The SBA has a lending program for loans smaller than $350,000 called the SBA Express Loan program. Many small business owners have heard about the SBA 7(a) program for larger needs, but the SBA Express Loan program has several advantages if your needs are $350,000 or less.
First and foremost, an SBA lender that uses the SBA Express Loan program has a great deal of flexibility about how it uses the program, verses the flagship 7(a) program that requires all lenders to follow the same guidelines.
For lenders, the current loan guarantee from the SBA is 90% and a very good lender can close a loan in six to eight weeks from the time it receives all the loan documents. With the SBA Loan Express some banks have an average turn around time of three to four weeks. Many banks aren’t advertising the Express Loan because they only receive a 50% loan guarantee on the loan which increases their risk.
The largest SBA lender in the country today, Wells Fargo uses the Express Loan extensively and wisely. Nearly any Wells Fargo commercial relationship officer can submit a request for the Loan Express program. Wells Fargo has dedicated SBA specialists that handle larger 7(a) loans. Wells Fargo like other banks that use the Loan Express program can set their own criteria for making these loans and they can use their own forms and guidelines for credit approval.
Strong SBA lenders like Wells Fargo use the program to provide both term debt and lines of credit. In Wells Fargo’s case, their Express Loan line of credit has a three year commitment. Other banks may differ.
Collateral for a SBA Express Loan is not as critical as strong personal credit and a good business plan. Lenders have to believe that your business has “turned the corner” and has a good plan for short-term and long-term profitability.
SBA Express Loans can be as small as $25,000 and as large as $350,000. The most critical element of applying for any loan is showing your ability to repay the loan. Lenders call this debt service. Debt service comes out of pre-tax operational profits of a company.
Here are some characteristics of a company that might qualify for an Express Loan.
Say your company has had a track record of profitability for a number of years but had losses during the last two years. You trimmed expenses during that period, you may have cut back staff and you reduced your fixed expenses. Your management skills have helped you weather the storm. Revenues were down because of economic conditions but now sales are starting to increase. Perhaps you had a good first quarter of 2010 and showed profits. Your balance sheet may show negative equity, but you have a full pipeline of sales for the first time in two years. Your company may even have orders and contracts signed for products and services that are likely to be delivered the rest of the year. You project revenues will increase in 2010 over 2009.
As long as you can tell the story about what happened that impacted your profits and how you are now seeing an uptick in profitable sales you are likely a candidate for an Express Loan. Most importantly though, you must be able to project in a believable way that you will be able to repay the loan.
I wish I could provide you a list of all banks using the Express Loan program. I simply can’t find such a list. I feel sure many community and regional banks that are strong SBA lenders are. As far as banks with a national footprint, I believe Wells Fargo is making the most loans using this program. If you know of other banks using it, please comment here anyone interested can have the benefit of your knowledge.
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