If you’re having financial difficulty, don’t wait too long to refinance your debt. Attractive business lending programs are still in place through the Small Business Administration (SBA). You might be surprised by what’s possible. Just ask David Laughrey* of The Laughrey Company. He’s an SBA loan specialist who helps small businesses around the country put new financing in place. He attests that SBA loan programs put in place in February 2009 have kept good businesses in business.
SBA programs allow banks to take higher levels of risk and lend at reduced rates. Laughrey says monthly debt service reductions of 25 percent and 50 percent are common. It’s achieved by lengthening the amortization period on “term debt” and lowering the interest rate.
Current loan maximums and guarantee maximums under current SBA program law are $2 million and $1.5 million, respectively, but the U.S. Senate is considering a bill that would raise it to $5 million and approximately $3.5 million, respectively. Lenders and the SBA generally need the following from you when you apply:
- Business Profile: Description of your business. Include what it does, type of legal entity, its products, whom it sells to, number of employees, brief history and who owns the business.
- Loan Request: Description of how much money is needed and what the funds will be used for.
- Collateral: Description of collateral offered to secure the loan. Include equity in the business, borrowed funds, available cash, and assets such as accounts receivable, inventory, equipment and real estate.
- Business Financial Statements: Complete financial statements for the past three full years plus year-to-date. This includes balance sheets and income statements.
- Projections: Expected revenue, expenses and cash flow for the next three years. Must show that the business can support repayment of requested funds.
- Business Tax Returns: Most recent three years.
- Personal Financial Statements: For each person who owns 20 percent or more of the business, current personal balance sheets (i.e., list of all assets, liabilities and personal tax returns for the past three years).
Don’t sweat the paperwork. Banks that specialize in SBA loans can help you comply, as can independent SBA loan consultants such as David Laughrey. Finally, if someone asks you for a large up-front fee, find someone else. For more information, including a complete list of SBA lenders, go to www.sba.gov.
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* David Laughrey does not have a website. You can reach him at 918-524-9400.
This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2012.
This publication is intended to provide general information on the subject matters covered. It is sold and distributed with the understanding that neither the publisher nor any distributor or advertiser is engaged in providing legal, tax, insurance, investment or other professional advice. The advice of a qualified professional should be sought before any reader applies a concept presented herein to his or her particular situation or business.
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