Posts Tagged ‘general’

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SBA Business Financing, General Advice

Below is some real world advice on SBA business financing in this market.  Specifically, advice on getting your loan closed. 

SBA financing and general banking industry is what it is.  You, nor I, can do anything about that.  What you have to focus on is doing everything in your control to increase your chances of closing your SBA loan.

And it has never been more important to prepare yourself and your loan request for the realities of current small business loan climate.  What this normally means is being totally upfront and dealing with your loans weaknesses head on.  You have to build your argument of why your business is credit worthy – and most specifically dealing with the issues that have or likely will get you declined if you don’t deal with them. 

SBA Financing, Rule #1

Never, leave your issues to chance or ignore them hoping that the underwriters will not notice.  They will notice!  They will discover the issues and you will lose.  Let me give you an example. 

We recently where engaged by a small business in Rhode Island to refinance his existing conventional loan (i.e. a local bank mortgage).  The borrower how is a great guy and an impressive 30 year veteran entrepreneur was facing a ballooning loan.  It was due 10 weeks from the time that he initially contacted us.  Though I was concerned about the timing and knew we couldn’t make any mistakes, I was confident that we could get the loan closed in the required time frame.  In addition, it is not uncommon for the existing bank to extend the loan if you can prove to them that you have a viable new loan on the table. 

The weaknesses of the file where that the business gross sales had declined for the last three years and fell more even more rapidity year to date.  This in itself is a huge issue.  Banks and their underwriters want to know and want you to prove that you have fit “bottom” and that the situation has been turned around. 

However, and this is a big however, the borrower had done a good job on eliminating his fixed costs and diversifying into other businesses.  He was still very much in the black and his cash flow, despite the huge drop in gross sales had only dipped slightly.  So my job and our argument to the underwriters was to highlight this.  I.e. that despite the declining sales the borrower was in a solid position as he was still making great income. 

Despite the well thought out and detail Letter of explanation that we put together the borrower failed to tell us the whole story – that he was served a foreclosure notice a week before he contacted us and that he stopped making payments on the loan, as the existing bank stopped sending him payment coupons. 

Bad move.  We had 45 days into the transition when we finally discover this.  It was a bad situation for us, as we wasted almost 2 months, but he ended up losing his property and app. 0,000 in equity. 

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