Frequently Asked Questions

Now we are only talking about the down payment and no other qualifications using an SBA Loan.

  1. It does not matter if their is real estate involved or if the Buyer is only purchasing the business and equipment.
  2. Using current SBA Guidelines and standard customs of the industry for those SBA Lenders who finance loans nationwide.
  3. The minimum down payment is 10% of the purchase price.
  4. The 10% can be made up of all cash, or the Buyer can put down 5% and the Seller can “carry back” (lend the Buyer) the other 5%
  5. If the Seller “lends” the Buyer the 5%, the Seller cannot receive a payment and the Seller cannot be paid off for the life of the SBA Loan
  6. Additionally, the Buyer need not use his own funds. The Buyer can be “gifted” his entire 5% down payment from anyone (family and non-family)
  7. Understand, this is a gift and the gifting source will have to sign a document that the gifting source does not expect repayment
  8. Any funds used by the Buyer must be shown in the Buyer’s bank account for a minimum of two months and some SBA Lenders require the funds to be shown in a bank account for three months as of the date of the closing
  9. Based on #8, sometimes the gifting source needs to show the funds gifted in a bank account to make up the two to three months.

SBA Loans are governed by the SBA Regulations called the “SOP” (Standard Operating Procedure. The SBA Regulations designate prepayment penalties based on the length of the loan term for all 7(a) SBA Loans as follows:

  1. For any loans under a fifteen (15) year term, there is no prepayment penalty
  2. For all loans over a fifteen (15) year term there is a three year prepayment penalty of 5% (within the first year of the loan closing)- 3% (the second year) – 1% (the third year) and None thereafter.

The SBA 7(a) Loan Program encompasses most of the SBA Loans you would be interested in obtaining.

All SBA Lenders, whether a bank or non-bank, must follow the SBA ‘SOP” in regard to prepayment penalties. A bank who funds a loan which is guaranteed by the SBA cannot make up its own prepayment penalty rules.

There is also an SBA 504 Loan Program which exclusively funds Real Estate and Equipment. This loan program has much different prepayment penalty regulations.

It is always a good for the business to return the money you used to create it. However, unless the proper process is followed, there will be tax consequences.

The answer to this question is in the planning.

  1. The business must be created in the form of a legal entity (Corp, LLC, Trust, Etc). Why? Because you can’t borrow money from yourself. You as an individual are the Sole Proprietorship.
  2. When you begin the process of obtaining a personal loan, create a promissory note to be used between you and the legal entity you “own”.
  3. When you obtain the personal loan, deposit the funds into your personal bank account
  4. By this time you have created a bank account for your legal entity
  5. Then transfer the funds from your personal bank account to your legal entity bank account
  6. Sign a “Promissory Note (Contract to pay back a debt) from you to the legal entity and include nominal (small) interest as part of the repayment terms
  7. The Legal Entity must have a vote to approve the lending of the money
  8. Pay back the legal entity with the nominal interest
  9. Review the above plan and paperwork with your accountant or attorney to make sure it complies with IRS Regulations

I will have to assume you question whether it is against SBA Regulations to fund a loan where liquor is served.

  1. The SBA Regulations do have “moral code” rules which do not allow certain types of business from receiving an SBA Guarantee (thus, no SBA Loan)
  2. These “moral code” rules do not all funding of Strip Clubs, Adult Book Stores, Adult Novelty Stores and like kind establishments
  3. The Federal Government still has laws against the use of Cannabis/Marijuana. Therefore, you would not be able to fund a business which in any way is involved with these products
  4. However, liquor has been an allowable business model ever since Prohibition ended with the passing of the 21st Amendment
  5. So, as long as a Borrower has the requisite experience (and all other underwriting criteria is met) you can use an SBA Loan to purchase a bar or any establishment which has a license to serve wine, beer or liquor.

Getting an SBA Loan to start a business is like obtaining any other loan from a bank, plus a few additional SBA Requirements. You have to be ready to put in the time and effort. SBA Lenders fund these type of loans every day.

  1. You need to have either management or ownership experience in the
    industry of your new business.
  2. You will have to have a down payment equal to 20% of the total project cost
  3. You will need reasonable credit (a flexible SBA Lender is credit issue driven, not credit score driven).
  4. You will need a Business Plan
  5. You will need Projections of future income and expenses (itemized) over a three (3) year period. (Some SBA Lenders will accept two years)
  6. You will need supporting facts for your Projections. These facts are called “Assumptions” in the lending industry
  7. You will need to obtain Term Life Insurance in the amount of the loan.
  8. You will need to produce a detailed Personal Financial Statement
  9. You will need to produce other documentation requested by the SBA Lender including various SBA Forms
  10. It takes eight to ten weeks to go through the loan process to a closing.

My expertise is in SBA Lending. Unfortunately, your business purpose would be considered an investment in yourself and not your business. The SBA Regulations does not allow funding to be used for investment purposes.

And No, Self-investing is not be an exception.

As we all know, all income earned by a business needs to be accounted for and taxes paid. This is usually done by opening a business checking account. The business checking account is used to deposit all income and pay all bills. This is the start of your book keeping system.

A small business should start with the Main Account. This account can be designated the “General Account”, Operating Account, Business Account or any other designation which refers to the account where income is exclusively deposited and bills are paid.

The small business may then open other accounts based on need and business purpose.

A separate payroll account may be opened for specifically that purpose. This way you are transferring funds from the Main Account to the Payroll Account on a monthly basis. This makes it easy to keep track of funds you need every month, checks paid out which are exclusively for salary, and if you have a payroll service, the payroll service is drawing only from this account

If there is enough income coming in and you have a “substantial” amount of cash building in your Main Account, many small businesses open another account to “park” this “reserve” of cash. This can be helpful in keeping “large” accumulated sums out of the Main Account where cash is going in and out every day.

Other accounts can be opened and used for other specific reasons such as to pay for health insurance and health insurance plans, other employee benefits or specific payments for expenses.

A Lender will want to see business bank statements as proof of the information shown on Profit & Loss Statements and other business financial documents.

Looking at this question from the view of a Lender/Bank: a subsidized loan comes from the bank’s own account but is often backed by the SBA or some other government agency in case of default. The un-subsidized loan comes from the bank’s own account and if there is a default, the bank assumes all the loss.

Recover in the sense of re-building credit.

Start with two secured credit cards. These cards are secured by a deposit you give the credit card company. The credit card company allows you to borrow up to the amount of your deposit.

I suggest two secured credit cards as you would use one to purchase your food and the other to pay for your vehicle gas.

Pay off these balances at the end of each credit card period. That way you do not incur any interest payment.

It will usually take ten (10) to (18) months and at that time the credit card company will return your deposit and you will have your unsecured credit cards again.

Keep this up and begin borrowing for something or things of need. Make regular and on time payments.

It will take three to five years to have credit scores in the 700’s again.

The question is bank statements in general. The SBA Regulations require:

1. The borrower to “source” the funds used for a down payment. This means the borrower needs to show where the funds were deposited. These funds can come from a personal or business account. There is no prohibition against using funds from a personal account.

2. The borrower needs to “source” the funds used for the deposit which was given at the time of the Purchase & Sale Agreement being signed.

3. The borrower needs to “season” these funds. This means the borrower needs to show the funds used were in a bank account for two months prior to the closing (some lenders want three months).

4. The borrower may receive a gift of the deposit and down payment funds. In this case, the gifting party may have to “source” and showing “seasoning” of the funds gifted.

This answer is based on the interest rates as of Friday, March 20, 2020.

SBA (Small Business Administration) standard 7(A) Loans are tied to the Prime Interest Rate. Most lenders cite the Wall Street Journal to find the daily Prime Interest Rate.

As of Friday, March 20th, the Prime Interest Rate was 3.25%

SBA Lenders then add a “margin” to the Prime Interest Rate to calculate the final interest rate on a loan. SBA Regulations state that 2.75 is the highest allowable “margin”.

Example: 3.25% + 2.75 = 6.00%

The 6.00% would be the “start rate” for the loan. The loan interest rate adjusts when the Prime Interest Rate changes. This change occurs on a quarterly basis (at the beginning of the next quarter).

So, if the Prime Interest Rate goes up .25% then the loan amount in our example goes from 6.00% to 6.25%.

There is no cap on how high the interest rate can go. If the Prime Interest Rate goes up, the interest rate goes up.

Most SBA Lenders do not limit the interest rate going below the “start rate” of the loan as of the day the loan closes.

So, using our example, if the Prime Interest Rate goes down to 2.50%, then the interest rate would be 5.25% (starting the first day of the next quarter).

Get Started: Complete These Forms To Apply for Your SBA Economic Injury Disaster Loan

You’ll need to include these forms with your application. If you’re having trouble accessing the loan application, you can do these first.

Tax Information Authorization (IRS Form 4506T) for the applicant, principals and affiliates.

Complete copies of the most recent Federal Income Tax Return.

Schedule of Liabilities (SBA Form 2202).

Personal Financial Statement (SBA Form 413).

Profit and loss statements

You’ll need to include these forms with your application. If you’re having trouble accessing the loan application, you can do these first.

  • Tax Information Authorization (IRS Form 4506T) for the applicant, principals and affiliates.
  • Complete copies of the most recent Federal Income Tax Return.
  • Schedule of Liabilities (SBA Form 2202).
  • Personal Financial Statement (SBA Form 413).
  • Profit and loss statements
  • Monthly sales figures (SBA Form 1368)

Once you start the loan application at www.sba.gov/disaster, be sure to check “Economic Injury” for the type of loan you’re applying for.

There are two (2) types of economic “disaster” loans:

EIDL (Economic Injury Disaster Loan): This loan is personally guaranteed

PPP (Paycheck Protection Program): This loan is not personally guaranteed

SBA Information: Coronavirus (COVID-19): Small Business Guidance & Loan Resources

This would be possible (this answer pertains to standard SBA 7A Loans)

The SBA guarantees a maximum of five (5) million dollars per guarantor (the personal who is the single member). Loans up to a total of five (5) million dollars can be made to companies owned by the guarantor.

A joint applicant is anyone who has 20% or more ownership interest in the business which is applying for the loan.

The marital status of a person is not a factor in who must be a joint applicant.

Joint Filing of a Tax Return has no bearing on who is a Joint Applicant.

But: Lenders have no guidance for the documentation needed to prove income.

Be prepared to show 2018 Tax Return, 2019 Profit & Loss Statement and 1099’s for those years.

As well, you will have to show income made between January 1, 2020 and March 31, 2020.

Yes. For Reported Income & Reported Tips.

Need Form 1099 from Uber for 2019 for the application.

Self Employed Borrowers can start submitting loans on Friday, April 10th.

The Interim SBA Rules governing the Payroll Protection Program states that 75% of the funded loan must go to salaries during the eight (8) week period after receipt.

Whatever part of the loan under the 75% is not used for salaries (or the other 25% for permissible uses), must be paid back.

1% interest, 2 year term.

Any SBA Loans funded by the Bank of America must comply with the SBA “SOP” (Standard Operating Procedures) to receive the SBA Guarantee.

That being said, Bank of America and any other SBA Lender can add underwriting requirements which makes the approval of an SBA Loan more stringent. That is why no one bank has the same approval requirements.

The Payroll Protection Program has no personal guarantee requirements. If you do not repay any amount owed, the Lender cannot go to court to make you pay.

However, think twice before you default and not pay. You will never be able to obtain a government guaranteed loan (FHA, VA, SBA, Etc) until you payoff the outstanding defaulted amount of the loan.

Answer is Yes. Up to a total of $100,000 dollars.

  1. You cannot apply for the PPP Loan until April 10th
  2. Documents you will need:
    Form 940 – 4 Quarters of 2019
    Form 941 – 4 Quarters of 2019
    Form 941 – 1st Quarter of 2020
    Tax Return 2019 or Profit & Loss Statement for 2019
    Profit & Loss Statement – 2020, Jan to March
  3. SBA Not Required, but some Lenders may want to see your bank statements showing the business funds going into your personal account.
  4. See the SBA Interim Rules found on the Coronavirus (COVID-19): Small Business Guidance & Loan Resources

As an Independent Contractor I will assume you do not pay yourself with W-2 income. I will also assume that the net income of your business is your “salary”.

  1. Tax Return for 2019 if filed. Profit & Loss Statement for 2019 if you have not filed your Tax Return. (We will assume that you only file a Personal Tax Return and use a Schedule C to report your business income and expenses)
  2. If you did not file your 2019 Tax Return, you will need to provide your 2018 Tax Return
  3. Profit & Loss Statement for 2020, January to March
  4. If you pay for health insurance out of your business account, you will need proof of this
  5. If you received 1099 Forms from any of your jobs in 2019, you will need to produce them.
  6. Your “Monthly” Average Income will be calculated on your 2019 numbers.

Under the CARES ACT, the SBA will make six (6) months of payments for all SBA 7A Loans. The period covered starts in April.

A Borrower of an SBA 7A Loan should call the Bank or Servicer and find out how the Borrower’s April payment is going to be handled. The reason you want to do this is that it looks like the payments which will direct from the SBA will not start until May.

  1. The Paycheck Protection Program (PPP) does not require credit report review.
  2. The Economic Injury Disaster Loan (EIDL) Program does require credit report review
  3. SBA Regulations do not require a minimum credit score. It only requires “acceptable” credit. Each SBA Lender can decide its own credit policies and any minimum credit score required.
  4. The EIDL Program is funded directly from the SBA and does not have a minimum credit score requirement.

What is the definition of “Cost of Goods” when calculating the loan amount for the Economic Injury Disaster Loan Program (EIDL)?
Note: The Paycheck Protection Program (PPP) does not use “Cost of Goods” in its loan amount calculations.

  1. This is actually a standard accounting issue.
  2. Anything purchased which is used in the creation of the product sold to a customer is considered “Cost of Goods”
  3. A Classic example is as follows:
    a) The company manufactures metal soup cans
    b) The company purchases the metal for the manufacturing process
    c) The company purchases paper for the label manufacturing
    d) The cost of the purchase of metal and paper is the “Cost of Goods”
  4. For some service industries:
    a) Auto Repair Shops would use fluids and parts for the repairs
    b) These fluids and parts (although purchased as inventory) are
    actually the “Cost of Goods” for the repair as the company is purchasing these items for re-sale as part of the repair.
  5. For information industries:
    a) There are little if any “Cost of Goods”
    b) If the company is not purchasing an item for re-sale as part of the service, then there are no “Cost of Goods”

Answer : No

  1. Only US Citizens and Legal Aliens with Green Cards are eligible for an
    SBA Loan
  2. SBA Regulations requires a Business Purchaser to have a minimum of 5% “cash injection” (down payment) into the transaction.

The EIDL (Economic Injury Disaster Loan) was created many years before this current economic crisis. It was really meant to aide business affected by natural disasters.

This is in fact an installment loan. Interest rates are 3.75% for profit businesses and 2.75% for non-profit businesses. The term can be up to 30 years to pay off the loan as decided by the SBA underwriter.

Unlike other SBA Loan programs, the SBA actually funds these loans.

These loans are supposed to be mini-underwritten, but none-the-less, these loans do have “underwriting” requirements.

The SBA Regulations state that a Borrower can go back and ask for additional funding as an “addition to” the original loan.

No more and No less than a “legal document” for the purpose it was drafted.

Many times an “instrument” is a promissory note or a document creating a security interest.

Besides the obvious, there is something called a deficiency and an overage.

1. When the property is auctioned by the Lender, if the sale does not pay off the amount owed, this is called a deficiency. The Lender can then collect this deficiency from the Borrower.

2. When the property is auctioned by the Lender, if the sale is for more then what is owed, this is called an overage. The Lender must pay to the Borrower any overage collected from the auction.

3. And, if there was a second mortgage, the second mortgage holder does not get paid from the sale or receives the overage. (Either way his security interest is wiped out)

Three actions happen:

1. Lender will file lawsuit to recoup any monies due

2. Lender will foreclose on any property where you pledged a security interest

3. You cannot obtain another type of government guaranteed loan until the deficiency is paid off for the SBA Loan

a) This extends to other types of government guaranteed loans which you have defaulted on. Until you negotiate a payment arrangement, the agency then states you are no longer in default and you begin making payments or pay them off, you are ineligible for an SBA Loan

There are a few facts missing from your question:

1. Did the bank foreclose based on the mortgage?

2. Did the bank “sell” the mortgage to another bank?

3. Did the bank “sell” the “ownership” of the house to another individual or entity?

4. Did the bank send any notices of any kind to the friend?

5. Was your friend behind on his mortgage payments and doing a “pay with hope of doing a work-out” with the bank?

Banks have to go through a legal process to “change” the ownership of a house where it has funded a mortgage. However, a bank does not have to go through a legal process to sell the mortgage to another bank.

What is the story behind the headlines?

Savings Account, Pass Book Loan.

1. Open a savings account (there will be interest payments)

2. Obtain a loan using the savings account as collateral

The interest paid should equal the interest charged – or the interest charged will be a minimal

If all partners had more then a 20% ownership interest, then all partners would have to sign as guarantors of all the loans. So the answer is No.

However,

1. There are two types of SBA Loans – 7(a) and 504

2. A 504 loan can be used to purchase real estate and equipment

3. A 7(a) loan can be used to purchase the “goodwill” of the “intrinsic” value of the business (or in other circumstances the real estate and equipment as well as working capital)

4. A 504 loan can go up to $10M + and the 7(a) loan can go up to $5M

5. You will need to find an SBA Lender which will use both programs to achieve your purchase

Yes. The SBA Loan was created for such a purpose.

That being said, there are many factors which are part of the qualification criteria and process.

Do your research and part of that research should be to speak to an SBA Specialist whether that be from a local bank or other sources.

Rule of Residential Bank Loans: Bad Credit drags down Good Credit.

Good Credit does not compensate for Bad Credit.

Get thee to a residential mortgage broker of your choice: Consultation and Planning.

If you know a person does not pay back a loan from another person, are you going to lend that person money?

I haven’t seen a Crystal Ball that actually tells the future. Therefore, past actions are used by you, me and a lender to decide if the human who is running a business is responsible enough to pay back a loan.

You mention he has no collateral. Does he have 10 – 15% of the purchase price in cash? Can he obtain this 10 – 15% cash from a family member or friend?

1. An SBA Lender will finance the purchase of a business where the Borrower has no personal collateral

2. An SBA Lender will want the Buyer to have a down payment of 10% to 15% of the purchase price. The Lender will finance the remaining balance of the purchase price.

3. In this case, as the Buyer is an employee (Hopefully a key employee), his involvement and knowledge of the business makes him a very good prospect for an SBA Lender to give him a loan.

4. Interestingly, as long as the Buyer is a reasonably qualified Borrower, the underwriting requirements shift to how well the business is doing (gross and net cash flow), the assets of the business and future projections of receivables and payables.

5. If the Buyer is a “qualified” Borrower, is a key employee can obtain the down payment, SBA Lenders love this type of transaction.

Contracts are written so a Buyer and Seller know their rights and obligations on the day the Buyer gives his deposit and both parties sign the contract.

Once the contract is signed, the wording of the contract controls the relationship between the Buyer and Seller.

In the case of this question I am assuming the following:

1. There is a loan contingency which says that the Buyer has a certain number of days to obtain a Commitment from a Lender. Where the Buyer
cannot obtain such a Commitment, he needs to obtain a denial of the loan request from the Lender (Prior to the Contingency Date) and can then
terminate the contract and get back his deposit.

Note the definition of “loan contingency” in # 1 above.

a) The appraisal did not support the purchase price

b) The lender will not fund the loan as the property is not worth the purchase price on the contract

c) As long as a and b happened before the last date allowed for the Loan Contingency, you can terminate the contract and get your deposit back
as outlined above.

You are confusing the fact that an appraisal may not come back with the value required to support the Purchase Price

with

The rights given the Buyer as written in the Purchase & Sale Contract.

In the United States, it is not customary to have an “Appraisal Contingency”
In the United States, it is customary to have a Loan or Mortgage Contingency.

Learn to use the most important word in the financial world – NO

If we understand correctly

A. You and a partner agreed to open a business and both you contributed money toward creating the business

B. The money is now being held in a business account

C. Some activity has been done to create the business

D. Your partner now has “Partner Remorse” and wants his money back

Analysis:

1. Hopefully you and your partner have a contract which created the partnership.

2. If your partner wants out of the partnership, then the contract would govern how that occurs

3. If there is no contract (Live & Learn) then your partner cannot just get his money back

4. By most state laws, the business can keep going. But, the partner who wants out can file a lawsuit to “wind down the partnership”.

5. Also, if all business decisions are made on a 50/50 basis, the partner can effectively block anything you will try to do

What should you do:

Option A: Find another partner to contribute the cash needed and negotiate a “winding down” of the current partners interest (Creating a new partnership)

Option B: Terminate all activity and give back whatever money is reasonable to the partner

Option C: Fight the “winding down” of the partnership with the end game of finding the cash to negotiate a termination of the partnership interest

Find a good business lawyer and keep him close and paid and

Find a good accountant and keep him close and paid

And use this as an expensive lesson (Live & Learn)

The three basic steps which support the operation:

1. Choose the account / accounting firm which has the expertise. Or, hire an in house accountant

2. Choose the accounting / book keeping software

3. Hire the person who either knows how to use the software or has used other accounting software and can learn your system as fast as required.

Bill has the right idea.

1. Online business lenders often have different underwriting criteria

2. If Ondeck turns you down, there are literally several hundred online lenders to check out

3. Another idea is to find a lender who will issue you a business credit card

The above suggestions are all credit driven. Very good credit will allow you to obtain better terms. On the other hand, there are many online lenders who cater to borrowers who have “less then good credit”.

So do you have a loan situation where you run an Exporting Company in the United States and you are looking for an SBA Loan under $350,000 dollars (and you are a US Citizen or have a Green Card)?

The above scenario I describe would fit all the facts you gave us!!

To directly answer your question:

1. Express Loans take 3 – 6 weeks to close and the maximum loan amount is $350,000. It has much less requested documentation then a standard SBA Loan.

2. An SBA Loan to an Exporting Company is a standard SBA Loan with the “good” exception that the SBA guarantees 90% of the loan amount. This means the lender should be more flexible with its underwriting when processing this type of loan. A loan like this takes 45 – 90 days to close.

3. There is no such type of loan as an “SBA Export Express Loan.” An SBA Express Loan can be obtained by a company which exports its products.

If you spoke to an SBA “professional” who told you there is such a thing as an “SBA Export Express Loan”, I suggest you find another SBA Professional.

Cannot be one in the same.

1. Credit card loans you money

2. Debit card uses your money

So far, the electronic payment companies have not combined the two

The “how” is the easy part.

The hard part is knowing:

1. How to create the LLC or Corporation before the transfer

2. How to keep the LLC or Corporation active and “alive” so the property
does not revert back to you as an individual

I suggest retaining an attorney from your state to assist you with the legal work and educate you on the why’s and wherefores.

An SBA Loan:

1. Can be obtained from $5,000 to $10,000,000 +

2. An SBA Loan can be adjustable or fixed

3. An SBA Loan can have a 10 year term up to a 25 year term

4. An SBA Loan may have a prepayment penalty or may not

5. An SBA Loan can be used for an unlimited number of reasons

Let us know how you want to use the SBA Loan, and we can give you more information

Does “immediately” mean within three business days?

1. Find an online business loan internet company
(there are several hundred)

2. Fill out an application

3. Provide three months bank statements

4. Be in business from 3 months to 2 years
Have monthly cash flow of $5,000 +

5. Expect interest rates in the 130% + range
(For every dollar borrowed, you will pay back 30 cents)

6. Expect the Lender to expect you to pay all the interest
charged and agreed to in the Prommisory Note.

Now you have borrowed a business loan in three business days.
(I didn’t say it would be pretty, and I didn’t say you should do it)

No – But,

If you are paying in a confirmed plan, an FHA Loan will allow you to refinance your home.

If “stand out” means some thing like “qualify” that’s what an underwriter for a commercial lender looks for. Qualification.

1.  Non-SBA Loans – in business two plus years

2.  A stable or rising gross and net income

3.  Owners of the company need middle credit scores over 660

4.  Owners (Guarantors) need to show they have enough income to meet personal needs and some banks want Owners to qualify based on residential criteria – Debt to Income Ratio (income compared to debts showing on a credit report)

5.  SBA Loans – in business one year

6.  A stable or rising gross and net income

7.  Owners of the company do not need any particular credit score
(SBA is credit issue driven, not credit score driven)
That being said, many local and regional banks do have minimum
credit score requirements but this is not SBA requirements

8.  Owners only need to show their income meets household needs as shown on a credit report

9.  Also, the reason for wanting the loan is a very important aspect of
qualification for both a conventional and an SBA Loan.

Remember that payments on loans can be “principle + interest” or “interest only.”

The interest portion of the payment is an “expense” and can be used to reduce your gross income on your tax return. The principle is the loan amount being paid back and is not part of the “expense”.

If you receive a loan where you are paying interest only on the principle balance, then this payment amount in its entirety is an expense.

You can “write off” the interest paid on a loan. You cannot “write off” the principle paid back on a loan.

I will assume you don’t want to go to a relative.

A loan pre-supposes that there will be interest charged. Otherwise the person coming up with the money is a partner.

So, you could give a piece of your company to the person giving you the money.

The other way to obtain an interest free loan is to pay the interest, but have it rolled into the total loan. So during the term of the loan you are not making monthly payments. You would pay the principle and interest at the end of the loan term.

For Your Information (FYI), you will probably have to come up with some security for the lender to collateralize for the terms you are seeking (and usually for any loan).

We shall assume you are asking about the fee to pay a commercial mortgage broker when a loan closes with a lender who was introduced to you by this broker.

1. You first need to understand that these relationships are governed by “willing buyer, willing seller.” There are no governmental bodies which control fees for commercial mortgage brokerage. (There are a handful of states which require a commercial mortgage broker license, but to my knowledge these states do not control fees charged by the broker).

2. The success fee is controlled by the kind of transaction and the kind of real estate.

3. Conventional real estate transactions may have a success fee of 1 – 2% of the loan amount.

4. The other end of the lending spectrum are Bridge Loans. These loans are usually Private Lender transactions and have success fees of 1 – 5% (to the broker) depending on the loan amount and the number of “points” the Lender is charging.

5. The best way to find out what the market will bare and what is “fare and reasonable” is to talk with several brokers.

6. Once you find a broker who you are comfortable with and who is reasonable, I suggest becoming exclusive with this broker as long as he does his job to your specifications.

A knowledgeable and competent broker is an important member of your team.

You sure can, but there are no tax benefit for doing so.

If your parents die with or without a will, the house still has to go through
probate before you and your brother own it.

Your family (all four of you) really should consult a lawyer who practices estate law for the best method of transferring this property.

A HELOC (Home Equity Line of Credit) is based on your credit and the equity in your residence. If you qualify, you can use the funds for any purpose.

A HELOC by definition must be applied for by the owner of the home and the owner of the home must be an individual and not a legal entity.

Make sure you understand the terms of the HELOC. Some HELOCs must be paid back in a certain period of time. Also, most HELOCs are adjustable rate mortgages, not a fixed rate. With interest rates going up this year, make sure you have enough personal income to pay for the first mortgage and this second mortgage.

Is it advisable to borrow the money to purchase property? Make sure you have thoroughly looked at all the risk before pulling this trigger. If you lose the property, you still owe the bank for the HELOC.

Investors and business people obtain HELOCs all the time. The question is, should you.

Degree: Hard Knocks.

Why do you believe you need a degree to start a business?
Mark Zuckerberg dropped out of Harvard.

What you need is a new idea or an old idea that you do better then anyone else.

A business plan will help you clarify the steps you need to take to start your business.

Use local business mentors found at SCORE or business incubators or by your own research to begin moving forward.

Short Answer:

Find a Partner who has the required cash and credit. This can be a relative or “arms length” third party.

Also, you or the partner would need at least one year of experience as a manager or owner of the kind of equestrian facility you want to open.

There is a very old parable, it goes like this: What’s the best way to lose a friend – lend them money.

In my experience we do not find good partners, we create good partners. After all the work is done finding a partner, you create a long term relationship by agreeing on and creating a “Partnership Agreement” signed by the partners.

This “Partnership Agreement” would have systems and understandings for resolving issues which cannot be worked out. Or, the partners know what the “Partnership Agreement” says so the issue never gets to the un-resolvable stage.

Most importantly, the “Partnership Agreement” spells out how a Partner leaves or is asked to leave the Partnership.

Partnerships are marriages. Most marriages fail and most partnerships fail. Plan accordingly or walk the tight rope without a net.

For the purpose of answering this question, I will assume you are asking what is the function of keeping daily financial records and having them in a system where you can track information for planning purposes.

1.   All businesses whether part time or full time, whether home office or high rise office need to keep                  financial records.

2.   Not only is this required for tax purposes, but every business person needs to see the business from             the its past – present – future.

3.   Past records will show you where the money was made and where it was spent. This gives you                        information to make present decisions which will affect your immediate and future plans

4.   Present records show where the money is being made and where the money is being spent. Sounds

5.   Future projections based on past and current records allow you see the many variables affecting your            business (including customer base) so you can make an informed decision which will affect every                    aspect of the business.

For those who are starting out, I suggest using a “Dome Book” found at business supply stores. For those who have developed businesses, I suggest a computer program like “Quick Books” and the like.

I also suggest employing a business consultant (who is often a tax professional) when your business is past the embryo stage. A business consultant/tax professional can help you plan for business expansion, how to pay for it and how it will affect the payment of business and personal taxes.
And – read, read, read.

The “processing to closing” time for an SBA Loan depends on the amount of the loan and the reason for applying for the loan.

Loans under $350,000 dollars requested for any purpose can close in three (3) to six (6) weeks. This depends on whether your applying for an SBA Express Loan or a “regular” SBA Loan – known as the 7(a) Program.

For loan amounts over $350,000 dollars, the usual time is sixty (60) to (90) days. Some Lenders have it known that these loans can close in 30 days after all the required documentation is provided. Frankly, I have never experienced that type of speed.

The important factor to applying for an SBA Loan (or any type of loan) is knowing what underwriting requirements need to be met and providing the documentation to meet these requirements.

You can either go to your local bank and speak with the bank’s SBA Loan Officer or call someone like myself who can guide you through the process.

Let us understand what you are asking.

A business grant is different from a business loan.

A grant is usually awarded to a non-profit entity. Now, non-profit entities run from the “Heart Association” or “Boys and Girls Club” to the local animal shelter. So non-profits can be “big business”.

The recipient of a grant does not have to pay it back.

If you are talking about applying for a business loan and you have no collateral, it is not required by the SBA to have collateral. This is why the SBA guarantees up to 85% of the loan amount.

SBA Express Loans (usually up to $150,000, but some lenders go up to $350,000) do not require collateral.
Put together your presentation and go see your local bank’s SBA Loan Officer or the organization “Accion” to apply for your business loan.

Obtaining a personal loan is based on three criteria:

1. Your credit scores
2. Your historic income
3. A good purpose

I will assume this question speaks to a bank loan and not a credit card. I will also assume that this is for a personal loan and not a business loan.

There are many places on the internet to find out how to obtain credit, what effects credit scores, and how to keep high credit scores (680 +). I suggest you become your own expert on this subject.

Banks want to see that a person has the ability to pay for a loan on a monthly basis. To meet this criteria, the person must show income stability or income growth over a minimum two year period. Why this lengthy period? Because the bank wants to make sure that you have a stable employment history and that this employment history shows excess income to pay for a loan.

What is excess income? Income not needed for your personal expenses. And, the bank will use something called “Debt to Income Ratio” to determine if your income qualifies you for a loan.

Banks use a percentage figure as the criteria for the ratio. In other words, a bank will set a maximum ratio (say 50%) for what all of your expenses need to be as compared to what bills you have to pay and then another ratio which includes the loan payment.

Purpose seems self evident. You have to have a purpose for borrowing the money. And, if this will be your first loan, think in terms of borrowing way lower then your maximum ratio(s) will allow.

The above information is basic to a personal loan. A business loan has its own set of basics as well as specific criteria depending on the purpose of the business loan.

1. All business is based on selling something to a customer

2. A start up business revolves around “sales – production – installation” or to put it another way “sales (closing the deal) – giving the customer what was paid for – and getting paid”

3. Each of these phases need to be planned by both creating infrastructure and researching what the phases will cost the business before being paid.

4. Part of this mix is doing research on what the competition is charging so you know a base line for what to charge and what your profit margin will be.

5. You also need to know what out of pocket cash will be required to put together the infrastructure. (Part of this cash may be personal living expenses although I suggest doing the “start up’ part time while you keep your day job)

6. The above is very basic (and very simplistic) but must be thought out thoroughly before the business opens

7. In my experience most start up fail due to lack of foresight. You are not ready to start a business unless you know the questions to ask. Until then, keep researching and if possible, find a mentor (or some would have it – a coach).

8. I am not a fan of “Ready – Fire – Aim”.

The short answer is YES. Certainly with an SBA Loan:

1. We will assume that this is an ongoing business with net income to support the purchase price and debt service (loan payments).

2. We will assume there is no real estate owned by the business. Caveat, the remaining time left on the lease must equal or exceed the term of the loan

3. We will assume there are minimal assets owned by the business. Kitchen equipment and furniture

4. We will assume the business has been in business at least three years with gross revenue which is equal to each year or rising each year (Shows stability)

5. With the above information, an SBA Lender will allow a Buyer to purchase the business with as little as 15% down payment. (In this case $150,000 dollars)

6. The Buyer must have at least one year of management or ownership interest in this

Short answer is Yes. . .

1. Be aware of the laws of the nation where each headquarters is located including its tax code

2. Make sure you know the customs of the population and the customs of doing business. Often these are not the same.

3. Understand the technology of the countries where you will be locating. Often the internet is not as available in the same manner or the technologies are dissimilar

4. Have as many systems centralized as possible to stop redundancy and save money

5. Are you well enough funded to open two start ups simultaneously?

Let’s look at this from a different perspective.  What percentage of the cash do you need to start up a gas station and do you need other collateral to be secured by the Lender?he perspective of obtaining a loan so you do not need to use all your own cash:

  1.     An SBA Lender requires 20% of the total project cost as the down payment to
    qualify for a loan for a start up business.  Example: Real Estate, Renovations,
    Equipment, Inventory, New Pumps – total $500,000 dollars.
    The SBA Lender would require the Borrower to have a down payment of $100,000
    dollars and the loan would be $400,000 dollars.
  2.      Often the SBA Lender will require additional collateral in the form of real estate, securities or a                   certificate of deposit (to name a few).

3.     The SBA Lender will want you to have at least one year of experience as the owner or manager of                  another gas station.

4.     If you do not have the requisite experience, then you can have a minority partner who has the                        experience and will manage the gas station.

5.    Starting a business and obtaining a loan to start the business can work if you understand the requisite         steps and put all the pieces of the plan and loan together.

Answer on Quora.Com: March 1, 2017

I will presume that you have reasonable credit, you have been in business more then one year and you are looking for conventional terms rather than bridge loan terms:

There are several other preliminary questions which should be answered before generalizations can be made: what type of business, what type of real estate, will other funds be required for equipment, working capital or renovation (to name a few)

You can look for a conventional loan from a bank or an SBA Loan. The SBA Loan can be obtained from a local, regional or national bank, or one of the SBA non-bank lenders.

The bottom line qualification is how much cash you have for a down payment. Most bank lenders will offer 60 – 75% of the purchase price. If you have the necessary cash for the down payment, the bank will offer somewhat better terms then an SBA Loan

If you have or want to use less cash for a down payment, an SBA Lender will require 10 – 15% down payment. The loan terms will either be adjustable with a 25 year amortization or a fixed term of 5 – 10 years with a 25 year amortization. (This is using the SBA 7(1) Loan Program)

The SBA 504 Loan program will have the same down payment but there are two mortgages. The first mortgage will be a 5 – 10 year term with a 25 year amortization and the second mortgage will have a 20 year term with a 20 year amortization

Therefore, if you have the cash and want to use it for a larger down payment, you will receive better interest rates and terms from a bank. However, if you want less down payment and terms which are somewhat higher, you would choose an SBA Lender.

The SBA has guidelines which regulate what kind of properties are eligible for an SBA Loan.

The only prevalent property types which are not allowed for financing deals with moral turpitude issues: nude dancing, pornography shops, marijuana sales, casinos and the like.

Real Estate and Businesses used in the auto industry are eligible for SBA Loans

  1. Obtain a $4 million dollar, 90% LTV, SBA Loan
    a) This can be done with an SBA Loan as long as the cash flow supports
    the debt payments
  2. In New York City
    a) The location usually does not matter. That being said, the question does not say if there will be a purchase of real estate or if the loan is to exclusively purchase the business.
    b) If the business is leasing the location, the lease must extend to the term of the SBA Loan (this would be ten years) for the purchase of a business without real estate
  3. Experience of two years as a property manager
    a) If you are the general manager of the property management company and the business involves the management of real estate, then you do have the requisite experience.b) If the business to be purchased is not real estate related, or the skills of your profession (including being the general manager) cannot be translated into the business you want to purchase, then you do not have the requisite experience.c) To overcome this issue, you will need to find a “partner” who has the needed management and/or ownership experience and create a legal entity with this “partner” having a minimum of 5% ownership.

A “Pre-Qualification Letter” from a Financing Broker can be fashioned to point out the maximum loan amount allowable and that based on the information provided, the business has no financial or business issues which would impede an approval by an underwriter.

An SBA Lender will not assist a Seller with a loan “pre-qualification” to give to a potential Buyer.

A Financing Broker will be able to “qualify” your business for a future SBA Loan. This will help you in the process of deciding the value of your business and a sale price.

You will also be able to talk to the Financing Broker about the down payment required to purchase your business and if you will be offering Seller Financing as part of the transaction. (It is often beneficial to offer some Seller Financing both as a supplement to the available cash of the Buyer and to make a stronger loan submission to a Lender.

However, a “Pre-Qualification Letter” is a sales tool only. An SBA Lender will not accept a “Pre-Qualification Letter” and it will have no bearing on the Buyer obtaining a loan for the purchase of your business.

A Financing Broker will be able to point out to you any issues which will come up in the underwriting process. This will assist you in understanding if there are problems with selling your business and options to overcome these issues.

Or, whether you will need to wait to sell the business so you can go about the required repair of the present issues.

To be able to do this “qualification” you will need to provide the Financing Broker with three years of financial information and the Year to Date financial information. This includes tax returns, ‘profit and loss statements’ as well as balance sheets, inventory lists, equipment lists, account receivable and account payable reports, and any other information relevant to your business.

The above documentation will need to be provided the Buyer of your business for his loan submission to a Lender – so prepare accordingly.

The rule is a Borrower cannot borrow the funds for the down payment of a purchase.

You can make arrangements for a friend or family member to give you a gift(s) up to the amount needed (100%), but these funds cannot be paid back.

a. Between you and a gifting party, the funds must be shown in three months bank statements (as of the closing date).

And, for your information, on a $2,500,000 business purchase, most national SBA Lenders will accept a 10% down payment. Of this 10%, only 5% cash needs to be provided by the Buyer and the Seller can loan the Buyer the other 5%.

If the Seller goes along with this (the Seller cannot receive a payment or be paid off for the life of the SBA Loan), your down payment is $125,000 plus an additional $15,000 for a business appraisal, etc.

If you have written documents for a presentation and collateral, “start up” loans are done on a regular basis by SBA Lenders.

  1. A “concept” needs to have these written presenting documents to be “real”:
    a) Business Plan
    b) Three Years of Projections with underlying Assumptions for how you came up with the Projections
    c) In many cases a “Market & Feasibility Study” by a specialist in the field of your “concept” will need to be produced
  2. You will need to know the total amount the “start up” will cost including the dollar amount needed to have the business running until revenue pays the bills
  3. You will need to pledge collateral for 25% to 50% of the loan amount. This is usually in real estate equity, tangible property equity or in some cases using stocks, bonds, cd’s or cash in savings accounts.
  4. The SBA Lender will usually require that you have 20% of the project cost given as a “down payment” at closing. This means you will need to show 20% of the project cost in available casha) This available cash can come from anyone as a gift

    b) You and/or the gifting party will need to show the funds were in an account for three months prior to closing

  5. You will need to show you have the requisite managerial experience in the “concept’s” field of activity
  6. You will be requested to provide three years of personal tax returns, bank statements, personal financial statement, etc for a full documentation and full underwriting of the loan.

Yes you can.

  1. The SBA Regulations do not mention bankruptcy as an issue to obtain an SBA Loan
  2. SBA Lenders are allowed by the SBA to add layers of additional requirements when qualifying (underwriting) a Borrower for an SBA Loan.
  3. A majority of SBA Lenders take a cue from the government backed FNMA and FreddieMac homeowner underwriting requirements and add 2 to 7 years where a Borrower does not qualify for an SBA loan (from that particular SBA Lender
  4. National SBA Lenders are usually more flexible in their underwriting standards. As long as the Borrower has a good reason for the bankruptcy and writes a “Letter of Explanation”, the fact that a bankruptcy was filed and discharged is a non-factor
  5. National SBA Lenders will approve Borrowers (with the Letter of Explanation) even if the bankruptcy discharge was within one month of a loan submission.

    In usual situations a Bankruptcy in no way stops a Borrower from obtaining an SBA Loan.

Most business coaches and business gurus would look at you and say your “only” thirty years old and you should keep with your game plan. The comforts and fruits of your labor will come with the growth of your business.

However, I’m thinking if you are asking the world this question, you are not only asking the outside world but also the world within.

Why the confusion? What is going on that you are having these questions come up?  What has changed or is changing that you are considering the alteration of your business plan?

There is also the middle course. Find a house which will have reasonable appreciation (for all the usual possible reasons), live in it for how ever long, and when your ready, sell it and use the profits to continue on your journey.

Some additional education and insight into the financing of your company and how this financing affects your business. I suggest you create a group of people for this purpose:

1) Find a mentor(s) and/or call SCORE. You can also call your local SBA Regional Office which has resources and guidance.

2) Use the bank where you have your accounts and/or loans as a major resource for these type of questions.

3) Use your accountant as a major resource on a regular basis.
The above are my initial thoughts. To answer this question directly and comment on the above answers, here is additional information:

1. Yes, you can have an SBA Loan and a Separate Line of Credit.
a) The SBA Loan will have a first lien position on your business assets and/or real estate.

b) Because most banks and SBA Lenders will want to have a first position on any 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 your current bank.

c) Your dilemma is one of the reason that the cash flow based lending industry has mushroomed. On Deck, 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 existing debt (This is an unequivocal fact). Standard SBA Loans are offered under $350,000 and can be used to refinance debt. Fundera usually offers another type of SBA Loan known as “SBA Express Loans.”

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. Even though this may be a “Lump Sum” loan and all the proceeds given to you at closing, this type of loan will have better terms then the “Cash Flow Loans”

5. It is h points out that some 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.

An Online Business is no different from any other business which offers a service and has little or no “hard assets”. Its about longevity and net cash flow (along with additional collateral from the Buyer).

The business needs to be active for more then eighteen (18) months and show net income which will support the loan amount for the purchase. Usually the underwriting requirement is the net income must show 20 – 40% more then the actual principal and interest to be paid (this is called the DSCR – Debt Service Cover Ratio).

Note: Some SBA Lenders want a business to be active for two to three years before it is considered stable.

If the business net income cannot support the loan amount needed, then a buyer can still purchase the business – but it will be considered “still” in the start up stage.

The difference is: A “mature” business will require 15% down payment and a start up will require a 20% down payment. (The Seller can take back a note for some of this down payment in lieu of receiving cash from the Buyer – Lenders usually want the Buyer to have 10% cash into a transaction as described).

PLUS – most SBA Lenders will require 25% to 50% of the loan be secured with other assets of the Buyer. Especially where the business itself only has value based on the cash flow or “intellectual property” and not intrinsic (hard) assets.

You will need to work with a seasoned SBA Professional to sought out the many details of a transaction like this one and put together a sound submission for an SBA Lender.

The SBA does not fund limited types of loans in the manner which you pose your question.

The SBA has certain ineligible industries it will not allow to have an “SBA Guarantee”. No “SBA Guarantee”, no SBA Loan from a Lender.

Otherwise, there is no “limited” or “limiting” types of loans with SBA Lenders and Lending.

There are two types of criteria used by a lender when your loan is reviewed: SBA Regulations and Lender Underwriting Criteria. The Lender underwriting criteria is additional qualifications the lender uses in its underwriting to decide if you are eligible for a loan. The lending industry calls these additional underwriting criteria “overlays” as they are above and in addition to the SBA Regulations.

There are no specific underwriting limitations to funding a manufacturing company. And, the SBA Regulations are liberal in how financing can be used.

In my view a manufacturing company has the same manner of producing income as any other business and can be used as a metaphor for most types of businesses:

Marketing
Sales
Cost of Goods
Production
Sale of Goods
Receive Income

If you are a business with a twelve (12) to eighteen (18) month history of income and net profit, the business should be eligible for SBA Funding. If you are a start-up, you still can be eligible for funding – you will need to know how to present your loan request (submission) to a lender.

Remember, the SBA Regulations are not the limiting factors, its the bank or lender where you are submitting the loan who have the additional overlay of underwriting criteria. Local and In-State Banks usually are more conservative with their overlays then Regional and National banks and lenders.

You will need to contact several banks and/or lenders to gauge the way they look at your situation and the underwriting criteria which will be used to decide if you qualify for a loan.

A loan will allow you to expand your business faster then having your business “bootstrap” the expansion (finance the infrastructure required to increase marketing, production and sales).

To come to the best solution for you, you will have to get out your paper, pencil and calculator and do the “cost accounting”. What is the cost to your business in equipment, inventory, overtime for employees or new employees, marketing, etc.

Now figure the gross income and net income from the increased sales.

Now figure out how much of a loan you will need to “gear up” your business.

Now do the research to find out the best loan for this expansion and what the loan will cost you per month in payments.

Now subtract net income from the loan payments. If there is a profit, then the other question (which is the eight hundred pound guerrilla in the room) what is the timing for you to pull this trigger (obtaining the loan for the expansion).

This is the way to go about coming to a decision on a loan vs. bootstrapping.

And, remember, you should be keeping your expenses lien (as well as your income) so you have the choice to do some of the expansion by bootstrapping and some with a loan.

My personal opinion is to build cash reserves so you can self fund (bootstrap) until you are able to project or are experiencing a future of sustained growth, then go the loan route.

A general question with a hint of trepidation about Detroit.

Let’s see this from your outside looking inward: why do you need a loan and will the geographic area of Detroit affect this reason.

Often as you look at the pros and cons of beginning a business, you think to yourself that you need a certain amount of dollars for a “budget” and to make money.

When you are thinking about your small business, think about “bootstrapping” before you put too much effort into thinking you need money to make money.

“Bootstrapping” can be the use of your profits to buy equipment or other items needed for your business. Or, it can be the use of your “sweat equity” to build your business and start making a profit. “Sweat equity” is the process of using your time and talents to make money.

Creating a business and growing a business is usually a “slow but sure” process. Of the millions of people who do this, we see and hear the “get rich quicker” infomercials on Facebook and other Social Media. The but is, most businesses are successful after a long-term effort. As Tony Robbins would put it “massive effort”.

Certainly, there is a place and time where a loan will help you to get to a higher level of efficiency, better marketing, and higher sales. However, the first step is to create a strong and lasting base of support for what you are doing.

Take the time to learn everything you can about the business you have chosen, marketing, production, service, and sales before you start looking for your first loan.

Now, all the above being said, if you are in the process of doing business and learning more every day about your business, then come back and give us some facts about your business and we will help you to seek out the question of your first business loan.

PS. In your business life and your personal life, Detroit is a state of mind not a city in the United States.

You are asking unrelated questions.
You can apply for and receive an NMLS number no matter what is going on with your credit.
See other answers for the need for financial responsibility to obtain a state license.
HOWEVER, if you want to be a mortgage loan officer and cannot obtain a license there is an exception to the state license rule: Federal Chartered Banks and Federal Chartered Credit Unions can create Net Branches. The loan officers at these net branches do not need a state license to be employed as a loan officer.
The fact that the bank or credit union (and therefore the net branch) comes under the Office of the Comptroller of the Currency regulations takes them out of state regulation and oversight.
a) That being said, you would need a very good explanation for your credit issues to be hired by one of these organizations.

With all due respect to the other people who answered this question, Funding Circle bases its underwriting on some simple guidelines:
1) Gross deposits every month
2) Remaining balances in the business checking account every month
3) Credit Scores (Personal)
4) Years in Business
5) Type of Business
6) Documentation leans toward a bank like underwriting, though the above are the most important factors.
Suggestion: Go through the steps, send in the required documents and see if you qualify and for how much.
Suggestion: Do not request more then you need. Funding Circle will not reduce the loan amount to fit your qualifications (usually). If you do not qualify for the loan amount requested, they will just deny the entire request.
I would also suggest that after you obtain a loan from Funding Circle or any of this type of loan, you talk to an SBA Professional about refinancing and paying off these high interest rate loans.

The law differentiates between a “Borrower” and Guarantor.
An “Applicant” is a Borrower if the applicant is an individual.
The person who applies for a loan on behalf of a legal entity (corp, etc) is a guarantor.

A “Co-Applicant” is either a Co-Borrower or a Co-Guarantor.

There are subtle legal differences between a “Borrower and Guarantor”. However, generally speaking, being an applicant or co-applicant who is involved with a loan which is paid off will have good things happen. An applicant or co-applicant who is involved with a loan which is not paid off will have bad things happen.

Don’t get involved if you don’t understand all the risk!

Standard SBA Regulations do not put restrictions on time out of bankruptcy.
Any “time out of bankruptcy” restrictions are lender underwriting additions
You will find that lenders (banks) who use their own funds to lend are more restrictive then lenders (banks) who sell on the secondary market.

In essence, an SBA Lender who has a national scope will be more flexible with underwriting criteria then the local or state banks. (ie. time out of bankruptcy)
As an SBA Mortgage Broker, I work with this type of situation on a regular basis and close SBA Loan with this factor regularly.

Joel Soforenko, CEO at Continental Finance Capital (2017-present)
Answered Mar 14, 2017

Short Answer – Find a Partner who has the required cash and credit. This can be a relative or “arms length” third party.
Also, you or the partner would need at least one year of experience as a manager or owner of the kind of equestrian facility you want to open.

With all due respect to the other people who answered this question, Funding Circle bases its underwriting on some simple guidelines:

1) Gross deposits every month
2) Remaining balances in the business checking account every month
3) Credit Scores (Personal)
4) Years in Business
5) Type of Business
6) Documentation leans toward a bank like underwriting, though the above are the most important factors.

Suggestion: Go through the steps, send in the required documents and see if you qualify and for how much.

Suggestion: Do not request more then you need. Funding Circle will not reduce the loan amount to fit your qualifications (usually). If you do not qualify for the loan amount requested, they will just deny the entire request.

I would also suggest that after you obtain a loan from Funding Circle or any of this type of loan, you talk to an SBA Professional about refinancing and paying off these high interest rate loans.

The law differentiates between a “Borrower” and Guarantor.

An “Applicant” is a Borrower if the applicant is an individual.

The person who applies for a loan on behalf of a legal entity (corp, etc) is a guarantor.

A “Co-Applicant” is either a Co-Borrower or a Co-Guarantor.

There are subtle legal differences between a “Borrower and Guarantor”. However, generally speaking, being an applicant or co-applicant who is involved with a loan which is paid off will have good things happen. An applicant or co-applicant who is involved with a loan which is not paid off will have bad things happen.

Don’t get involved if you don’t understand all the risk!

When you speak of commercial real estate, be aware that to qualify for an SBA Loan, the business of the Guarantor (Borrower) must use a minimum of 51% of the structure’s (building’s) space.

There are two types of terms offered when using an SBA Loan:

Adjustable for length of loan (7A Loan)
Fixed for 5 years (7A Loan)
Fixed for 10 years (504 Loan)

1. An adjustable 7A loan will be a 25 year term and a 25 year amortization.
This is with a 3 year pre-payment penalty (5–3–1%).
To obtain these terms, the real estate has to be worth more then the business.

2. A fixed term 7A loan is usually a 5 year term and a 25 year amortization.
This is usually with a 5 year pre-payment penalty (5–4–3–2–1%)

a. After the fixed period, the interest rate adjusts with prime and an additional amount you negotiate with the Lender

b. You need to speak to your Lender or broker to understand if you qualify for a fixed rate loan and whether its better to have a fixed rate or whether its better to have a loan which you can keep for as long as you decide it is working for you (no interest rate termination date)

3. The 10 year fixed loans are offered with an SBA 504 Loan. It is not the focus of this question to explain the SBA 504 Loan Program. However, know that there is a usually a 10 year pre-payment penalty and a small window after 5 years to refinance if desired.

a) Again, talk to your Lender or Broker about the benefits of an SBA 504 Loan vs. an SBA 7A Loan and whether you would qualify for an SBA 504 Loan.

I am assuming the following based on your question:

1. You have completed the application process
2. You have provided all documents requested by the underwriter
3. The bank has issued you a Commitment Letter
4. You have paid for the appraisal and other research reports

a. The appraisal has come back at an acceptable dollar amount to support the loan amount

5. Seems to me you should be receiving a letter from the bank which says you have final approval and the loan is being transferred to the closing department.

a. The Closing Department will work with you to gather any other documents needed
b. The Closing Department will give you a date to sign documentation
and receive your loan proceeds.

Yes. This can be used for the collateral to qualify for an SBA Loan.
1. Most SBA Lenders who fund start-up loans will only qualify a Borrower who has collateral to offer.
2. Collateral can be personal or business real estate and/or equipment.
3. Often, SBA Lenders want a start-up loan to have 50% of the loan amount collateralized.
4. An SBA Lender will allow 50% of the equity in the land to be used towards the collateral requirement.
5. Note, you will have to show ownership or management experience in the industry of the start-up business
6. Note, you will need to have 20% of the total cost of the start-up in cash as a down payment. In other words, the SBA Lender will finance 80% of the start up costs.
7. Note, the collateral required is usually 50% of the 80% the SBA Lender is financing
8. Note, you will need a reasonable and understandable Business Plan
9. Note, you will need three (3) years of itemized projections (Income & Expenses) with explanations of how you came up with the numbers (called the “Assumptions” document)

Yes – But!!

You usually will not have enough time between the auction and when you need to pay the auctioneer to obtain the loan. Be very careful and talk to a bank or mortgage broker before you go to an auction.

1. Fixed Rate Options are only offered for loans with little risk to the SBA Lender.
2. Real Estate is the highest and best form of collateral
3. Most SBA Lenders will consider loans without real estate as having more risk and therefore the Borrower will pay for this risk in the form of higher interest rates and shorter terms
4. Usually, where there is no real estate collateral, an SBA Lender will only offer an adjustable rate loan.
5. In this scenario (question asked) a business is being purchased and this includes the following (goodwill) of the business. The only type of SBA Loan which can be used to purchase the goodwill of the business is an SBA 7(A) Loan.
6. SBA 7(A) Loans may be adjustable or fixed.

I see that you are a business loan broker.
As you know, borrowers need to match a lenders underwriting criteria. The more lenders you know, the more options you will have to fund a loan for your clients.
And, as I’m sure you know, this takes long hours of work with what seems little return on your hours of investment – until one of your clients needs the type of loan offered by one of the Lenders you have in your database.

When you do it within the applicable state and federal laws.
Internet Daily Pay Lenders are charging upwards of 175% + when the
return on loan is calculated.

To add the SBA Perspective,
1. Many SBA Lenders require some direct collateral owned by the business in real estate, equipment or inventory
a) “Cross-Collateral” can also be used (like the Borrower’s home)
2. The amount of collateral required varies with the SBA Lender you are dealing with
3. For real estate, the rule is the underwriter will use 80% of the equity available for the collateral needed
Example: FMV $100,000 and MTG $50,000
80% of $100,000 = $80,000
$80,000 – $50,000 = $30,000 available equity
The above example is based on SBA Regs and should be used for all real estate collateral calculations
For Your Information:
a) Equipment use 50% of collateral value
b) Inventory use 20% of collateral value

And to answer the gist of your question, you would be considered the “start-up”.

This means that you will have to show the Lender “transferable skills” from the industry of your experience to the industry you are buying into. Plus, the Lender will want to see management and/or ownership experience in the industry where you acquired these “transferable skills”.

I will assume a closing occurred and you received funds from a Lender.

Answer is – the lender has a lien on the “title” and you cannot “get out” of it.

My suggestion is talk to an attorney. Consumer rights or Bankruptcy.

Amortization = (Number of total years to pay off loan) x interest rate

Example: $100,000 with 25 years to pay off loan x 7% = $706.78

Google ‘Loan Amortization Calculator” which will give you this information and will also tell you how much principle is paid off with each payment.

Note: The above example does not take into account if the loan has a “call provision” which makes it due before the full amortization period is completed.

The real difference is in the use and analysis of the credit being shown on the reports, not the reports themselves.

That being said, the lender may be using a difference FICO Program than the one a consumer uses and sees. This would usually affect the scores – not the disclosed information on the credit report.

Answer – Yes.

Directors do not matter. Stockholders or Members are the people who matter (Directors are not the “owners” of the entity)

a. Your question is really one of expediency and tax write off
b. Is their a good reason for the loan?
c. Is the loan interest payment an expense which is allowed by the IRS to reduce the net income of the business?

Perhaps the question you are asking is should you buy a house or continue to rent. Lots of useful information when you google that question. Many investment experts view a home purchase as a less then desirable asset and a person can obtain higher returns by renting and using the money spent on a home for other investment purposes.

If you are not sure what the money will be used for, you are not ready to borrow money.

1. What will it take to expand your market share

2. What will it take to expand your production of the product or service

3. Answer the above and that is the start of figuring out where “extra” money would go

4. If you do not have a business adviser, mentor or some person with some business sense to do this, then (and most likely in addition to) you should find the local “business incubator” organization in your area and spend a lot of time there.

5. Also, all the usual books need to be read and digested.

6. The life of a business man is a life of “Live and Learn”.

Elementary: Learn Book Keeping

Can’t do anything in real estate financing or business without understanding debits and credits.

The best personal loans for bad credit are the kind where your own money is used:

1. Secured Credit Card
2. Pass Book (Bank) Loan

I suggest obtaining two (2) secured credit cards. Usually the credit card lender wants a minimum of $300 dollars for any one card. Use one for gas and one for food. Pay these off monthly.

This is the way to receive a “loan” and build your credit back.