SBA financing – as “conventional” as it gets

Are you a privately-held business? Are you looking for financing under $12.5 million dollars? If so, then SBA financing is something you should explore.

One of the biggest misunderstandings with SBA financing is that it is for those that don't qualify for “conventional” financing. But what actually is conventional financing?

Would you define conventional financing as a loan you receive from a bank? Then SBA financing would be considered “conventional.” Would you define it as a loan where you receive a market rate and terms that help you meet the goals of your business? Then SBA financing would, again, be considered “conventional.”

SBA financing has been around long enough that we all know the basics. It affords you the following:

LOWER DOWN PAYMENT: SBA provides a program that reduces the banks collateral risk, giving you the opportunity to purchase with less cash out of pocket.

LONGER AMORTIZATION: During times of growth or heading into times of uncertainty, having the option to minimize your payments can help your business cash flow. And, in the best interest of small businesses, the SBA provides a program that affords the business owner an opportunity to make additional principal payments.

LONGER TERMS: Why have a balloon? All SBA programs give banks the opportunity to extend your terms, some as long as the life of the loan reducing your risk that the loan matures at a time when it is not best for the business to renew.

What you probably don't know about SBA financing:

HIGHER LOAN AMOUNTS: It probably caught your eye above — SBA financing is limited to $5 million, but under the 504 program, there is no limit to your loan project. It will be at the discretion of the bank to determine their lending threshold.

FIXED RATES: The SBA doesn't set the pricing, the bank does. And fixed rates are available. Under the 7(a) and 504 programs, loans can be offered at below market, fixed rates. And if fixed rate isn't an option, the opportunity to grow your business today is worth exploring.

SBA LOANS ARE EASIER THAN YOU THINK: With the right bank partner, SBA financing is no harder than getting a “conventional” loan. The SBA designates bank lenders with a proven history of processing and servicing SBA loans as Preferred Lending Partners (PLP). PLPs can process your loan from start to finish without the delay of additional approvals.

THE BUSINESS DOESN'T HAVE TO BE THE BORROWER: Many business owners have separate entities for a variety of business needs. SBA understands and allows business owners to borrow under an affiliated entity, even with different ownership than the underlying business. This affords the business owner the ability to bring in additional capital partners, such as a spouse or family member.

With over 27 years of experience in SBA lending, I am proud to be a partner to a number of businesses that have used the SBA program to grow and expand their businesses. We never felt this program was meant for only some of our borrowers, and by defining the individual needs of our customers, have found it to be an indispensable solution.

I don't know how the term “conventional” financing was created, but nothing seems more conventional than taking care of our customer's needs. And exploring all the SBA program has to offer, seemed like the most conventional thing to do!

• Jill Markowski is managing director with Union National Bank in Elgin. Contact her at jemarkowski@unbelgin.com or (847) 888-7500.