As challenging as our economy is today, small business entrepreneurship is definitely on the rise. This statement is not based upon any academic study that I have read about but upon my own personal interactions with the local business community and as a corporate transactional attorney in South Florida.
The number of clients that I have seen this year that have bought, sold or started a business is staggering. The demographic of the entrepreneurs that I come in contact with is very broad and covers all classes: men, women, white collar, blue collar, minority and non-minority alike.
As diverse as they are, almost all of them possess one common thread. Almost all of these entrepreneurs are looking to take control of their destiny and get on the path to financial freedom to build personal wealth.
One additional common thread is that most are also looking for capital in order to make their dreams come true.
Dispel Myths
Assisting entrepreneurs to obtain capital to acquire, grow or expand a business has always been the main purpose of the Small Business Administration’s loan programs. In this week’s column I want to dispel some of the myths that many people possess about the SBA’s loan programs so that you all can take advantage of these taxpayer funded programs.
Overall, there are many benefits to the SBA loan programs such as: longer maturities than most bank loans, lower down payments, lower monthly payments, no balloon payments, minimal prepayment penalties, no covenants and the use of multiple interest rate options such as floating, adjustable or fixed.
Quite often, these are all terms that are very common for non-SBA lenders or conventional lenders but are normal under SBA loan programs.
When cash flow is important to your day-to-day operations then these terms and conditions can be extremely beneficial. After the February 2009 passage of the American Recovery and Reinvestment Act, the addition of a 90 percent guarantee and the waiving of all costs and fees for the loan, makes it even more attractive.
Program Guidelines
The greatest inaccuracy regarding the SBA loan programs is that an entrepreneur goes to the SBA for financing and the SBA loans you the money. The fact is that SBA sets the program guidelines for the loans while SBA’s partners such as banks, community development organizations and microlending institutions make the loans to small businesses.
SBA backs those loans with a guaranty that will eliminate some of the risk to the lending partners. With a loan guaranty, the actual funds are provided by independent lenders who receive the full faith and credit backing of the federal government on a portion of the loan they make to small business.
In a variation of this concept, community development organizations can get the government's full backing on a loan to finance a portion of the overall financing needs of an applicant small business.
I feel comfortable stating that SBA loans are available to almost everyone and that the paperwork, time periods for decision-making and expenses are in-line with most lending institutions.
Full Documentation
SBA loans are full documentation loans, and with the new streamlined process in place in the last few years, along with new technology, you can find out if you qualify by providing the minimum information.
SBA loans don't require any more paperwork than a bank would require obtaining a non-SBA loan and for the most part they are competitive in costs and fees.
As a matter of fact, with longer amortization periods which can translate into better cash flow for your business, an SBA loan can actually put more monthly income into your pocket.
In my experience, SBA loans close in 45 days after all approvals have been obtained. I have even seen loans close from start to finish within a 30 day time period.
Covers Needs
A great thing about the SBA loan programs, are that they cover any and all types of needs that an entrepreneur might have. Some loan programs with conventional banks will only cover equipment purchases, working capital needs, or business and real estate acquisitions.
The SBA’s 7(a) loan program will pretty much cover all of your needs including refinancing existing debt. You should also be aware that there are specialized SBA loan programs for specialized needs such as exporting, seasonal lines of credit and asset-based lines of credit.
Now more than ever it is critical to get to know these programs and get your piece of the government benefit pie.
Ian M. Berkowitz is a former attorney/advisor with the United States Small Business Administration in Washington, D.C. During his tenure with the Federal Government he specifically worked in the areas of disaster relief for homeowners and businesses and government contracting. He is currently a practicing business and real estate attorney in Boca Raton. In addition to his law degree, Ian also holds a Master’s Degree in Government from The John Hopkins University.
Bova Ristorante in Boca Raton It's where you want to be!
www.bovaristorante.comStokton Global Trading needs production managers. No sales. This is a part-time opportunity that could be long-term.
http://stokton.org/vacancies...Discover the beauty and location of Boca Raton & Delray Beach
www.olivebelcher.comDownload editions of the Our Town News, Atlantic Ave & ITB
www.SouthFloridaMediaGroup.c...Don't get ripped off: We pay 70% of the wholesale value for your gold scrap, Rare Coins. Most competitors pay less than 30%. We are Honest!
www.FinestKnown.com