Scotsman Guide - June 2011 Commercial Edition

By Mark Feathers
CEO and president
Small Business Capital LLC

6 SBA Selling Points e n
Let clients know these strengths of Small Business Administration loans

Small businesses have been hit particularly hard by the eco- nomic downturn, and in today’s market, even creditworthy customers can struggle to find financing. Commercial mortgage brokers who work regularly with small-business clients know there’s one financing source that can offer nearly everything a small-business owner needs.

U.S. Small Business Administration (SBA) loans offer some of the best products with the best terms. In fact, if you asked small-business owners to dream up the ideal credit product for their needs, an SBA loan might be exactly what they would create.

Here are six selling points you can use to get clients on board with SBA financing.

1. Affordability

Successful small-business owners pay close attention to the cash flow and obligations of their business, so they want to keep their payments as affordable as possible. The SBA offers that, as well as a long amortization period — as many as 10 years for equipment and working capital, and as many as 25 years for real estate financing.

In addition, SBA loans are fully amor-
tizing. There are no balloon payments
in five or 10 years, meaning small-busi-
ness owners won’t have to go through
the loan application all over again.

2. Liberal underwriting

Liberal underwriting and qualification terms are particularly important for small-business owners. Often, these businesses’ accountants utilize perfectly acceptable accelerated depreciation methods and other ways to minimize a company’s taxes, but this tends to make the company’s net income and profitability go down, which in turn makes it harder to qualify for the credit that could benefit the business.

SBA loans were created with the needs of small businesses in mind, and under writing standards reflect that.

3. Few prepay penalties

Although small-business owners may be struggling now, when the economy picks up, they may want to get debt off their books. The SBA lets small-business owners avoid any prepayment penalties on shorter-term loans — which is particularly helpful for companies that want to get equipment loans and other such debt off their balance sheets quickly.

The prepayment penalty for lon-ger-term real estate loans is reduced somewhat quickly, as well. For many small-business owners, their business property is their most valuable asset.

If small-business owners want to
refinance, they don’t want to be stuck
with a stiff penalty for more than a few
years after they have a new mortgage.

4. Credit counts less

Small-business owners frequently use personal credit and resources as sources of working capital when they’re pinched for time or need to put more capital into their business without going through a bank’s loan committee. As a result, small-business owners may have high balances and a high percentage of used personal credit.

This tends to drive down credit scores, even though the small-business owner often makes more income than many W-2 salaried workers and also frequently has a higher net worth.

Small-business owners need a program that doesn’t rely on credit scoring. The SBA meets that need.

5. Financing in fees OK Small-business owners are always trying to preserve their working capital for the business and to put it to good use. They need funding that lets loan fees be financed into their new loan, instead of paying fees out-of-pocket. SBA loans can meet this need.

6. Forward-looking Small-business owners must have their eyes on their long-term investment.

Often, they have spent years building a book of business. When a couple of big revenue-generating accounts are ready to roll in, they often need additional financing to fund expansion or other needs. Many financing institutions, however, won’t consider expected future profits.

In such cases, small-business owners need a program that can give them some credit for the revenues and profitability they will earn in the near future, rather than relying entirely on what financial statements say they made during the past few years. The SBA can fill that need.

• • •
Commercial mortgage brokers who
work with small-business clients know
the SBA offers a great product. By
mastering the aforementioned selling
points, you can convince your clients of
the same — and perhaps sell them on a
product tailor-made for their needs. •

Mark Feathers is the founder, CEO and president of Small Business Capital LLC. He has 20 years of Small Business Administration lending experience. Small Business Capital is a national, SBA-licensed nonbank direct lender and has wholesale-lending programs for mortgage brokers. Reach Feathers at (650) 559-5601 or mark@sbcapital.com.