SBA Loans & Finance Consultants
The United States Small Business Administration (SBA) is the
government agency designed to assist entrepreneurs in America with the funding of their small businesses. The SBA includes an assortment of tools and programs for every phase of business from a
start-up advice, legal advice for more complex business transaction, and of course the government guarantee loan program they are so well known for.
SBA Loan guarantee programs help small businesses obtain financing by lowering the risk to the lender. With these programs, the SBA sets the guidelines for the loans while the Lenders make the loans to the small businesses. SBA backs those loans with a guarantee that will eliminate some of the risk to the lenders.
Most people have heard of SBA loans, so this is no secret to reveal. However, many Finance Consultants who are pursuing commercial loans often overlook these transactions as potential targets for their marketing.
The Project Corporation is a commercial finance consulting firm with more than 20 years experience. We have worked with hundreds of other Consultants through the years, and one thing we see is that many Consultants chase deals that are associated with daydreamers, people that are financially broke, and businesses that are in desperate situations. It is very seldom these daydream, desperate type of deals will ever close. The Consultant will never earn a commission. On top of that, these bad deals absorb the valuable time of the Consultant. Time is a constraint for all of us. We all need to place a value on our time and understand that there are deals that we need to let go. Otherwise we will end up like the desperate people that are calling seeking daydream funding.
There are literally thousands of good deals that each Finance Consultant can pursue. By picking an industry that you have a background in, or an interest in (based on reasoning), you will have a market of thousands of prospects to contact. An example is hotels. There are thousands of potential hotel financing deals in the U.S. How many hotels are in your area, or your state? Most hotel chains require a location to meet certain criteria for their facilities. These hotels need to remodel, or update their facility over certain intervals. Others are building new locations, or simply need to refinance their current location. These are real deals, and not daydreamers looking for quick millions on a deal that will never get funded.
How many other industries are like hotels where there are thousands of deals? How many industries are you familiar with? If you break down those industries into different segments, how many prospects are there? How many would fit within an SBA loan program? When you focus on real deals and stay away from the daydreamers, you will have success.
Despite the industry you choose you need to develop a quick qualifying process. Remember your time has value, but time is a constraint, so you want to use your time wisely. A quick qualifying process does not mean that you will instantly be ready to announce funding terms. It means that you will have a comfort level with the prospect, that they have a real deal that you want to pursue, and the prospect is serious about obtaining funding. If they are not serious, or don’t supply the information you need for getting to your comfort level, then let them go. Remember there are thousands of good deals out there. Don’t get hung up with time wasting non-potential deals.
Finance Consultants should target specific industries looking for transactions that meet SBA guidelines. Targeting will assist the Consultant in pursuing real deals. The SBA offers numerous loan programs to assist small businesses. It is important to note that the government does not make the loan. The SBA is a guarantor of loans made by lending institutions. With the SBA guarantee, Lenders can offer longer terms, no points, and no balloon payments.
Most for-profit small businesses are eligible for an SBA guaranteed loan. This includes manufacturers, wholesale, retail and service businesses as well as independent, or franchise businesses.
Wholesale businesses with employees up to 100 regardless of sales volume
Manufacturers with employees up to 500 depending on the industry, regardless of sales volume
Retail and service businesses with a sales track record (sales volume: 3-year average not exceeding $6 million
to $20 million, depending on the industry.)
Banks on many city corners where most of us have checking and savings accounts are of course obvious choices of
lenders. These are considered “retail” banks. Bank branches may be able to approve loans up to $200-250,000. Funding request for more than that will usually be sent to the corporate
Besides the traditional “retail” banks there are many lending institutions, which do SBA loans. These can be
mortgage banks, investment banks, and commercial loan companies. These commercial lenders deal with money and specialize in specific financial areas, but they are not your standard bank on the
Retail banks are regulated by both state and federal agencies making their parameters a little more rigid than other lending institutions, which don’t have the same regulatory controls to contend with. These other institutions may be more aggressive in funding a transaction for you.
All lenders don’t handle transactions in the same manner, so Consultants should contact various banks and get the parameters of each bank. Contact your local banks, national banks, insurance companies, investment banks, etc. Find lenders that provide SBA guaranteed loans. Learn from these various sources. Ask what they are looking for in the Client’s documentation package. Get their loan applications. Do they target specific industries? Are the hungry for certain types of deals? Outline for picking a Lender to work with.
Some lenders will pay a “Finders Fee.” Some won’t. Finders Fees are typically 1%. If the lender won’t pay a fee, they do allow the borrower to have expenses for legal, accounting and professional services, as part of the loan amount. Your professional services can be part of the proceeds of the loan. For business loans Consultants can typically charge a fee that is 2% of the total loan amount. There are times that the lender will dictate the total amount allowed, and if the Consultant wants to get the deal funded they will have to accept what is allowed. Consultants will need the Client to sign an Engagement Agreement stating the services being rendered and the amount to be paid.
There are thousands of deals for you to pursue. Stick with the real deals. Let the daydreamers go.