Business owners have heard much about the SBA commercial mortgage programs over the years and unfortunately much of the rumors are negative.  The SBA has changed dramatically and most of the bad press is now without merit.  Here are some of the common questions we field on a daily basis.  All SBA lenders are the same, why work someone that isn’t local?Program guidelines and criteria vary from lender to lender.

For example we work with 2 national commercial real estate loans that offer the SBA 7a loan as a 5 year fixed, 25 year amortization starting at Prime + 1%, rather than the typical floating rate that most banks do offer.  Some other lenders have different focuses such as financing various property types, or they may have differing requirements for management experience or historic cash flow than conventional financing.

It can be tempting to choose a lender based on rates alone, but other factors are also important. Will government monitor my business indefinitely?    No.  After the loan is underwritten, the only time the SBA would actually become involved would be at the point of payment default and then the SBA would work with the lender to remedy the mortgage.   Some potential borrowers do fear the “Big Brother” element will accompany an SBA 7a loan. 

There are no government audits or monitoring of the business in any way, nor does it increase your chances of being audited by the IRS.   How long does the SBA 7a Loan take to close? I’ve heard it can take up to 6 months? Not so.  It is very important though to seek out and work only with Preferred Lenders (PLP status) to avoid long closings.  It is true that if the borrower works with a bank or lender that only dabbles with the SBA that the process can be long. 

This is due to 1 the loan has to be underwritten twice and 2 the bank won’t really know the intricacies of the process.   If you work with a Preferred Lender the loan gets underwritten once and the process should take around 45 -60 days to fund.  This timing is typical with all commercial mortgages. The Preferred Lender status allows the lender to have some decision making authority as well, thus streamlining the process.  Isn’t the SBA loans paperwork intensive and require a lot of special forms?

Today’s SBA loans require the same amount of paperwork and effort as a typical conventional commercial mortgage.   

Aren’t the qualifying requirements really strict? 

Actually the SBA 7a program was designed by Uncle Sam to help out business that won’t qualify for conventional financing.  Because the government guarantees 75% of the loan for the bank, their risk is greatly reduced and allows for some of the most aggressive programs in the business – like 90% financing on both purchase or refinance, 1.1 debt coverage ratios and some Preferred lenders will fund with borrower credit scores in the 500’s, etc.