April 18, 2024


Mad about real estate

SBA 7a Loans, Biggest Questions

The SBA 7a loan has been getting a lot of press lately, as it is one of the most viable commercial mortgages out there, and many business owners are trying to get a better understanding of the loan program.  Below are the typical questions that business owners have regarding the SBA 7a loan.    

Aren’t SBA lenders the same?  Should I just work with a local bank?

Though the SBA has set guidelines, banks all have their own lending criteria, and what is considered a doable deal from one bank will not be to the next.  Many borrowers incorrectly think that the SBA funds loans.  They actually just guarantee the funding bank, that in case of borrower default, the bank will get their capital back. 

So the point being, you may get 9 declines from various SBA lenders, than find one lender that really likes your request.  Lending criteria/guidelines does vary.  There is a very good chance that best lender for your request is not local, but maybe located on the other side of the country. 

Also, some SBA 7a loans are structured in different ways.  For example, 99{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of banks structure SBA 7a with an adjustable rate.  There are a few banks that offer the loan with a 3 to 5 year fixed rate.  Some other lenders have different focuses in terms of building types.  While some lenders won’t even look at hotels requests, others banks focus almost exclusily on them, for example. 

Willthe SBA monitor my business, after the loan closes?

Actually, not at all.   In fact the only time the SBA would get involved is if you default on the loan.  And the SBA would work with the funding bank to remedy the loan, not the borrower.  There is no need to fear a “Big Brother” element with an SBA 7a loans.

How long does the an SBA 7a Loan take to Close?

It should take approximately 60 days to close.  It is very important though to seek out and work only with lenders and banks that very experienced with doing SBA 7a loans.  Many banks, including huge ones, have never done a single SBA loan, so borrowers should be careful with this. 

If the borrower works with an “approved lender” the loan gets underwritten only once and the process should take around 60 days to fund.  This timing is normal, relative to all other  commercial mortgages.  If they work with un unapproved SBA lender, the loan will have to be underwritten twice – once by the bank, than by the SBA. 

I’ve heard the SBA paperwork is intense and require a lot of special forms?

Today’s SBA loans require about the same amount of paperwork and effort as a typical commercial mortgage.

SBA7a loans are one of the most reliable sources of capital in today’s credit crisis for small business owners.  The programs boasts the highest level of financing in the business and is ideal to roll in working capital, business debt, and equipment loans.  It might just be the best program out there for your request.