Imagine running a business in which sales always go up, income is steadily increasing and you are always able to predict and react to economic cycles. Imagine real estate prices continuing to rise and the value of your equipment remaining constant.
In reality, things change, financial performance seldom goes in a straight line and your banker either changes his mind or his institution. However, the Small Business Administration has programs available through participating lenders that can provide stability in this ever-changing market.
SBA loans allow businesses to finance real estate for terms up to 25 years and equipment can be financed for as long as 15 years. These programs allow the option of having long-term debt without the need to renegotiate every three or five years. You no longer need to worry about a new appraisal, new environmental reports, or yet another round of closing costs.
Two significant advantages of SBA loans are: the term/amortization is usually longer than conventional financing, which allows for an increase in cash flow; and SBA loans have lower equity requirements, providing a unique option for certain businesses. Many businesses that benefit from SBA programs are those looking for real estate and business acquisitions, refinancing, expansion, construction loans, machinery and equipment acquisitions and franchise financing.
If you decide to pursue financing for your business through the SBA, you should have your plans well thought out, be prepared with historical financial statements and tax returns and be ready for questions. Once the loan is obtained, you won't encounter new appraisals, impending maturity dates or worry about the day your banker says, "We have decided your business doesn't fit our business model anymore." A bank that specializes in SBA lending can adeptly guide you through the process of detailed paperwork and requirements, which can ultimately result in a significantly more positive outlook for the future of your business.
--Bruce Lammers is the president and chief executive officer of Ridgestone Bank in Brookfield.