SBA Loans - San Diego
Lightning Commercial Funding
SBA Debt Refinancing
by Harlan A. Friedman
In commercial lending these days, more complicated loans such as nonrecourse construction loans or high-loan-to value loans can be hard to fund. Other, more basic loans, however, such as U.S. Small Business Administration (SBA) loans can be lucrative for commercial mortgage brokers.
Many banks — especially those in SBA’s
preferred lender program (PLP) — like to book
these loans to portfolio, as well as to sell for their
fee income. Why? One reason is that the SBA
guarantees 7(a) loans for as much as 75 percent
of the loan amount if your clients should default.
In other words, the SBA will pay back the bank
issuing the loan 75 percent of the amount, which
decreases the bank’s risk.
The SBA finances only owner-occupied business
properties. By reaching out to these businessowners
who seek to consolidate debt or purchase
a property, you can unearth new business.
The SBA can provide debt-consolidation
and pay back your clients for their initial startup
investment, if they meet certain requirements.
The first condition is the payment savings must
be at least 20 percent of the monthly payment.
This can get sticky if payments are interest-only.
If you cannot categorically prove the 20 percent
savings, then debt-consolidation is out of
the picture. Remember, however, that this is on
a loan by loan basis, not a total basis. So as you
examine your client’s business-debt schedule,
compare each payment to the new SBA payment
for the same loan amount.
Second, you must make sure that any debt
you are refinancing is not SBA debt. While you
can add more SBA debt, you cannot refinance
SBA debt with another SBA loan.
Third, you must prove that all debt being
refinanced was business debt and not personal
debt. This point is somewhat more difficult to
establish, as many new entrepreneurs commingle
their personal and business finances
when starting a new venture. They usually take
money from any source to pay their bills.
Clients should have one or two credit cards
that are strictly used for business debt. That debt
can be proven more easily