HOW TO OBTAIN AN SBA LOAN, PART 3

A person who wants to borrow from a lender who finances SBA Loans needs to understand these qualifications:

Cash Required (Cont’d from Part 1, Number 2):         

Borrower must have the cash needed for the transaction in a bank account for three months

prior to closing.  If the Borrower does not have all the cash, the Borrower can qualify with a gift

from another source.  On a case-by-case basis, borrowing the funds from investment property or

another source may qualify the Borrower

Management:     

On a case-by-case basis, a management company instead of hands on supervision of the business may be acceptable.

An alternative is to hire a W-2 Employee to manage the business (The Employee must prove competence with a resume).

These options are important where the borrower does not live near the business or owns multiple businesses.

Ownership:

Any person who owns 20% or more of a business or will own 20% or more of the business to be acquired must be an applicant and guarantor.  Conversely, any person who has less than 20% ownership will usually not be a co-borrower/guarantor (even if bringing in cash to the transaction).

Net Worth:

The Definition of Net Worth is “THE VALUE OF ALL ASSETS MINUS THE LIABILITIES OF AN INDIVIDUAL”.  A borrower must show on a Personal Financial Statement the funds required for a down payment (Cash Injection) and the funds required for the costs of the Loan (Appraisal, Environmental Report, Legal Research, etc.).

The Lender may also require additional collateral to qualify the Borrower for a loan.  This is why it is vital to show all assets owned on a Personal Financial Statement.

Ownership of other businesses can be an important piece of information. There are times when the assets or positive cash flow from another business will be a “compensating factor” toward the loan approval.

Joel Soforenko is an industry veteran having extensive experience with SBA 7(a), SBA 504 and USDA loans.  He has assisted borrowers as a loan originator, processor, underwriter and Manager of the SBA Department of a major origination platform. Joel is now the CEO of Continental Finance Capital Corp and can be reached at (617) 336-3215 x 5 or joel@continental.finance.

HOW TO OBTAIN AN SBA LOAN (Part 2 of 3)

SBA Definition:   Who is qualified for an SBA Loan 

A person who wants to borrow from a lender who finances SBA Loans needs to have these qualifications:

Foreign National: 

  

Borrowers need to be citizens of the United States or have a green card.

Criminal Record:

                                   

Felons are not qualified.  It does not matter how long ago the conviction occurred.  When a

background check finds a felony conviction, the applicant is disqualified. Misdemeanors are on a case-by-case basis as reviewed by an underwriter.

Experience:             

Borrowers must have at least one year of experience as an owner or manager in the industry of the business.  A resume may be required to prove this experience.

Experience in a different industry can sometimes be transferred on a case-by-case basis.  But, just because you were the president of a landscaping     Company does not mean you are qualified to apply for a loan as the owner of a restaurant. 

                                Education is never itself qualification for the experience required to qualify for a loan. Bringing in a Co-Borrower with the required experience is an option.  See Co-Borrower.

Joel Soforenko is an industry veteran having extensive experience with SBA 7(a), SBA 504 and USDA loans.  He has assisted borrowers as a loan originator, processor, underwriter and Manager of the SBA Department of a major origination platform. Joel is now the CEO of Continental Finance Capital Corp and can be reached at (617) 336-3215 x 5 or joel@continental.finance.

How to Obtain an SBA Loan (PART 1 of 3)

SBA LOAN DEFINITION:          

Borrower:    Who is qualified for an SBA Loan?

A person who wants to borrow from a lender who finances SBA Loans needs to have these qualifications:

1.    EXPERIENCE - Requisite experience in the industry he is in or wants to participate in. Standard guidelines for this experience is a minimum of one year as an owner or manager. On a case-by-case basis, a Borrower can transfer experience in a different industry as qualification for this guideline.

2.    CASH - Requisite funds as a down payment and/or “cash injection” for the purchase or project including up-front costs charged by the SBA Lender.

3.    CREDIT - Requisite credit to qualify under the SBA Lender’s guidelines. There are national SBA Lenders who do not have a minimum credit score requirement.  However, a Borrower will have difficulty or not be able to qualify if there are these issues on a credit report:  late payments, charge offs, judgments, tax liens and the like.

4.    INCOME - Requisite of personal income into the Borrower’s household.  The industry standard for a borrower’s income into the household is $30,000 dollars.  An SBA Lender wants to make sure the borrower has enough household income to cover the borrower’s household expenses including food. (exceptions on a case-by-case basis with a letter of explanation)

5.    NET WORTH – (Always on a case-by-case basis) Requisite of the borrower having personal assets, which shows cash available for the down payment and any other additional cash injection.  During underwriting it may be determined that the Borrower needs other assets to be used for additional collateral: stocks, bonds, certificate of deposit, whole life insurance with cash value and the like.  Or in the case where the Borrower owns other businesses, the positive cash flow of these businesses.

 Joel Soforenko is an industry veteran having extensive experience with SBA 7(a), SBA 504 and USDA loans.  He has assisted borrowers as a loan originator, processor, underwriter and Manager of the SBA Department of a major origination platform. Joel is now the CEO of Continental Finance Capital Corp and can be reached at (617) 336-3215 x 5 or joel@continental.finance.