My SBA Loan Pro Podcast

Demystifying The SBA Loan Application Process - Defining The Term Retrade Seldom are surprises welcomed when applying for an SBA loan to acquire a business, execute a change of ownership or purchase real estate. In fact, surprises usually mean a change in terms which may affect the loan's outcome or desirability. The official term for this phenomenon is Retrade. The term retrade simply means the practice of renegotiating the terms of a transaction after the initial price and terms have been agreed upon. Unfortunately, SBA lenders are also prone to retrade which may come as a surprise and to the dismay of loan applicants. Let’s explore when and why a Retrade may occur during the loan application process and more importantly how to avoid them. First, we must understand the order of events when applying for an SBA loan. After submitting a complete loan package it is customary for the lender to issue a Term Sheet also called a Letter of Interest. There are three types of Terms Sheets A term sheet printed upon demand by an inexperienced Business Development Officer without any prior due diligence performed A term sheet printed on demand by an experienced Business Development Officer with credibility within organization A Term Sheet approved by a Credit Manager or Chief Credit Officer It’s easy to understand the veracity of a Term Sheet improves and the likelihood of experiencing a retrade diminishes with more due diligence and higher scrutiny. However, take note that Wall Street banks, seen on every corner, are notorious for retrading at any point during the loan application process, even right up to the point of signing loan documents. The reason for this phenomenon may be attributed to inexperienced Business Development Officers, decentralized credit decision making authority and an abundance of obscure lending policies unknown even within the organization until after a loan is formally underwritten and reviewed by a credit manager. As a rule, I require all of my portfolio lenders to perform a minimum acceptable level of due diligence that includes reviewing the Term Sheet with a Credit Manager or when possible a Chief Credit Officer, significantly minimizing the likelihood of a retrade. Further, I require my clients and lenders to speak prior to submitting the loan request to formal underwriting so the lender can confirm the due diligence performed up to that point in an attempt to avoid any surprises including a retrade. I have only experienced three retrade events since founding ThinkSBA in 2019. Two of them by Wall Street banks with a decentralized underwriting center and one due to the need to mitigate unsatisfactory personal liquidity at the time of loan committee. Incidentally, all three loans closed. Listen to more episodes 🎧 ▶ https://mysbaloanpro.com ▶ https://mysba.pro/applepod ▶ https://lnkd.in/gwZj8wnG

How To Bulletproof Your Business Acquisition All self funded searchers pursuing ETA, listen up. This podcast episode contains a comprehensive overview of the acquisition process including the following topics. After listening to this episode you will be equipped with the tools and information to make better decisions on your journey. Sell Seller Legal Team Landlord Financing Business Transfer If you liked this content, let's connect on social media: Instagram: ⁠https://lnkd.in/g6bRk62r ⁠ Twitter: ⁠https://lnkd.in/gfT2PZzK⁠ LinkedIn: ⁠https://lnkd.in/grePHU9d⁠ More ThinkSBA Resources ⁠⁠https://lnkd.in/gCPshqDW⁠ - Schedule Call ⁠https://g.page/thinksba⁠ - Google Business Page & Reviews ⁠https://thinksba.com/faq⁠ - Frequently Asked Questions ⁠https://mysbaloanpro.com⁠⁠ - My SBA Loan Pro Podcast ⁠https://lnkd.in/gRsqehnA⁠ - YouTube Channel Listen to more episodes 🎧 ▶ https://mysbaloanpro.com ▶ https://mysba.pro/applepod ▶ https://lnkd.in/g2ZgFNag

SBA Financing For Residential Care Facilities For The Elderly Residential Care Facilities for the Elderly (RCFE’s) have become the housing model of choice for our senior population and their loved ones due to the fact that many require increased accessibility, social connectivity, and medical support services that living at home simply cannot provide. As the name implies, RCFE’s, also called assisted living facilities, are often located in suburban residential neighborhoods. Many of these assisted living facilities are permitted to house between 6 – 16 senior adults. As a result, buyers and sellers are often represented by residential real estate agents and brokers who are only familiar with residential mortgage financing. Though residential mortgage financing will suffice when acquiring unconverted residential property it does not when the loan purpose includes ground up construction of a new facility, refinance or acquisition of an existing facility. This makes finding the right financing difficult. That is why it’s important to align yourself with an expert. In an RCFE sale transaction, both sellers and buyers should take note of the following qualifying criteria: Whether the buyer is able to demonstrate direct or equivalent experience which qualifies them to own and operate an RCFE per bank guidelines. The process to re-license an RCFE with a new owner, operator and how that can affect the escrow close date. How the appraised value is determined for purchase transactions, refinances and ground up construction and the impact to down payment percentage requirements. When a Phase 1 Environmental Report is required and when it is not. How to calculate and identify use of square footage to qualify for prime lending rates and terms. Whether the level of medical support services offered at the facility qualifies for prime lending rates and terms. Loan Terms Available For Qualified Borrowers whether ground up construction, refinance or acquisition includes. Minimum 15% equity injection allowing entrepreneurs to keep more capital in reserves for strategic growth and unexpected expenses. Loan closing within 45 – 60 days to meet the demands of escrow. Requesting working capital to meet the demands of short term operating expenses after the transaction closes. Reasonable interest rates and up to 25 year amortization period for easy monthly payments. Flexible pre-payment penalties giving business owners the power to payoff their loan on their terms. Listen to more episodes 🎧 ▶ https://mysbaloanpro.com ▶ https://mysba.pro/applepod ▶ https://lnkd.in/g2a6ZQiN

Collateral Assignment of Life Insurance Requirement For SBA 7(a) & 504 Loan Programs Life insurance is a contract between a policyholder and insurer where the insurer promises to pay the insured's beneficiary an agreed amount upon their death. The most common application is between heads of household and their dependents. Life insurance is also used by commercial lenders as a risk mitigation strategy for loan applicants of privately held, family owned businesses. In the same vein the SBA requires that loan applicants obtain a collateral assignment of life insurance for the lender's benefit when the business is formed as a sole proprietorship or single member LLC and is otherwise dependent on one owner’s active participation. Examples of businesses dependent on one owner's participation include businesses where special training or licenses are required such as doctor's offices, assisted living facilities, contractors, mechanic shops, etc. The required face value amount of the insurance policy for 7(a) loans is determined by the operating businesses industry classification code, loan amount, length of loan term and available collateral. On the other hand, Certified Development Companies (CDC) which fund the 504 2nd Deed of Trust, also known as the Debenture, are mandated to require a collateral assignment of life insurance with a face value amount equaling the Debenture minus the available collateral's discounted liquidation value based on the following schedule: Commercial real property including buildings: 75% of appraised value. Residential real property including buildings: 80%. of appraised value Land only: 50% of appraised value Equipment: 50%.of appraised value Leasehold improvements: 5%. Of appraised value Furniture and fixtures: 5%. Of appraised value Now, pay close attention to these three important points. A collateral assignment of term Life insurance is acceptable to meet the SBA’s requirement. No lender should ever require universal or whole life insurance which are generally more costly.. A loan applicant may assign to the lender or CDC an existing policy that meets their underwriting criteria. A lender can waive the requirement to obtain life insurance if a licensed insurer provides written documentation that the loan applicant is unable to obtain life insurance. Some lenders require denial letters from a minimum of two licensed insurers. As a best practice, I recommend loan applicants discuss the requirement to obtain life insurance with their loan broker or SBA business development officer upon or before the loan is submitted to underwriting or is scheduled to be presented at loan committee. The length of time it takes to obtain life insurance is between one to six weeks, or more depending on the life insurance company’s pipeline density, underwriting practices and the loan applicant's age and health status.

SBA 7(a) & 504 Real Estate Purchase Loan Application From Start To Funding The most frequently asked question I receive by far is how long does the loan application process take to complete from start to finish. The quick answer is 45 - 60 days. The honest answer is it takes as long as necessary to complete all steps in the process. The next logical question is what are the steps. Here is a list of each step in order with an explanation. Before I begin, I want to emphasize the timeline starts from the day the lender receives the monetary Deposit, usually $2,500 or $5,000 and the signed Letter of Interest or Term Sheet. Step 1: Loan Application Needs List. This needs list is sent to the Applicant by the Lender in preparation for underwriting. Included are General Application Forms and SBA Forms 1919, 413 and 912 if necessary. It typically takes 2 - 4 days for the lender to generate this needs list from receipt of the monetary Deposit and signed Letter of Interest. Step 2: Underwriting. The amount of time to underwrite the loan is 1 - 3 weeks depending on the lender's pipeline density, available underwriters and support resources and outstanding information required by the underwriter to render a decision. Step 3: Credit Decision. The credit decision is announced upon completion of underwriting or the conclusion of ”loan committee.” Some lenders shepherd loan requests through individual underwriters in an underwriting loan center. Other lenders maintain a decision making body referred to as “loan committee.” It takes 5 - 10 days for an underwriter to review a loan application and either return to the applicant with questions or a credit decision, meaning the loan is either approved or declined. Loan committees decide a loan in the committee meeting which is typically held one day per week or every other week. SBA 504 loan requests require a separate SBA Approval called an Authorization which may add an additional 5 - 10 days to the entire application process. Step 4: Commitment Letter. The commitment Letter outlines conditions required to close the loan and is sent to the Applicant 2 - 4 days after loan approval. This step begins the process of ordering third party reports and the collection of closing documents. Step 5: Third Party Reports & Closing Documents. A real estate appraisal is ordered by the lender to be performed by an SBA approved third party appraisal company. The appraisal may take 2 - 3 weeks to complete with an additional 2 - 5 days for lender review. If a business acquisition is included with the real estate purchase, a business valuation is also ordered which also takes 2 - 3 weeks with an additional 2 - 5 days for lender review.

SBA 7(a) Business Acquisition Loan Application From Start To Funding The most frequently asked question I receive by far is how long does the loan application process take to complete from start to finish. The quick answer is 45 - 60 days. The honest answer is it takes as long as necessary to complete all steps in the process. The next logical question is what are the steps. Here is a list of each step in order with an explanation. Before I begin, I want to emphasize the timeline starts from the day the lender receives the monetary Deposit, usually $2,500 or $5,000 and the signed Letter of Interest or Term Sheet. Listen to more episodes 🎧 ▶ https://mysbaloanpro.com ▶ https://mysba.pro/applepod ▶ https://lnkd.in/gfNS8PHW

ThinkSBA Small Business SBA Loan Experts Applying for a small business loan can be stressful, grueling and confusing when you hear the dreaded NO from your bank. Does this sound familiar? Hello, my name is Ryan Smith, Principal Broker and Founder of ThinkSBA. If you are listening to this podcast it’s likely you are a small business owner or entrepreneur who is purchasing real estate, acquiring a business or franchise or are in need of working capital to grow or start your business. If this describes you, you’re in the right place. I started ThinkSBA because, as a former banker, I was tired of saying no to good people with good businesses. And now I don’t have to. That’s because I’m not constrained by one bank or one credit platform. I work with local, regional and nationwide lenders to find the loan that meets your unique business demands. My process is simple, yet effective. First, I get to know you, your company and business goals. Second, I conduct a thorough financial analysis to determine which lenders are the best fit. Third, I engage the lenders, receive proposals, and then you choose which lender funds your loan. Don’t worry, I am with you every step of the way. And just like that, I’ve put the power to determine your company’s financial future back into your hands. The best part, the majority of the time I am paid by the lender, not you. Yes, it can be that simple with your cooperation and my years of experience leading the way. If you’re ready to discuss your purchase or acquisition visit the ThinkSBA website at http://thinksba.com and click the Get Started button in the top right hand corner of the homepage. If you’re not quite ready but want to learn more about SBA guaranteed loans, feel free to browse the My SBA Loan Pro podcast library and please remember to subscribe and leave a review. Have a great day! Listen to more episodes 🎧 ▶ https://mysbaloanpro.com ▶ https://mysba.pro/applepod ▶ https://lnkd.in/gtTVi-yT

SBA 7(a) Business Acquisition Loan Series - Seller Discretionary Earnings Seller Discretionary Earnings referred to as SDE equals net profit, which is the sum of annual revenue minus expenses, plus add-backs of seller discretionary spending. SDE directly impacts enterprise value, buyers equity injection, loan amount, seller carry amount, and debt service coverage ratio which ultimately determines whether a loan application is approved or declined. Common expenses added back by sellers beyond Interest, Tax, Depreciation and Amortization include officer salary and benefits, meals and entertainment, travel, automobile loan payments, cell phone and internet bills and personal care items. I've also witnessed seller discretionary add-backs of child care, alimony, child support and a whole host of other questionable expenses. I don't recommend business owners expense these items if their exit strategy is to earn maximum enterprise value in an arms length sale transaction. Sellers are incentivized to add back expenses, even questionable one’s, primarily to inflate the businesses enterprise value. Sellers feel justified adding these expenses back due to their years of blood sweat and tears starting and operating the business and also because they are convinced these expenses are unique to them and are indeed discretionary. On one hand, sellers are correct, as the word discretionary means available for use at the discretion or choosing of the user. However, lenders literally review hundreds of profit and loss statements each year with nearly all of them including most, if not all, of these aforementioned expenses. Therefore, though these expenses may be discretionary they are also so common most lenders expect buyers to also expense these items thereby nullifying their discretionary nature. Sellers should expect that in almost every case meals and entertainment, travel, automobile loan payments, cell phone and internet bills and personal care items will not be added back by lenders. Proceeding with the loan application without accurately assessing SDE may set up a scenario where the loan is conditionally approved but the business valuation derived is less than the sale price. If this happens, In almost every case there are three possible outcomes: The applicant is required to inject more equity, The seller is required to carry a larger loan amount or the loan application is declined. That’s why it’s important to structure the loan for success, in compliance with all SBA policies and procedures prior to submitting the loan application. One last thought and recommendation for business owners preparing their business for sale. Listen to more episodes 🎧 ▶ https://mysbaloanpro.com ▶ https://mysba.pro/applepod ▶ https://lnkd.in/gaJwnz9m

Demystifying The SBA Loan Application - Crossing The Finish Line! The most important step in the SBA loan application process is closing the loan. This is obvious, right? You would think so. However, many applicants make the mistake of focusing their attention on closing after it’s too late, and they've missed a critical step or piece of information that inevitably prevents them from closing the loan. An SBA loan is considered closed after a loan number has been assigned by the bank and boarded to their loan management platform, applicant and bank funds have been moved into escrow or a construction account, deeds of trust have been recorded and/or licenses obtained and escrow finally and formally notifies all parties its job is finished. Unfortunately, many SBA loan applications never close. This is extremely frustrating for the applicant who has invested time, money and other precious resources with nothing to show for it. No new business, no new office building, no working capital. I know this because many applicants who are referred to me or find me on Google have personally experienced this frustration first hand. Reasons for the loan application stalling out prior to close include inadequate bookkeeping and financial reporting, improper legal entity documentation and structure, applicant non-disclosure of prior adverse credit, criminal background or other malfeasance, insufficient asset value resulting from a real estate appraisal or business valuation, discovery of soil or water contamination from a Phase 1 environmental report, ineligible business applicant, individual guarantor or purchase contract, inability to obtain proper licenses and certifications and/or uncooperative and unreasonable partners, sellers, contractors or landlords and the list goes on. The good news is there is a tried and true method to successfully close an SBA loan and avoid the frustration of watching your hopes and dreams disintegrate into thin air.

The Benefits of Hiring an SBA Small Business Loan Broker Navigating the SBA loan program and application process can be complicated. For starters, the entire SBA loan program, including borrower eligibility requirements and all policies and procedures, is governed by the SBA’s Standard Operating Procedures Manual also known as the SOP for short. The SOP is a 400 page document filled with industry jargon and references. To make matters worse, it is regularly updated making it nearly impossible for an applicant to know everything necessary to successfully apply for an SBA loan on their own. This begs the question, “Where should an applicant turn to prepare themselves to successfully apply for an SBA loan without wasting time, money and other precious resources? Many applicants simply turn to their incumbent Bank. The benefits of working with an incumbent bank include familiarity, trust and rapport. The potential negatives include; the bank not being a respected SBA Lender, the bank not being the right fit; which may result in a bad experience or even worse a credit decline, and the bank not offering the lowest rates and fees for which the applicant qualifies. An alternative many applicants choose is asking for lender referrals from their trusted advisor network. This option amounts to a crap shoot as most trusted advisors have little to no familiarity with the ins and outs of SBA lending. The third option is hiring a trusted SBA Small Business Loan Broker. Many consumers are comfortable hiring a residential mortgage loan broker to finance the purchase or refinance of their primary residence and it should be the same for business owners and entrepreneurs who are in need of financing to purchase or refinance their owner user real estate and/or acquire a business. The benefits of hiring an SBA loan broker include: Working with an expert who is proficient in the details of SBA financing Being matched with the right SBA lender from the start Having a trusted advisor who is on your team and can answer questions or give advice through the entire application process from start to funding I want to warn you that not all loan brokers are created equal. Beware of any loan broker who doesn’t focus primarily on SBA loans, requires fees to be paid upfront, is not properly licensed, makes unsubstantiated guarantees or promises regarding interest rates and loan approval, and anyone who advises and/or encourages unlawful actions to get the deal done at any cost.