Small Business Administration

I get to talk tomorrow at a business financing roundtable so I thought I'd practice a bit here on the topic I'm covering. Why use the SBA? When should you use the SBA? The reasons are simple enough, if you have a recognized weakness in a deal you otherwise would love to do, slap on a guaranty.

Those reasons can include "green" management, shortfall on collateral (or maybe you need to lend more on collateral than your policy allows), or maybe this is a new business with no history of repayment but really believable projections. All of these can be a good justification for a guaranty. I believe the technical stand point is "I would not make this loan if not for a guaranty".

As mentioned previously in a post, the SBA has a much better website now, I've linked to the specific page that deals with what paperwork is needed to facilitate a guaranty request. http://www.sba.gov/category/navigation-structure/loans-grants/small-business-loans/how-prepare-your-loan-application

The myriad of enhancements available are varied, there are programs that are dependent on the size of the loan, the make up of those applying, type of collateral. Again, I defer to the website for a better breakdown of what these products are and how they are best used. This chart best breaks down the who, what and how of the programs. http://www.sba.gov/sites/default/files/files/Loan%20Chart%20Baltimore%20June%202012%20Version%202.pdf

Strap in, there is a bunch of paperwork and there is a cost to get the guaranty initially and annually, however they are an essential weapon to have in your lending arsenol, the better you know how they work, the better lender you will be.

I should note there are other options to enhance your deals, and other agencies/entities that are out there to help, VEDA, VCLF, VSJF, but we'll tackle those individually in future posts. At some point I'll give some insights on a deal I did that combined had 8 (yes 8) separate parties involved. Stay tuned....