Small Business Administration (SBA) Express loans are a simple way to receive expedited, amortized government-guaranteed financing for a small business or franchise needing low-dollar funding. While the SBA 7(a) program offers up to $5 million in loans, Express loans are $350,000 and less, with most borrowers looking at $150,000 or less. By Symara Rog
Small Business Administration (SBA) Express loans are a simple way to receive expedited, amortized government-guaranteed financing for a small business or franchise needing low-dollar funding. While the SBA 7(a) program offers up to $5 million in loans, Express loans are $350,000 and less, with most borrowers looking at $150,000 or less. To be clear, the SBA is not the lender; rather, the SBA guarantees the loan should the borrower default for any reason, reducing the risk for the lender.
Like any debt-based funding, SBA Express applicants must meet certain criteria:
Credit Score: Lenders are looking for 685 or higher in most instances.
Background: No judgments or liens, and also no bankruptcies (personal or business-related in at least the previous five years).
Bank inquiries: No more than two-to-three recent inquiries.
Equity Injection: Equity injection is currently at 11% of the loan amount ($16,667 on a $150,000 loan; $11,111 on a $100,000 loan, etc.).
Cash Reserves: $50,000 in cash reserves is required. Many borrowers are choosing to pair their SBA loan with a 401(k) Rollover. A Rollover is non-borrowed money that be used to satisfy the Equity Injection or Cash Reserves portion of the loan requirements.
Are there other ways in which an applicant can make his or her loan application more attractive? Yes!
If a franchise buyer has previous or current related experience, include it! If the franchise buyer has a business plan or management team, include it! Additional data supporting the application and, ultimately, the viability of the business’ success only improves your funding position.
What are the charges and fees? SBA Express loans are currently running at WSJ Prime plus 2.75%. And, from February 1, 2021 through September 30, 2021, new loans qualify for three months of principal and interest payments to be paid by the SBA on behalf of the borrower (while funds are available). This “free” money will no longer be available once funds are exhausted. Closing time varies and has been impacted by COVID relief programs, but the goal is generally three months to closing.
Why work with Tenet Financial Group for this particular loan type? Many times, the borrower’s local bank will have more stringent requirements such as additional cash injection (above 11%) or collateral (such as your home). The criteria cited earlier are confirmed with preferred lenders working with Tenet Financial Group across the U.S.
For more small business tips, visit the Tenet Financial Group blog at tenetfinancialgroup.com.
– Symara Rog
Symara Rog has been a Senior Consultant with Tenet Financial Group since 2020 and has nearly two decades of franchising experience as both a single and multi-unit franchisee and as a franchise development team member. Having recently earned her CFE designation, she is committed to helping dreamers become successful franchise owners through full-service funding consultation and support. Symara can be reached at symara@tenetfinancialgroup.com and 214-614-8236.