SunTrust Business Owner Research indicates that many business owners do not seriously consider Small Business Administration (SBA) loans when looking for financing. Digging into the survey findings, the data reveals a set of negative assumptions about SBA loans that do not always match the reality of what is available. Here are the top reasons business owners give for not taking advantage of SBA loans.
Insufficient operating history, lack of collateral or down payment, inability to fund short loan term payment with existing cash flow -- these are all reasons that many small businesses do not qualify for traditional loans. However, these are the exact reasons that businesses may qualify for an SBA loan. Many SBA loans offer flexibility for longer terms to make payments smaller and more affordable. Others require no collateral or down payment conditions for certain types of loans, including financing for retail, real estate or businesses owned by veterans. Undercapitalized growth companies are especially in a sweet spot for the flexible terms and requirements of SBA loans.
Recent government programs designed to accelerate small business lending have simplified the process, so that preferred bankers will actually help business owners complete the paperwork. Another business owner resource is local Small Business Development Centers (SBDC) where counselors from the Service Corps of Retired Executives or SCORE, a nonprofit educational and mentorship group that works with the SBA, will help you prepare a business plan, and introduce you to quality bank and non-bank financing institutions with a reputation for supporting small business.
Owners don’t understand how fast SBA loans can happen, particularly given recent programs designed to accelerate and streamline small business lending with preferred lender banks. Many banks with SBA expertise have streamlined their underwriting processes and secured “fast track” status for loan guarantees from the government. It is important to look at the experience and volume of SBA loans written by the lending institution.
The SBA backs a wide variety of loans, for example:
About SunTrust Business Owner Research: SunTrust surveys small business owners and advisors as part of its ongoing business seminars and symposiums. The small business owners attending these events include both SunTrust client and non-client business owners and are representative of the broad spectrum of businesses located in the SunTrust markets. The research cited in this report is extracted from these 5,425 small business owner surveys collected between 2007 and 2011.
This article is general in nature and does not constitute legal, tax, or investment advice. SunTrust makes no warranties as to accuracy or completeness of this information, does not endorse any non-SunTrust companies, products, or services described here, and takes no liability for your use of this information.