Questions & Answers.

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If you own a home and have built up equity, using a home equity loan to finance a business is an option.  Now many of you may be thinking (and I’ve have heard this from many clients) – “I don’t want to get a home equity loan for my business because I don’t want to risk losing my house if the business fails.”  While this is a legitimate worry, the fact in most cases is that when you go to the bank for a business loan and you have equity in your house, they will put a lien on your property anyway.   ...

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Q.  What are the SBA’s collateral requirements? ———- A.  Even though the SBA provides a guarantee to the bank, there are still SBA collateral requirements to get a business loan.  Collateral is an additional form of security which can be used to assure a lender that you have a second source of loan repayment. Assets such as equipment, buildings, accounts receivable, and (in some cases) inventory are considered possible sources of repayment if they can be sold by the bank for cash. Collateral can consist of assets that are usable in the business as well as personal assets that remain ...

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There were a handful of loan and loan guarantee programs about a decade ago that have since mostly been phased out that targeted women and minority businesses from various state and federal agencies.  These programs were typically nothing more than a rebranded version of a program they already had in place.  There are still a few programs in existence that are targeted for women and minorities.  These are typically state operated micro loan programs, such as Georgia’s woman owned business loans program.   At the end of the day all loan applications are going to be judged on the confidence ...

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Question – What is an SBA loan and would I want one?  I hear that term a lot when looking for small business financing but not sure why I would want the government more involved in my business than it already is.   Answer – In some cases you don’t want or need an SBA loan.   First off, let’s dispel a common myth about SBA loans. The SBA does not directly provide financing with the exception for their Disaster Loan. What the SBA does is provide assurance to the bank that if the business owner defaults, the bank is guaranteed ...

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If I am applying for a business loan, what type of information does the bank usually ask for? Answer —- When applying for a business loan there are a number of forms and documents to fill out for the bank.  While the information required may vary by bank, here are a number of items that are typically required: Personal background and financial statements Business financial statements (income statement & balance sheet – if the business is already open) Last 3 years of business tax returns (If the business is already open) Projected financial statements (Banks typically want 3 year projections) ...

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Question – I am interested in purchasing an existing, successful business from my current employer.  I have talked with my bank and even though I have cash to put into the deal, his concern is the lack of collateral.  The current owner is retaining and then renting the business real estate and business equipment is minimal. Since this is essentially an unsecured request, would an SBA Advantage 7a work?   Our Response: SBA’s written policy regarding collateral has two parts: 1 When a loan guaranty is approved, the SBA would expect all existing business assets collateral. After exhausting business assets, ...

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