Small businesses: SBA loans can be a viable option for business owners

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Small business owners and entrepreneurs seeking financing to help start a business or expand one should consider the many resources the Small Business Administration offers, including loans that are often more flexible and tied to a lower interest rate than conventional loans.

The SBA recognizes companies with fewer than 500 employees as small businesses and attributes them with generating more than half of the nation’s nonfarm private gross domestic product. In addition, the administration notes that small businesses account for nearly half of all jobs in the private sector.

According to the NCRA, freelance court reporters and captioners comprise approximately 70 percent of its membership. In addition, hundreds of court reporting firms throughout the United States provide an array of services including court reporting, broadcast captioning, assistance to people who are deaf and hard-of-hearing, legal videography, business and corporate reporting, and more.

“When I was looking for a loan to buy a business, I knew that the typical standard loan was available, but I also knew I could get better interest rates and the potential for better terms if I used the SBA,” said NCRA member Cregg Seymour, president of CRC Salomon, Inc., a court reporting firm in Baltimore, Md.

Seymour said he interviewed three different banking representatives when searching for his loan and presented each one the terms and conditions he was looking for. He finally settled on working with an institution that has an internal SBA department.

“My pitch to the bank was that I wanted to establish a relationship because I want to do multiple deals over time. I was actually able to name my terms for the loan, something a lot of people don’t realize. Most people think terms need to be five, 10, or 15 years, but through the SBA you can construct them to have their own life,” Seymour said.

He advises those seeking SBA loans to find a banking institution that does a lot of SBA loans such as one that offers an in-house specialist. He also said borrowers should have patience because they might find more boxes to check to qualify since the SBA is a government-sponsored entity and tends to be more tenacious in regards to due diligence.

According to Melanie Samoska, a business banking relationship manager for a branch of SunTrust Bank in Baltimore, Md., the SBA loan process can be just as easy as qualifying for a conventional loan. She also noted that SBA loans can be a great option for business owners who might have had past bad credit issues since the program offers a lower credit score requirement for certain types of loans. However, she emphasizes, bad credit issues should not be the primary reason to apply for a SBA loan.

“There is a misconception that SBA loans take longer than conventional loans. An SBA non-real-estate loan can close within 60 days if all documentation has been presented in a timely manner. If the SBA loan involves real estate, the loan process from beginning to end will typically take on average 120 days,” Samoska said.

NCRA member Teresa Rider, RPR, CRR, president of Rider & Associates, Inc. in Vancouver, Wash., said that after speaking to several more traditional financial institutions and considering the state of the economy at the time and high interest rates on commercial property loans, she was pointed in the direction of SBA to secure a loan when she was looking to purchase a building.

“The paperwork seemed more tedious and extensive than purchasing residential property which I had gone through in the past. However, the SBA was willing to give me a second loan for improvements that were needed in the office building. This helped me tremendously,” Rider said.

Rider said she would recommend SBA loans to other small business owners but would caution them to understand all aspects of the loan first. While conventional loans require borrowers to have liquidity collateral to place against a loan, the SBA will accept the borrower’s house or even a life insurance policy.

“One of the issues that we encountered was that the lender put a lien on our personal residence. This became troublesome when we wanted to refinance our home,” said Rider.

“The company that held the SBA loan was not willing to lift the lien long enough for us to refinance. It also would have made it difficult to sell our home. In the end, we refinanced the SBA loan on the office instead,” she added.

Whether securing a loan from a conventional lender or SBA, borrowers should do their own due diligence and be sure to weigh the pros and cons of all terms of the loan, including what type of loan product fits their needs the best.

“I found the SBA pretty easy to work with. I have the experience of doing large loans so I went in with the proper expectations. Have your ducks in a row. It is relatively easy to obtain a loan through the SBA if you have good financials, good tax records, and profit and loss information in place to tell a good story,” Seymour said.

“This is a great time for folks to be seeking capital. Banks have private venture groups looking for ways to loan money to good people, and the SBA wants to work with good candidates,” he noted.