Interested in starting or growing your small business? A Small Business Administration (SBA) loan could help. Skip Long, Commercial Lender/Vice President, and Haley Barnes, Marketing Coordinator, discuss where to begin and how SBA loan financing works. Watch below.
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Haley Barnes: Hey everyone, my name is Haley Barnes. I am the Marketing Coordinator here at CBC Bank. Today, we are with Skip Long. He is our Commercial Lender and VP at our Baytree location, here in Valdosta. Today, we just wanted to come and talk with you guys a little bit about SBA loans, and give you a little bit of insight about how CBC Bank can help you in that particular area. But I'll let Skip introduce himself and then we will get it kicked off.
Skip Long: Yeah, so my name's Skip Long, Commercial Lender, Vice President here at CBC Bank. Been with CBC Bank for five years now, and before that I was with the Southern Georgia Regional Commission here in town, doing SBA lending and government lending through their program.
What is an SBA loan?
Haley Barnes: Let's get started. So what exactly is an SBA loan?
Skip Long: Yeah, so an SBA loan is a Small Business Administration loan. It's a government lending program to help small businesses either get started as a new business, or maybe to finance a property purchase, an equipment purchase, possibly working capital.
Opportunities like that for small businesses to receive financing that maybe cannot be done conventionally through a bank in and of itself. So it can enhance the loan to help banks be more comfortable to lend that money to the small businesses in their area.
Haley Barnes: Gotcha. Okay. So are all banks SBA lenders, or are there only certain banks that can participate in that?
Skip Long: Right. Yeah, so no, not all banks are SBA lenders. That is something that you have to be approved to do. Banks can apply to be SBA lenders, but only certain banks are approved to do that. They've gone through the process to be approved and are able to make SBA loans through the different programs that they offer.
What types of SBA loans are there?
Haley Barnes: Are there different types of SBA loans? So kind of like, with a mortgage department, you have different types of mortgage products like USDA, FHA. Is that kind of similar for SBA? Are there different options for the loan product?
Skip Long: Yeah, so they have multiple different loans for small businesses. The ones that we at CBC Bank participate in are the SBA 7(a) Loan Program and the SBA 504 Program.
The difference in the two, the SBA 7(a) Program is a kind of an all encompassing business expense program. Pretty much everything can fall under that program, and it is a government guaranteed loan program. So the bank is the one that actually lends you all the money and the SBA comes in and guarantees that loan for the bank, basically providing some comfort in making that loan, knowing that the SBA has guaranteed a portion of that deal. Typically, you know, 75% guaranteed on that loan. So it gives the bank the willingness to do a deal that maybe for whatever reason lacks, maybe it's collateral or there's some kind of gap that needs to be filled to make the bank more comfortable to make that loan. And the SBA steps in with that program and allows us to be able to do that for the customer.
The other programs, the SBA 504 program, that I mentioned that we also participate in, and that's a fixed asset loan program. So things like real estate, land and buildings or long life machinery and equipment, that's the kind of things that can be lent. Our money can be lent for those items through that program. And it's another good opportunity for us to be able to be involved with the customer and provide financing through us, but also through the SBA.
Haley Barnes: You mentioned the different types of loans. Are there certain industries that are able to apply for an SBA loan or is it really all industries across the board?
Skip Long: It's all industries across the board. I guess what makes it a small business, sometimes people get thrown off by that, because what qualifies you to be a small business? Well, the overwhelming majority would qualify as a small business, because it's $15 million or less in your gross revenue. So the majority of our businesses in our area and really throughout the country would qualify as a small business.
What kind of businesses can qualify for an SBA loan?
Haley Barnes: So tell me this, is an SBA loan only for new small businesses, or can it also be beneficial for an established business owner?
Skip Long: A lot of people do think it's just for that new business that's starting out, that maybe doesn't have the cash, the capital, the collateral, and it is for them, but it can also be for that established business that's been around for 10, 20, 30 years, depending on what their needs are.
So again, the 7(a) Program is an all encompassing business expense program, so anything you need can fall under that program, whether it's purchasing real estate or it's needing working capital for whatever it is that you have going on with your business, or that's upcoming, or maybe you're purchasing a business. So yeah, it can be for your startup that needs to buy inventory and equipment and do some leasehold improvements and also needs working capital to survive that first year, and be able to become profitable. It can help them get opened, when maybe otherwise they wouldn't have a bank that would be willing to do the deal without that federal guarantee from the Small Business Administration.
But it can also be for that business that's been around for 20 years, and maybe is expanding and purchasing a new property and the 504 Loan Program allows them to finance 40% of their loan on a 20 to 25 year fixed rate, that they're not going to get conventionally.
What does the application process look like?
Haley Barnes: What does the process look like? So like how long does it take, is it a very strenuous process?
Skip Long: Anybody that knows anything about closing loans right now, it's a lot of paperwork, whether you're buying a house or starting a business. But the timing of it all is pretty much the same.
We would gather the items that we would gather on a conventional loan, so your tax returns and financials, possibly a business plan. We'd gather the same items that we would gather on a conditional loan in-house. And then we would underwrite it just like we would an in-house loan, approve it, submit it to the SBA.
Depending on the program, would depend how we submit it. There might be one or two SBA specific forms, but nothing that causes any delay in processing the loan. And so timeframe-wise, it's really not much different. There might be a week or two difference, but nothing too major. And so they've made it through the years, it's become a lot more streamlined and advantageous to the customer.
How can CBC Bank help?
Haley Barnes: How can CBC Bank help with navigating the SBA loan process? So if someone is wanting to come in and talk with someone right this moment, what are some first steps that they could take to get it going?
Skip Long: Remember that, SBA loans aren't just for those individuals out there that can't get financing otherwise. That's one of those things that a lot of people believe in, and that's just not the case.
An SBA loan can be for anyone and everyone, again, the new business, the established business, the business that is doing very, very well, and the business, maybe that's struggling a little bit and that needs a little help to get going again.
It really is for everyone, but we'd be more than happy to discuss the advantages why we think the SBA route would be a good route to take. And we can talk about obviously, how long it would take, what we would need. But we can talk about the rates, the terms, all those things to give you a comfort level on why this would be a good avenue and a good approach to take for whatever it is that you're trying to do for your business.
Haley Barnes: Well, Skip, thank you so much for coming and talking to us about SBA loans and the process, and how CBC Bank can help through this process.