SBA Loan Guide

- Financial Benefits of SBA Loans
- Uses and Terms
- Qualification Guidelines
- SBA Loan Rates and Fees
- The Application Process
- Getting Your Loan Approved

Financial Benefits of SBA Loans

Because the one thing an undercapitalized business doesn't have is excess cash, the SBA permits loans with unique financial benefits:

- Less Money Down - You can better leverage your personal or investment capital -
  and get more done with less up-front investment - with an SBA-guaranteed loan
- Longer Payback Terms - You can improve your cash flow with lower monthly
  payments, and - when appropriate - fix a better match between loan terms and
  longer-term rates for capitalized-equipment or real-estate depreciation
- Lower Interest Rates - Because the SBA absorbs a significant percentage of
  the loan risk, the bank can lend at a lower rate - you enjoy better cash flow, and
  the savings go straight to your bottom line

- No Balloon Payment Required - You can establish terms that minimize your
  monthly payment without attaching a large payout at the end of the loan
- Easier Credit Available - The SBA simply makes it easier to get the loan
  you want

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Loan Uses and Terms

SBA loans are meant to finance the growth or creation of business, and fall into four broad categories:

- Purchase of Existing Business or Franchise

- Business franchises with a track record of success are good candidates for
  an SBA loan
- Collateralization requirements are typically less stringent than for conventional
  loans, and often a lower down payment is required
- Many businesses could not be sold under any other terms, making SBA
  lending beneficial to both buyer and seller

- Building Real Estate

- For the purchase or upgrade of a business land site or house needed to
  operate an owner-occupied business
- Can also be used for new construction of a business facility, such as a
  professional building, automotive shop, or freestanding location
- Loan terms can range from 15 to 25 years - for businesses with a successful
  history, the SBA can offer the longest business real estate terms available

- Fixed Assets

- For the purchase and use of capitalized assets (typically heavy machinery
  and specialized equipment) that can be used as collateral for the loan- Loan terms can range from 7 to 10 years

- Working Capital

- For needs like managing day-to-day cash flow, purchasing assets with
  short-term depreciation - computers, office equipment, or inventory loading- Loan terms can range from 5 to 7 years.

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Qualification Guidelines

Nearly 90% of all businesses are eligible for qualification in the SBA loan program. In general, business must be:

- Owner-operated
- For-profit
- Organized as a sole proprietorship, corporation, or professional partnership

- Manufacturers
- Retailers
- Seasonal businesses
- General and trade construction companies
- Agricultural firms
- Businesses that offer professional services such as doctors, dentists and
  veterinarians

More Funding for High-Risk Business
Some businesses are considered a higher risk than others. The SBA levels the playing field for owners of these businesses, and makes it possible for them to get the funding they need to grow and prosper. If your business falls into a higher-risk category, the SBA lending program can make it possible to get financing that might otherwise be unavailable to you.

More Funding for Start-Up Business
Good ideas and entrepreneurial spirit drive small business. The SBA recognizes their value and qualifies you for the funding needed to start a new business venture.

More Funding for Non-Conventional Assets
SBA lending recognizes a broader range of assets, including non-conventional assets that would otherwise not qualify for collateralization. With SBA, you can get the funding for the parts of your business from which you know how to profit.
 
Credit Considerations
The general qualification standards for SBA lending are less stringent than many other types of loans, but the same issues are considered:

- Acceptable personal and business credit history
- Significant equity in the business
- Past earnings and/or estimated future earnings sufficient to repay the loan on time
- Pledge of available business assets and - in some cases - personal assets to secure
  the loan

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SBA Loan Rates and Fees

An SBA loan typically has an index rate that compares favorably to more conventional loans. In fact, the SBA caps the rates for each loan type.

Loan Fees
Getting an SBA loan is, for the most part, like getting any other loan. There are, however, a few special costs unique to SBA loans. Fortunately, they are nearly 100% financeable in the package, along with other customary fees that would be out-of-pocket for any other type of loan.Here is a typical (and actual) example.  An auto repair shop needs a loan to build a new facility. In this case, 75% of the loan amount is targeted for real estate and building, the balance for financing equipment and working capital.

*Nearly 100% of these loan costs can be financed.Since the Guarantee Fee can be financed, and the loan term is over 15 years, the actual "loan cost" of the Guarantee Fee is about $90 a month, roughly equivalent to the annual percentage rate (APR).The SBA Guarantee Fee not only secures better terms on the front end, such as lower down payment and out-of-pocket expense, it can "buy" a substantial savings over the typical rate of a non-SBA loan, much like buying down points on a home mortgage loan.

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The Application Process

There are five basic steps to getting an SBA loan. Except for one step the bank takes for SBA approval, the process is identical to that of any other business loan. In some cases, it may actually be simpler. At Baron Financial the steps are:

1. The Initial Interview
At some point, you decide that your business needs a loan and you call the Baron Financial SBA lending office. To reach the location nearest you, check our team of SBA Lenders.Within one business day a Baron Financial SBA lending officer is assigned to your business and contacts you by phone. The officer assigned to your loan is chosen for his or her experience in your type of business.Few banks have the experience and knowledge needed to make an evaluation. It's a key step, saving time and effort that could be lost with someone less experienced in SBA procedures and regulations.

2. Information Collection
Once Baron Financial's SBA lending officer has made an initial evaluation of your business circumstances, the information collection process begins. There are two parts to this process:

A.  Collect financial and business data routine to running your business and personal affairs. Most business owners are able to put this information together by simply pulling and copying records from files.B.   Ascertain how the funds will work to achieve your business objectives. This is where the "salesmanship" of the Baron Financial SBA loan officer can help get the funds you are seeking. An experienced officer will take the time to:
- Listen to your business objectives
- Understand how those objectives can be achieved through your loan
- Make it work by selling your loan to the bank and the SBA

3. Bank Approval
Since the bank is being asked to lend you the money, the first approval for your loan must come from Baron Financial. (The SBA guarantees only that you will pay it back, limited to a maximum 80% of any default value.)

4. SBA Loan Packaging and Submission
This is the one step unique to the SBA approval process. Once Baron Financial collects the information needed for internal bank approval, your loan is "packaged" and submitted for SBA approval. In many cases, Baron Financial is empowered to pre-approve your loan on behalf of the SBA. You get immediate assurance that your loan will close quickly and efficiently.

5. Closing the Loan
Depending on the type of loan you choose, the closing may be as simple as a visit to the bank for routine paper signing, or may involve a little more work, such as a title-company closing for a real estate loan.No matter what it takes to get your loan done, Baron Financial, by virtue of its experience and SBA-Preferred Lender status, can usually get your loan processed and approved quickly.

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Getting Your Loan Approved

Getting an SBA loan is relatively simple. The SBA mission is to loan you money and help you succeed. If you present them with a loan package that meets their very sensible business requirements, your loan will more than likely be approved.

The Key To Success is Your SBA Loan Packaging
Outside of business fundamentals, nothing is more important than your loan packaging - how your loan request is prepared and presented to the SBA for its final approval. Technically, anyone can prepare and present an SBA loan package, just as anyone can represent themselves in a court of law. Success, however, is greatly influenced by the skills of your advocate - your bank's SBA lending officer.

Choosing the Right Bank and Bank Officer
There is definitely a right way and a wrong way to prepare and submit an SBA loan package. There's more to it than simply "following the rules."The people who review loans for the SBA have reasonable preferences for how packages are prepared, how the information and back-up materials are submitted, and how your loan is evaluated. These people have a tremendous workload and significant fiduciary responsibilities. Knowing how to make their job easier makes a big difference in how quickly your loan is approved, and often, whether it's approved at all.In spite of stringent guidelines for evaluation, the SBA allows latitude for approval at the discretion of loan review personnel. An experienced SBA loan officer knows the range of discretionary decision-making and how to use this knowledge to get you the best possible terms.At minimum, a bank loan officer with SBA experience understands exactly what the SBA personnel need to see and how they want to see it. This not only ensures that your loan is properly presented, it also improves your chance for approval once your loan is endorsed by the bank. At Baron Financial, loan officers work with a team of professionals who know how to best manage your SBA loan process. Their expertise includes:

- Credit analysis
- Packaging
- Closing
- Funding
- Servicing

Baron Financial's range of expertise and our SBA Preferred Lender status can help you get the money you need, quickly and easily.

SBA Preference for Work Submitted by Knowledgeable Banks
The SBA believes so strongly in the value of a properly prepared loan application that it has instituted the Preferred Lender program. This program recognizes that some banks simply do a better job than others in preparing and presenting an SBA loan package.Why is this so important? If your loan package raises questions that are not properly answered, it is either returned for clarification or denied as being deficient. An experienced loan officer knows how to avoid common pitfalls by:

- Getting required information, in order, in advance
- Presenting it properly within SBA approved guidelines
- Explaining your business to the SBA so that it is understood in the best possible
  light

Explaining Your Business Is Everything
Your SBA Loan Packaging doesn't just make a case for the numbers; it makes a case for your business purpose and potential. This is where SBA approval offers the widest latitude for discretion - where your lending bank's credibility with the SBA is most critical.

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