Can You Have An SBA Loan And A Separate Line Of Credit?

1. Yes, you can have an SBA Loan and a Separate
Line of Credit.

a) The SBA Loan will have a first lien position

b) Most banks and SBA Lenders will want to have a first lien position on your business assets and/or real estate and on any other collateral you have for their security.  It will be difficult to find a lender who will provide you with a line of credit. You should first talk to the bank you are now a customer.

c) This dilemma is one of the reasons that the cash flow based lending industry has mushroomed. OnDeck, Funding Circle and the hundreds of other Lenders of this type will
lend money without needing a first position lien
on your collateral.

The downside of this type of financing is the cost. Beware of the expense to your bottom line and make sure you will be able to sustain the payments (or refinance them in the future)

2. SBA Loans can be used to refinance any type of business debt.

a) If credit cards are to be included in the refinance, a Borrower needs to prove the credit card purchase
was used for a business reason.

b)  SBA Lenders usually have a minimum loan amount of $100,000 and these funds can be used to                      refinance debt.

3. The SBA does offer Lenders the ability to fund Lines of Credit. However, there are not many SBA Lenders who offer “CapLines”.

4. You can refinance SBA Loans into bigger SBA Loans, or if need be you can “stack” SBA Loans. These are  “Lump Sum” loans where all the proceeds are given to you at closing.  This type of loan will have better terms then the “Cash Flow Loans” based on company revenue.

5. Some first position loans have provisions which prohibit Borrowers from obtaining second loans which will encumber assets unless the Borrower receives permission from the first position lien Lender.

a) SBA Loans will not have this provision

b) This is certainly an important factor in deciding if a Borrower should accept a loan offer from a Lender

6. As to restructuring debt and paying off an SBA Loan, I would not go so far as to say “it is often better to restructure all your debt and pay off the SBA Loan”. Every business/financial situation is different and you should take the time to analyze your situation before accepting any generalization. SBA Loans are available for particular business and financial reasons which often make them better options.

For more information contact:

Joel Soforenko
Continental Finance Capital Corporation
Tel:    617-336-3215 x 5