| Most business owners have a couple of impressions | | | | run your business out of the building you own). The |
| regarding SBA financing firmly in their minds. 1. The | | | | SBA 504 does not allow refinances however the |
| process to close an SBA loan takes too long and 2. | | | | SBA 7a does. |
| You cannot refinance an existing loan with an SBA | | | | The most common complaint about the 7a is that it's |
| mortgage - both of which are not accurate. | | | | normally structured as a floating rate. However this is |
| The process to close an SBA loan can be long. | | | | not always the case. For example, there are a couple |
| Granted. The problem with this is that many banks that | | | | of national banks that offer this as a 5 year fixed, 25 |
| are not set up or knowledgeable about the process | | | | year amortization loan. The main benefits of the 7a |
| will attempt to "wing it". This might be hard for a lot of | | | | include being able to go up to 90% loan to value (on a |
| borrowers to believe but many banks (even large | | | | refinance), debt coverage ratio as low as 1.1 and credit |
| national banks) simple do not do a lot of SBA loans | | | | score in the 500's (with compensating factors) are |
| and take their borrower through a long and confusing | | | | doable. |
| process - which they know almost as well as the | | | | The borrower does have meet a few criteria to be |
| borrower. | | | | eligible for the refinance, but a surprising amount of |
| Another key is to work with what's called an SBA | | | | borrowers fit. The borrower only needs one of the |
| Preferred Lender(PLP). Not only do these so-called | | | | following: Current loan is set up with a balloon (it |
| Preferred Lenders know the process inside and out, | | | | doesn't matter when the loan balloons), current rate |
| the loan only has to be underwritten once. This is a | | | | needs to be deemed as "unreasonable." A good rule |
| huge point. Borrowers that work with a bank that does | | | | of thumb on this is being able to reduce ones rate by |
| not hold the Preferred status will have to have their | | | | 2% or does the proposed refinance reduce their |
| loan underwritten twice - once by the bank and THAN | | | | monthly payment by 20% or more? Keep in mind that |
| by the SBA. This is the biggest reason why people | | | | this loan is amortized over 25 years, so simply by |
| hear of the SBA horror stories of 3 -5 months to get | | | | increasing the amortization from say 15 or 20 years to |
| there loan closed. | | | | 25 years allows most borrowers to fit within the 20% |
| By working with a Preferred Lender borrowers can | | | | payment reduction requirement. |
| realistically expect their loan to close in a reasonable | | | | We see a lot of people, especially those that were in |
| 45 days. I personally have closed SBA loans in less. | | | | private money loans be outstanding candidates for the |
| Again - work with a bank that is an expert at SBA | | | | SBA 7a Loans. First of all their rate is normally |
| loans and hold the Preferred lender status. | | | | excessive, they have a ballooning loan and their credit |
| As far as the refinance, this is very much an option for | | | | has been injured. |
| many owner occupied building owners (meaning you | | | | |