SBA loans Featured

8:00pm EDT May 26, 2007

Whether a start-up or established, businesses often need to borrow funds to operate. One lending option that has been around since 1953 is sometimes overlooked due to lack of knowledge or misunderstandings. The Small Business Administration (SBA) loan program is not for everyone, but has some definite benefits for companies and owners that are in a position to take advantage of them.

“There are only about 50,000 to 60,000 SBA loans approved nationally each year and most lenders only do 10 or 12 per year,” says Edward H. Holmes, president of Centinel Financial Corporation in Plano. Centinel is the SBA consultant ViewPoint Bank uses to package its SBA loans. “As with most governmental programs, it’s hard for most people to justify the time and expense to keep up with the constant changes in policies and forms. Individuals who specialize in working with these kinds of programs can help provide a win-win situation for the borrower and the lender.”

Smart Business talked with Holmes for more insight on SBA loans.

How are SBA loans different?

An SBA loan is actually a commercial loan granted by a lending institution that is partially guaranteed by the SBA. The SBA was created to assist small businesses in a variety of ways. One of the ways is to help businesses start, grow and expand by making funds available that wouldn’t be available in other ways. The idea is that as businesses grow so does the economy, and the government is provided an increased tax base.

Advantages of SBA loans include longer repayment terms, more flexible terms, lower down payments or capital injection and competitive interest rates. It can also be easier to qualify for these loans.

Who should consider an SBA loan?

New businesses are especially suited, as it is easier to obtain an SBA guaranteed loan than a conventional one when there is not enough collateral or past history to go on. It is possible to start a business with 30 percent owner-infused cash and 70 percent loan funds. SBA loans are also well suited to growing companies that have most of their assets in accounts receivable or inventory. Banks classify these as ‘soft assets’ which have less collateral value to the bank than hard assets such as real estate and equipment.

SBA loans are available to for-profit businesses that are owner-operated. Businesses formed for investment purposes, newspapers, speculative ventures, churches and some other types of industries are not eligible, however, most types of businesses qualify for SBA assistance.

What are the potential drawbacks?

They are paperwork intensive, at least in the application process. They may be a little more expensive upfront, but these fees can generally be financed in the loan. They can take a little longer to process. While conventional loans usually can be processed within 30 days, most SBA loans require up to 60 days.

Some people may feel that an SBA loan can open the business up to more government scrutiny. That is a false assumption. Once the loan is approved, the company only deals with the bank.

What can an SBA loan be used for?

Loans can be used for almost any business purpose. Uses could include real estate acquisition or construction, permanent real estate financing, capital improvements, equipment purchases, business purchases, working capital and business startups.

How would one apply for an SBA loan?

An SBA lender like ViewPoint Bank can help fill out the application. When the application comes in for packaging, we would make sure all the forms are filled out in accordance with current regulations and evaluate your needs along with those of the bank and the SBA.

Information needed includes business and personal financial statements, a business plan, owner’s personal tax returns, and historical and background information about the business. A personal résumé and background information is especially important for new businesses. The decision-makers need to know if you have the experience and background to start and run the proposed business. They are also going to look at the industry and its risk potential.

After all the paperwork is complete, it first goes to the bank for approval and then to the SBA. Once the loan is approved by the SBA, the bank will work with the business owner to close and fund the loan.

To learn more about SBA loans, go to’s business banking section or call (972) 801-5775.

EDWARD H. HOLMES is president of Centinel Financial Corporation. Reach him at (972) 985-3225 ext. 201 or at