Article Source:http://www.articlesbase.com/mortgage-articles/apply-for-an-sba-loan-1425179.html

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