Following our most recent leadership meeting, my marketing director (not so) gently mentioned to me that I talk too much about the economy and capital markets. I wasn’t offended; she is right, and I count on her for honest feedback.
My days typically start with a cup of coffee and a scan of the economic news on CNBC and Market Watch, with a predictable detour into the primary sources of some the data discussed. By my second cup, I am engrossed in trade wars, GDP data, yield-curves, and Chairman Powell’s and other Fed Governors’ remarks. I rationalize to myself that these are all very important to our business of lending, and they are.
But that’s not our world. It is not where we operate day in and day out. Our world of SBA lending is made of America’s small business owners who are looking to grow, expand, better the lives of their families, employees, and communities. That’s what I mean when I say “It’s Main Street, not Wall Street.”
The U.S. Small Business Administration (SBA) supports small businesses by working with financial organizations like ours to provide access to affordable capital. Without SBA loans, many of these owner-operators would simply not have access to capital and, consequently, their dreams would not be realized.
Here is a quick recap of how the SBA, specifically its flagship SBA 7(a) loan program, can support you, the business owner:
- Flexible uses: SBA loans support almost any imaginable business use, from the purchase of the business; the refinancing of debt; a buyout of a partner; generational transition of businesses; startups; and real estate acquisition, just to name a few of the more common requests we see. If you aren’t sure whether the program can help you, give us a call and we will quickly sort it out.
- No collateral required: While many lenders focus on the purchase of real estate, you might be surprised to learn that the SBA does not require it, nor does it require hard assets as collateral if the loan proceeds are not used to purchase those. We, and other like-minded SBA lenders, regularly finance just goodwill.
- High advance rates: The SBA provides us with a 75% loan guarantee, essentially “collateralizing” our loans and encourages us to lend the maximum amount of capital the business can reasonably support. Our loans are typically 80-90% loan to value (LTV), occasionally higher under the right circumstances.
- Great terms: While “conventional” loans to small business are marginally less expensive, SBA 7(a) loans (priced at a spread over the Prime lending rate) favorably compare to other forms of capital such as equity, bridge-loans, and others. The repayment terms are usually longer as well (10-25 years). Loan size is as high as $5 million, and we are hopeful that this upper limit will increase at some future point. SBA loans do not have balloon payments and are always fully amortizing.
- Variety of capital solutions: In addition to the flagship SBA 7(a) program, the SBA, through its partner lenders, offers additional programs such as the 504 (real estate and equipment), lines of credit, International Trade Loans, and special terms for veterans and other groups. Additionally, banks like Gulf Coast Bank & Trust (our parent bank) can offer conventional loans and other services in conjunction with an SBA loan. With all these options, we are able to customize a loan package to fit each borrowers’ unique needs. We like to say that we work hard at finding a way to say YES (and we do just that)!
AbilityDesire to do complex transaction: One of our distinguishing features is our ability (and desire) to structure complicated transactions. We don’t just rely on the borrower to structure a deal; we also use our decades of experience to bring fresh ideas to maximize the advance rate and make the transaction less risky to all involved. Not all SBA lenders possess this capability, and if your bank is stumped by your request, give us a try. Our experienced team would love to be of assistance.
I will continue to read the financial news and nerd-out over economic developments. In a past life I spent many years working with very large corporations and very large deals, and I will always enjoy following along and talking about the latest financial news. But, for many years, I also worked beside my father who was a small-business owner (multi-unit franchisee) and small businesses are in my blood. My colleagues here at Gulf Coast Small Business Lending have a passion for helping small business owners realize their dreams. You can find a listing of our SBA professionals along with their contact information here: https://gulfcoastsba.com/our-people/. We look forward to talking to you about the power of SBA lending and how it can help you start, grow, and/or build your business.
At Gulf Coast Small Business Lending, WE’RE MAIN STREET.