Small Business Access To Capital

When interviewing attendees of the North Fulton Business Expo in Atlanta, one key topic kept surfacing: Access to Capital. We all know that the credit markets continue to be tight for small business lending. The administration announced in February, two new SBA lending initiatives to help increase access to capital. One is a refinancing program for owner-occupied commercial real estate and the other is an expanded working capital loan program. There is also a call for a permanent increase of the maximum loan sizes for SBA’s 7(a) program.

To learn more about available programs, watch the interview with Wendy Armstrong, Private Banker with One Georgia Bank.

Loan Program Overview

SBA 7(a)

7-10 years full amortization term with 10-15% down payment which can include a seller take back and a tenant improvement allowance. With real estate, the amortization can grow to 20-25 years and can include blending amortization to extend payments. The maximum loan per person/per entity is $2 million but may increase to $5 million. Rates are variable and based on the Wall Street Journal prime rate but cannot be higher than 2.75% above prime. Usually, its around WSJ Prime + 2.25% to 2.50%. A $2500 packaging fee is required but the guarantee fee is currently waived.

USDA

USDA programs allow up to a 30-year amortization with 20% down payment. Loan amounts are available up to $25 million and require a 2% guarantee fee. Rates may be variable or fixed.

For more information, contact Wendy Armstrong, One Georgia Bank at 678-553-7039 or email her at wendy.armstrong@onegeorgiabank.com.

Microfinance Loans

Thanks to tighter credit standards and stricter regulatory scrutiny, many small businesses have found it difficult – or impossible – to get a bank loan.

A federal proposal to launch a $30 billion fund aimed at boosting lending could help.  But,  in the meantime, a growing number of companies that might not have been able to get a loan from a traditional bank have been flocking to microfinance institutions, instead.

Called community development financial institutions (CDFIs), these organizations include community development banks, credit unions, loan funds, and venture funds “dedicated to serving small businesses and others who are outside the financial mainstream”, says Mark Pinsky, CEO of Opportunity Finance Network, a network of microfinance groups based in Philadelphia.

Some provide loans of up to $35,000 to “anybody having trouble getting access to credit,” says Pinsky.  Others lend amounts of up to $200,000 to small businesses.

But, most important, the approximately 700 CDFIs in the U.S. have dramatically different lending criteria from the usual bank standards.  They include an eclectic mix of such factors as a good credit score and relevant industry experience.  You also need collateral, but often that can mean anything from a car to a television.

Originally published in OPEN Forum. To read the full article, click here.

The 9 Most Devastating Mistakes Entrepreneurs and Business Owners Make When Financing Their Businesses

Mistake #9:  Using personal credit to finance your business

Mistake #8:  Putting personal assets at risk

Mistake #7:  Contaminating your credit

Mistake #6:  Not paying your bills on time…100% of the time

Mistake #5:  Using your family’s money

Mistake #4:  Not setting up a corporation and building corporate credit – the right way

Mistake #3:  Rushing the process for building corporate credit

Mistake #2:  Not following up on the credit-building process

Mistake #1:  Not recognizing opportunity costs

Admittedly, this has a bias towards building credit and is written by a credit company but there are still some great insights.  Read the full article here.

Community Bank Loans May Be Harder to Get

Community banks have been a lifeline for entrepreneurs during the recession – one of the few places that small-business owners have still been able to get traditional loans.

But the Wall Street Journal not long ago took a look at how community banks facing increased federal scrutiny from regulators are also placing tighter scrutiny on their small-business customers.

Community banks typically hold less capital than bigger banks, don’t leverage themselves as much and rarely get involved in subprime mortgage lending–all of which helped them stay out of trouble. But eventually some did venture into this market, got into trouble and eventually even closed down.

Community banks also tended to be heavily involved in commercial real estate lending–a market that some experts believe is heading for a crash similar to that suffered by the subprime housing market a few years ago.

The problems have led to more scrutiny, with federal regulators demanding that community banks increase their capital and loan-loss reserves even further, call in the risky loans that are outstanding and be more cautious when making new loans.

To read more about what that means for business owners, read the full article here.

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