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“You’re Going to Like the Way You Look”:

 The all-in-one guide to tailoring the perfect SBA Express Loan for your small business

 

 

                Nobody likes a hassle, especially when it involves finances. This is especially true when you do your own research on a product or service trying to find out what is the right option for you. For so long this has been the case with loans, especially commercial loans. A good commercial loan can transform your idea for a small business from a neglected Word document on your laptop into a tangible reality. Finding the right small business loan is not impossible. In fact, it is quite easy when you have the right guide.

Noted philosopher George Zimmer of Men’s Warehouse fame made it his company motto that “You’re going to like the way you look. I guarantee it,” and finding the right loan for your small business is much like getting the perfect suit tailored just for you. The tailor knows what the numbers and measurements mean, and knowledge of the materials available to know exactly what is out there. All you need to do is find the right tailor to make your dreams a reality. Few Americans know about both the public and private resources available to them designed specifically for financing their small business ventures.

For example, an SBA Loan is an incredibly convenient and easy way to jumpstart your dreams and get that perfect fit for your financial three-piece suit. People often assume that loans of this nature take a long time to process and a lot upfront to even qualify, but nothing could be further from the truth. Just like a good tailor, the right SBA Express loan is designed to meet your specific needs while being able to also do the heavy lifting for you; and you can qualify for it in as little as 36 hours! Rather than having a stiff-fitting sport jacket, you will have the perfect suit for your business because it was made from the bottom up with you and your company’s needs in mind! Before we get ahead of ourselves, let’s break it down step by step.

Step 1: Know Your Tailor

            Sometimes it is better to know more about who is supplying you the service provider than what you want the final product to look like. A good tailor – just like a good loan provider – should be able to guide you through the process even when your idea of what you want is hazy. That is where the United States Small Business Administration (SBA) comes in. Started in 1953 under President Eisenhower, the SBA seeks to stimulate the American economy and encourage entrepreneurship by helping business owners obtain the capital needed to do so. Their 7(a) loan program provides a series of loans (of which the aforementioned SBA Express is one) that are given through private banks and guaranteed by the federal government. So that means you may actually receive your loan from a private firm while the SBA provides the general terms for the loan and guarantees it. This is an ingenious use of public/private partnership. The 7(a) loan program works towards the stated goal of the SBA to make sure at least 23% of federal contracts go to small businesses. In addition to this, the SBA also seeks to educate small business owners by offering training and counseling programs. Lastly, they advocate for small business and entrepreneurs through legislation and other public policy measures. The SBA’s work can succinctly be described by the “three C’s” of Capital, Contracts, and Counseling.

Step 2: Measuring. Are You Small or Big & Tall?

            Size matters in business, since it’s all about efficiency. Learning what you have in proportion to what you need is the difference between an early retirement or bankruptcy. Given that the SBA provides multiple different commercial loans with their numerous programs, here is a convenient chart for reference. We are eventually going to choose a variation of the 7(a) loan called the SBA Express loan for our tailored fit.   

Loan Type

Terms

7(a) loan program (SBA’s flagship loan program)*

·        Federally guaranteed term loans of up to $5 million.

·        Funds for working capital, expansion, equipment purchases.

·        Processed through banks, credit unions, specialized lenders.

504 loan program

·        Federally guaranteed loans of up to $5 million.

·        Funds for buying land, machinery, facilities.

·        Processed through private-sector lenders and nonprofits.

Microloans

·        Loans of up to $50,000.

·        Funds for working capital, inventory, equipment, starting a business.

·        Processed through community-based nonprofits.

SBA disaster loans

·        Loans of up to $2 million.

·        Funds for small-business owners affected by natural disasters and other emergencies.

·        Processed through the SBA.

*includes SBA Express Loan

Source: https://www.nerdwallet.com/blog/small-business/small-business-loans-sba-loans/

 

Step 3: The Fitting Room

            So far, we have found a reputable tailor, taken measurements, and seen all our options. Now is the time to see what fits. Let us take the 7(a) program with the added express loan option as our example. The whole purpose of the 7(a) program is to hand capital to those who would otherwise not be able to acquire such wealth on “reasonable terms.” However, there are still conditions for qualifying of course and deciding if a loan “fits” or not depends on if these requirements are too much or too little for your business. Meager portions won’t be worth the added interest; and biting off more than you can chew will not be worth the long-term debt. The official requirements are listed as follows:

  • You must be officially registered as a for-profit business, and you must be operating legally.
  • As the business owner, you can’t be on parole.
  • Your business must have fewer than 500 employees, and less than $7.5 million revenue on average each year for the past three years
  • Your net income must be under $5 million (after taxes and not counting carry-over losses), and your tangible net worth must be less than $15 million.
  • You must show you’re investing your own time and money into the business, having “invested equity.”
  • Your business must be physically based in the United States, and you must be doing business with the U.S. and its territories.
  • Your small business must be in an SBA-eligible industry (speculative, illegal and non-profit businesses don’t get to play). Learn more about Eligible and Ineligible Industries for SBA 7(a) Loans
  • You’ll need to show that you’ve already tried and failed get funds from other financial lenders, fully exhausting non-SBA loan options.
  • You’ll need to prove you’ve got a sound business purpose for the loan you’re requesting, and that your intended funds usage is approved by the SBA.
  • You’ll need to prove you’re not delinquent on any existing debts to the U.S. government (taxes, student loans).

Source: https://www.sba7a.loans/eligibility-and-qualifications-for-the-sba-7a-loan

Another important factor is that, while not required, a credit score above 680 will significantly improve your chances of receiving the loan. This credit only becomes more important as we look into the express option that drastically speeds up your approval time.  Note also the stress on having equity in your business and having looked at more traditional methods of funding before requesting a 7(a) loan. It may seem daunting, but loans are typically paid off in 7 (for working capital) or 25 years (for real estate) with only 8% interest. Just think about it for a moment, if the barriers to entry were so financially steep then what kind of person who could qualify would actually need a loan at that point anyway? So don’t be worried! 

Step 4: SBA Express Loan Checkout

            So, you think a 7(a) loan might be the perfect loan for your small business and you already feel comfortable with its look and feel. What if you heard there was one more option within the 7(a) program that will expediate the whole process and push you to the front of the approval line? That is where the SBA Express loan makes its appearance. Rather than waiting weeks for approval, the SBA Express loan makes it so that you can receive financing in as little as 36 hours! Loans typically follow a 7-year long repayment plan with the reasonably low interest rate of around 9-11%. Remember, the SBA does not provide the financing themselves but backs the loans to up a certain amount so private lenders can more comfortably offer the loans. This means the individual terms of your loan may vary, but they are all going to follow a similar model.

It is important to choose a private lender that is reliable and has plenty of experience with SBA Express loans. Talk to one of their representatives if you have any concerns. It seems quite obvious that the Express loan is an incredible opportunity to get immediate financing that will not doom you later on; and it also allows you to get the money you need for real estate, staff, and equipment for your new business. There are a few cons, however, since the approval process is so quick that it is very credit dependent. A high credit score is almost a requirement for an express loan, and the average Express loan recipient has an even higher credit score than the regular 7(a) loan recipient. Lenders do feel more secure giving out Express loans now that the federal government has pledged to repay a certain amount of it if the loan recipient defaults.

Do not fret: You do not need to have a perfect record to receive an SBA Express loan and most applicants will be just fine. In fact, there really is no “catch” that makes the express option a “too good to be true” scenario. It is a genuine partnership between public and private enterprises to provide a leg-up to entrepreneurs and job-creators everywhere! It is easily the loan we recommend most to budding business owners.

Step 5: Like It, Love It!

            We have just gone over step-by-step how to tailor the perfect SBA Express loan for your small business. You have to first find the right public and private backer for you loan. Reputable enterprises such as the SBA offer fantastic services on very fair terms. Second, you look at the options available to you. Third, you “try on” the different loan types and see which most suits your businesses needs and funds. Fourth, if you chose to go with a 7(a) loan backed by the SBA then we highly recommend opting for an Express loan. Finally, don your new custom made loan and walk around town with the confidence that you would get from a custom tailored three-piece suit. You can now feel secure knowing that your business can afford what it needs in order to get off the ground. There is nothing quite like an item made just for you and your business, and the reputation of the provider behind it (whether that be a tailor or a lender) is what plants the seeds of a fertile economy. The process has become so easy and streamlined there is no reason you should not at least consider dipping your toes into applying for a SBA Express loan (you can do so here.) You can never make your dreams a reality if you are not willing to get help when you need it.

A smart loan is like a racecar, you can crash into a pole if you’re not careful but also it can take you where you want to go faster than anything else. So, take our advice and get in the driver seat for once. There is no better time than now to take advantage of these services, and everything we discussed so far is negotiable with your lender, so it really is made for you down to the seams. At the end of the day you’re going to like your small business loan. I guarantee it!

 

 

 

Last Updated Date: 2019-08-13

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