Tough Time to Borrow | SBDC UNF

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Tough Time to Borrow

We’re seeing a real downturn in the number of banks interested in doing business loans including SBA loans. If you are in startup mode, its going to be even harder.

The Small Business Administration last week encouraged banks that participate in SBA lending to be more willing to do loans and not rush to call in existing loans. This pitch by the SBA we caused by the clear lack of options to secure funding using conventional loans or the personal equity in their homes as those loans dry up.

According to the National Community Reinvestment Coalition, SBA 7a loans for small businesses were down $160 million between 2005 and 2006.

funding is down in the last few years. Fees on SBA loans have gone up quite a bit since 2005 and have these loans unattractive for some people. Certainly almost all banks has stopped doing start up business loans to lessen their risk. SBA loans worked because they were bundled and sold on the secondary market. Bruce Rossi, vice president heading SBA lending at Provident Bank in Woodbridge, New Jersey, states that insurance companies and pension funds have not been buying the loans as they have in the past. Banks that have made money selling SBA’s are not making the money on them that they did in the past.

Banks are citing the low credit quality of their applicants as another reason their SBA lending is down. All this leads to a vicious cycle of small firms seeing their line of credit stripped, using credit cards to keep the business open an try to cover debt, leading to their applying for SBA too late to have any hope for approval.

Good loans are still being done and our client that are receiving bank funding have the following in common:

  • A solid business plan
  • Good credit
  • Collateral
  • Experience in what they are doing
  • A plan to pay back the loan
  • A thorough knowledge of their industry, customers and competition

We can help you put it all together. Click on the logo…

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