Why You Should Consider SBA Loans for Your Small Business
According to a recent survey, small business optimism continues to remain high, which is important when you consider more than half of Americans either own or work for a small business, and small businesses account for an estimated two out of every three new jobs annually.Next week marks the U.S. Small Business Administration’s (SBA) 54thannual National Small Business Week, an entire week dedicated each year to highlighting and celebrating the vital economic contributions of America’s entrepreneurs and small business owners.
Texas, in particular, is home to some of the most exciting, innovative, and vibrant small businesses in the country. More than 2.2 million small businesses call the Lone Star State home, including more than 750,000 women- and minority-owned small businesses.As one of the state’s leading commercial banks and a designated SBA Preferred Lender, PlainsCapital Bankrecognizes small businesses as important drivers for the Texas economy.
“National Small Business Week is a great reminder of the value that small businesses bring to their communities,” said Mike Litton, PlainsCapital Bank senior vice president and director of SBA lending. “I’ve had the good fortune over the course of my banking career to help put a lot of people in business, build their businesses, and fulfill their dreams.”
Litton, who likens himself to a player coach, oversees the Bank’s SBA lending program, working with PlainsCapital’s designated SBA lending specialists—referred to as “SBA champions”—in each of its markets. Since 1988, PlainsCapital has championed the cause of small business owners in Texas to the tune of more than $250 million.
In January, PlainsCapital was honored by the SBA and the North Texas Association for Government Guaranteed Lenders (NTAGGL) for being the top SBA first lien lender in the Dallas-Fort Worth market for 2017.
PlainsCapital Bank was named the top SBA first lien lender in Dallas-Fort Worth for 2017. Pictured l-r: William Manger, U.S. Small Business Administration associate administrator for the Office of Capital Access; Mike Litton, PlainsCapital Bank director of SBA lending; Herbert Austin, SBA Dallas/Fort Worth district office director; Greg Dunn, North Texas Association of Government Guaranteed Lenders president.
According to Litton, SBA loans can be a very useful financing option for prospective borrowers, whether they are just starting a company or have been in business for a number of years. SBA loans allow business owners to obtain financing who may not qualify for a conventional business or commercial loan due to factors like limited cash flow, leveraged assets, or little to no business operating history.
“There is an extraordinary need for business credit and SBA loans can be a valuable solution for our bank customers,” said Litton
Some of the benefits SBA loans offer include:
- Up to 90 percent financing
- Fixed rates with longer terms – some up to 25 years
- Flexible loan approval
Because SBA loans serve as an important financing tool, Litton says it’s important that prospective borrowers know how SBA loans work, the types of loans available, and considerations to keep in mind should they decide to apply.
What are SBA loans and how do they work?
When you go to a bank to apply for an SBA loan, you’re actually applying for a commercial loan structured according to SBA requirements and backed by an SBA guarantee.
Compared to a traditional business loan, an SBA loan:
- usually has a lower down payment requirement, but higher fees
- may incorporate some of the borrower’s personal property as part of the collateral requirements
- features longer amortization periods and terms, resulting in lower loan payments
What types of SBA loans are available?
The SBA’s primary financing program is the 7(a) loan program, which includes several loan types such as SBA Expressand CAPLines. SBA 7(a) loans are for up to $5 million and can be used for a variety of general business purposes, like acquisitions, expansions, debt refinancing, and improving cash flow.
The SBA 504 loan programprovides long-term, fixed-rate financing for the acquisition of fixed assets like real estate and equipment or to fund new construction for business expansion or modernization. SBA 504 loans are made available through Certified Development Companies (CDCs), the SBA’s community-based partners, and can be used to finance projects up to $13 million.
The benefits of working with an SBA Preferred Lender
Some entrepreneurs and business owners are hesitant to consider an SBA loan because they believe the application process and associated costs to be daunting—on top of a lengthy approval process. Litton emphasizes the importance of working with a bank and banker who are experienced in SBA lending and can help expedite the application process, as well as evaluate other financing options.
The SBA’s Preferred Lender programenables the SBA to streamline the procedures for lenders by giving them the authority to make the final credit decision. Nonpreferred lenders have to send loans to the SBA for approval, whereas a designated SBA preferred lender like PlainsCapital is able to underwrite its own SBA loans.
“As an SBA Preferred Lender, we have the experience to navigate customers through the loan process quickly and efficiently,” said Litton. “We’re experts at this type of lending because we do it every day, not just once in a while, enabling us to close a majority of loans in weeks rather than months.”
Considering an SBA loan?
PlainsCapital addresses a number of frequently asked questionsregarding SBA loans on its website—like applicant considerations, prequalification, debt refinancing, and more—in addition to providing an overviewof SBA loan options and terms. We also recommend visiting SBA.govalong with the SBA’s Small Business Development Centerweb pages to learn more about the types of SBA loans available, qualifications, and to access resources for general business planning.
To learn more about PlainsCapital’s SBA lending program and to speak with an experienced SBA banker, visit PlainsCapital Bank’s SBA web page.
SBA.gov, National Small Business Week
BusinessinTexas.com, Texas Economic Development Corporation