SBA and area banks create valuable partnership

Although we’ve all heard of Intel, Ben & Jerry’s and FedEx, you may not know that they were all started with the help of an SBA-guaranteed loan from a commercial lender. So were Panera Bread and the amazingly successful Build-A-Bear Workshop chain that was founded in St. Louis.

The U.S. Small Business Administration was established during President Eisenhower’s administration to provide support to the nation’s entrepreneurs. Over the decades, the SBA has grown in services and support to the business community, but its loan programs have remained a staple of its comprehensive services.

In many cases, the critical partner in SBA loans is an SBA-approved commercial lender, many of which are your local banks. It’s another service many banks provide to do their part toward the economic development of the communities in which they are located.

The SBA itself does not lend money; instead, it guarantees to the bank that in the event of default, the agency will cover a certain percentage of the loan. In this way, the SBA provides a portion of the loan applicant’s collateral, thereby minimizing the bank’s risk. In most cases, if the SBA signs off on the deal, the bank will follow suit. The bank makes and administers the loan. It’s an invaluable partnership between a federal agency and our local lending community.

The most common SBA-guaranteed loan is the 7(a) loan. Its name comes from Section 7(a) of the Small Business Act that authorized the agency to provide financial products to small business. It serves as the SBA’s primary business loan program to help qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels. It is also the agency’s most flexible business loan program, since financing under this program can be guaranteed for a variety of general business purposes, such as working capital, machinery and equipment, furniture and fixtures, land and buildings (including purchase, renovation and new construction), leasehold improvements and debt refinancing (under special conditions). Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets.

If you are interested in applying for an SBA 7(a) loan, make an application to the bank. The lender decides whether to make the loan internally or if the application has some weaknesses that, in his opinion, will require an SBA guarantee if the loan is to be made. The lender makes the final decision. If the lender is not willing to make the loan, even with a guarantee, the applicant will be turned down. To improve your chances, make sure you meet the basic eligibility requirements.

First, you must have the ability to repay the loan. In addition, good character, management capability, collateral and the owner’s equity contribution are also important considerations. All owners of 20 percent or more are required to personally guarantee SBA loans.

To assist applicants in the process, SBA’s partners in the Small Business Development Centers (housed in central Missouri in the University Center for Innovation and Entrepreneurship) and the Service Corps of Retired Executives (SCORE), which is housed at the Columbia Chamber of Commerce, are available to review your application and offer input and advice. They will assist in making the business plan complete and help you ensure that the application is ready for the lender’s review.

Recently, the SBA added a new program to its loan portfolio. This streamlined loan product is designed to provide focused assistance to members of the military community. Called Patriot Express, the program is available to veterans, service-disabled veterans, active-duty service members participating in the Transition Assistance Program, reservists and National Guard members, and current spouses or widowed spouses of service members or veterans who died during service or of a service-connected disability.

Patriot Express loans are available from SBA lenders and feature a rapid turn-around time and a low interest rate. They are available for most business purposes.

The banks that participate with SBA in many of its loan programs are called SBA preferred lenders. These lenders are nominated based on their historical record with the SBA. They must have demonstrated a proficiency in processing and servicing SBA-guaranteed loans. If the lender is approved, SBA will designate a geographic area in which it can make SBA loans.

This powerful partnership between the SBA and community banks is vital. Without it, many small businesses would never be appropriately capitalized to reach their potential.

SBA Preferred Lenders in Boone County include the following:
• Bank of America, 800 Cherry St.
• The Bank of Missouri, 3210 Buttonwood Drive
• Boone County National Bank, 720 East Broadway, Columbia
• Commerce Bank, 501 East Broadway
• Hawthorn Bank, Forum and Nifong
• UMB Bank, 1516 Chapel Hill Road
• US Bank, 1408 Forum Blvd., Columbia

For more information on SBA loan programs or the other services the SBA provides, feel free to contact me at 573/808-1060.