by Evan Dickson, President, Nevada State Development Corporation
The following seven myths and facts refer to the U.S. Small Business Administration (SBA) Commercial Loan Program.
MYTH 1: It takes four to six months to get a loan approval.
Fact: You can obtain an SBA approval as quickly as ten business days.
Tip: Provide your lender with a complete package and answer your lender’s questions as soon as you can. Being available to the lender will greatly speed up the overall process.
MYTH 2: SBA loans are expensive.
Fact: All commercial real estate loans have loan fees, professional fees, and closing costs. The SBA 504 loan program will allow you to finance the fees associated with your 504 loan and use many of your out of pocket fees towards your 10% equity injection.
Tip: If there is enough value in your appraisal, additional fees and costs can be financed. (example: appraisal and environmental reports)
MYTH 3:SBA lending limits are too narrow.
Fact: SBA 504 loans start at $25,000 and can go as high as $5,500,000.
Tip: Talk to your local certified development company to see what you can qualify for based on your particular situation.
MYTH 4: It is hard to qualify for a loan based on my past.
Fact: People with a criminal history, bankruptcies, or significant credit issues can and have received financing through the SBA 504 loan program when they otherwise would not qualify for standard bank products.
Tip: Be forthcoming with all personal history as soon as possible, no matter how long ago the incident happened, so your lender can address the possible issues. Your past does not have to stand in the way for your future.
MYTH 5:There is just too much paperwork.
Fact: The paperwork is comparable to that of any business loan. There are a few SBA documents that need to be completed, otherwise the packages for a commercial real estate loan and SBA 504 loan are the same.
Tip: Work with your local certified development company so they can share the pertinent documents with the local lender.
MYTH 6: I have to put down 30% to buy or build a commercial building and pledge my home.
Fact: Most businesses qualify for 10% down when they use SBA 504 financing for their purchase. In most cases the loans are only secured by the building and/or machinery being financed and the personal guarantees of majority business owners applying for financing.
Tip: To qualify for the lowest down payment, your business must have two years of verifiable income. Also be sure your business ownership structure is in line with the business’ future goals of real estate ownership before applying for financing.
MYTH 7: Fixed rate commercial loans or refinancing of existing business debts are seldom available.
Fact: The benefits of an SBA 504 loan include a low down payment, longer loan terms, and larger loan amounts than may be available through a conventional loan. In most cases, the borrower’s down payment will be 10% of project costs. Interest rates on the SBA 504 loan are below market rate and are fixed for the duration of the loan term (10, 20, and 25 years). Eligible small businesses may also be able to refinance certain qualified existing debt under the SBA 504 Debt Refinancing Program. Loans made through this program are structured like traditional 504 loans. Borrowers can refinance up to 90% of the current appraised property value. The refinancing may also include a limited amount of eligible business expenses.
Tip: Ask your bank for an SBA 504 loan/refinance if you are considering financing through this particular program. Banks have a lot of different loan products and the SBA 504 loan may not be something that they do often but could provide the best solution for your particular situation.
Nevada State Development Corporation (NSDC) www.NSDC.COM is a local non-profit certified development company licensed by the U.S. Small Business Administration (SBA) to assist business owners in obtaining financing though the SBA’s 504 Loan Program. With over 32 years of experience in business financing, NSDC has forged strong relationships with numerous financial institutions and brokers through-out the region.
Reno office: 6572 S. McCarran Blvd.; 775-770-1240
Las Vegas office: 1551 Desert Crossing Ct.; Office: 702-877-9111