What You Need to Know About Government-Guaranteed Lending , Part I
By Leticia Scearce, Vice President of Government Guaranteed Lending at The Biltmore Bank of Arizona
Business owners plan for expansion, purchases, re-structure and consolidation. Accordingly, they seek out financial institutions to facilitate their plans. Some owners are well prepared, having crafted a business plan, financial statements and tax returns, but few understand the structural components of the information the bank needs from a loan applicant. Those components are as follows:
- Cash flow (repayment capacity)
- Collateral available
- The reason for needing the loan
- Equity available
- Term (repayment schedule and other requirements and specifics of the loan)
Your banker needs this data to qualify you as a borrower and determine what loan program(s) will best fit each loan request. Fortunately, business owners have access to many advantageous government-guaranteed loan programs.
In addition to conventional financing, Biltmore Bank offers many of these various government guaranteed and participation loan programs. The most recognized guaranteed program is the Small Business Administration (SBA), but the largest and oldest is the Export-Import Bank of the U.S (EX-Im Bank). Other programs include the USDA Rural Development loans, Arizona Commerce Authority and other local and city programs. Through this series of government-guaranteed loan programs blog posts, we’ll examine each of these in more detail.
One of the advantages of government-guaranteed loans is that they allow businesses to secure a longer loan maturity time horizon – up to 25 years for commercial real estate while a conventional bank loan typically offers a maximum maturity of 10 years. Additionally, upfront equity for a government loan can be as low as 10 percent for owner-occupied commercial real estate, versus the 30 percent in conventional loans.
Our next blog post in this series will examine the flagship SBA 7a loan program. In the meantime, please contact Biltmore Bank to see how we can help with your business financing needs and to learn which loan program might be right for you.