SBA Loans Seen Aiding Expansion
Thinking of expanding your kitchen/bath showroom or adding new displays? You may wish to take advantage of the LowDoc program from the Small Business Administration (SBA) of the federal government. If you've got pretty good credit, this is a program to consider.
Your first contact will be a lender either a bank or a small business investment company (SBIC) that's a preferred lender with the Small Business Administration.
The loan must be either to start or grow the business, which must employ no more than 100 people and have average annual sales for the past three years of less than $5 million. The business must also have a good credit history, and the owner or owners must have a good credit history and good character.
Your loan cannot be denied just because you don't have enough money or property to meet the LowDoc loan guarantee requirements, although anyone who owns 20% or more of the business will also have to personally guarantee the loan.
The business itself will be judged on its ability to repay the loan from operations. The maximum amount of the loan is $150,000, which includes the outstanding loan balance on any other SBA loans you may have. Maturity is usually five to 10 years.
In addition, loan applicants as well as their principals and guarantors must be current on all government obligations, such as payroll and income taxes, existing SBA debt and student loans.
SBA loans of this type cannot be used to purchase less than 100 percent of the ownership of any owner, partner or shareholder. They also can't be used for:
- Payments, distributions, or loans to your associates.
- Paying delinquent withholding or sales taxes.
- Paying funds to an owner, except for eligible changes of ownership.
- Refinancing any debt that is already on reasonable terms, or that does not provide at least a 20% cash flow improvement.
- Refinancing or paying any creditor in a position to sustain a loss, handing SBA all or part of a potential loss from existing debt.
For additional information, contact the SBA at (800) 827-5722.