In early 2013, getting small business administration loans became easier when the government streamlined the lending process and changed some features of the SBA’s popular loan programs. After complaints that the average SBA loan application was too complex and lengthy, the government decided to reduce the paperwork required to help expand upon the number of businesses with access to a loan or commercial mortgage. Some of the most difficult financing steps a business will face are the loans necessary at the startup phase. Getting initial funding for small business administration loans has been nearly impossible for some business owners, particularly because of the collateral and credit history requirements used in the past.One of the biggest changes to the SBA 7(a) and 504 loan programs has been the elimination of the personal resource test. Before this change, applicants would need to undergo a complex process to determine how much collateral might be required for a particular loan application. This change has benefited businesses seeking the commercial loan rates offered through SBA loans, particularly when conventional loans have been out of reach. In addition, the rule changes surrounding business affiliation have made it possible for certain companies to qualify for small business administration loans despite having a financial connection to larger companies with significant revenue.One of the biggest hurdles for qualifying for SBA loans has been the size requirement. The reason why the rules on affiliation were changed is because a large company with ties to a small company that was applying for an SBA loan wouldn’t benefit from trying to get a government-backed loan. Large companies have been able to qualify for conventional loans with rates lower than traditional SBA loan rates. However, loan limits were changed in 2010 to accommodate larger small business administration loans, as well as businesses with net income up to $5 million. This means that a company with $100 million in sales with only $5 in net income could actually satisfy SBA loan requirements.The recent changes were made to help small businesses, but overall the modifications have made it easier for larger businesses to get SBA loans, too. One of the ways in which SBA loans haven’t changed is the requirement for collateral. Despite changes to the personal resource test, business owners have still had the opportunity to put their personal assets into the application as collateral. Placing a personal home up as collateral for an SBA loan has remained a standard part of building a business from the ground up. Fortunately, the SBA has allowed applicants to use collateral not owned by the business to satisfy SBA loan requirements.Before deciding upon which loan to apply for with a local lender, a business borrower should figure out which SBA loan program would offer appropriate funds. Different loan programs available through lenders include CDC/504 loans for real estate and equipment, general SBA loans through the 7(a) program, and micro loans. The government even offers disaster loans that homeowners and renters can use. The variety of available small business administration loans ensures most small business owners can find an appropriate type.The economic recovery has helped make it easier to qualify for small business loans, and with the rule changes in effect, it has been the government’s hope that there would be additional businesses applying for SBA loans. When seeking a small business loan, it’s important for business applicants to research a variety of lenders to determine which offers the best opportunity for approval. Small business administration loans do have some eligibility requirements, but many businesses can meet those requirements by finding a lender who specializes in small business loans.
Many owners of commercial properties who are looking for a commercial loans are having problems securing one right now. The residential mortgage industry problems have trickled into the commercial mortgage industry and many lenders will only take the cream of the crop thus leaving leaving the rest dealing with hard money more expensive loans. If this is where your at there are some things to look out for.The delinquency that the residential mortgage markets experienced and scared mortgage lenders off is now projected to hit the commercial industry hard in 2010 thus making commercial mortgages even harder to come by.This being said it really puts the consumer in a vulnerable position as they generally will have a hard time going to their local banks for refinances. Once their local bank turns them down the question is where can they find a lender they can trust.There are a number of things that the consumer needs to be aware of when looking for a commercial loan. In many ways these loan can make or break a business if the loan turns out to be too expensive or there is no good exit strategies so being able to trust the lender you are dealing with is very important.In today’s markets your going to need a lot of equity in your property to qualify for a loan as lenders aren’t going to want to take the risk of a higher loan to value. If you have trouble verifying income, tax liens, marginal credit, etc. be prepared for a harder money loan that is more expensive.That being said one thing to be aware of is the commercial industry is largely unregulated unlike the residential industry. You can come across many unscrupulous mortgage brokers who aren’t looking out for your best interest. In many instances you will get an pre-approval letter and the broker will want you to give them a large sum of money up front which most times is nonrefundable. The pre-approval letter may lead you to believe you have a loan in place however it really is just a way to lock you into that particular broker. There are some brokers that make a living just taking fees to find a loan and then never actually funding a loan!Once you start your search for a commercial lender make sure if you get a letter of interest (LOI) that it is from an actual lender and not a mortgage broker. A mortgage broker does not have the ability to actually give you the money and really should not have the right to take your money stating you are pre-approved. You will ultimately have to put money up front but it should be directly for appraisals, environmental reports, title fees, etc and should be refundable.The commercial mortgage game can be frustrating however if you come across a broker you can trust then rest assured at least you can find out up front what your dealing with and how much it will cost you, which is half the battle!