Financing and Capital Markets

Think You Know SBA Financing? Think Again

Four Reasons SBA Financing May Be Right for Your Business

Four Myths About SBA Financing

SBA (Small Business Administration) lending continues to widen its reach and acceptance as a preferred source of business financing, on pace for 40 percent growth year over year (FY2015 to FY 2016).1 This enthusiasm for SBA reflects the numerous improvements the government, working alongside financial institutions, has instituted to the process and the SBA lending model.  Business executives are increasingly discarding their outdated assumptions about SBA loans and recognizing the attractiveness of today’s SBA programs.

Consider four reasons you should give SBA lending a look:

1: Your business doesn’t qualify for traditional lending

Insufficient operating history, lack of collateral or down payment, inability to fund short loan term payment with existing cash flow, etc., 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 or real estate. Undercapitalized growth companies are in a sweet spot for the flexible terms and requirements of SBA loans.  In addition, recent adjustments to SBA size standards and loan amounts allow even more businesses to qualify for programs.

2: SBA loans have more flexibility in use of funds

The SBA backs a wide variety of loans, for example:

  • Federal microloan programs for up to $50,000 to startup “pre-bankable” businesses that are not yet ready for traditional bank financing.
  • SBA 7(a) program loans allow financing for commercial real estate "goodwill," working capital, equipment, acquisition and/or improvements, all in one package with flexible terms and rates.
  • SBA Express program offers a line of credit that is an affordable option for companies that generate trading assets.
  • U. S. Department of Agriculture loan programs are available in many rural areas with a wide range of state and county level options.
  • Exporters may get loans quickly on favorable terms with SBA Export Express loans.
  • Commercial real estate owners may qualify for low down payments and flexible spending options.

3: Streamlined SBA paperwork

Recent government programs designed to accelerate small business lending have simplified the application process, so that preferred bankers will help business owners complete the paperwork. SunTrust provides specialized SBA Business Development Officers who apply detailed SBA knowledge and experience to take the pain out of the application process and move financing to approval quickly.

4: Fast turn-around for SBA loan funding

Many 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. Typical turnaround time on a loan is 45-60 days. 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.

Don’t slow your company’s growth. Reach out to your SunTrust Relationship Manager to find the flexible SBA financing you need to get your business going.

1 SBA Statistics for Major Programs as of 8/12/16; 7(a) and 504 loans.

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.

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