SBA Loans 101: A White Paper

Our Speritas Capital clients asked for help understanding SBA loans and we answered the call. Below is an exhaustively researched guide to SBA 7a and SBA 504 loans to combat the incorrect and dated information you’ll find online about SBA Loans.

The Small Business Administration offers six types of programs designed to support small businesses. To quote the Congressional Research Service “these loan guaranty programs are designed to encourage lenders to provide loans to small businesses that might not otherwise obtain financing on reasonable terms and conditions.”

In short, the SBA helps businesses get loans after they’ve been turned down by other lenders. And while the SBA offers many programs, in this White Paper, we’re ‘following the money’ and focusing on the two most popular – SBA 7a loans – broad use term loans up to $5MM; and SBA 504 loans – most commonly used for owner occupied real estate up to $14MM.

SBA 101

The SBA doesn’t lend money, it simply provides lenders with a partial guaranty so they are more willing to give a ‘less than perfect borrower’ a loan. If you default, the lender is partially covered – for up to 85% of the loan.  And according to Senator’s James Risch’s June 2018 SBA report, “the program currently operates at zero cost to taxpayers, with costs covered by borrower and lender fees.”

Fun Fact

The SBA is currently administered by 2017 presidential appointee and Senate-confirmed Linda McMahon former CEO of World Wrestling Entertainment, Inc. McMahon is the sixth female administrator (of 25) since the SBA’s formation in 1953. She unsuccessfully ran for a seat in the US Senate (CT) in 2010. To celebrate her 60th birthday she jumped out of an airplane.

SBA White Paper Sources

To create this white paper we relied strictly on primary research from Acts of Congress, Federal Regulations, Congressional Reports, legal documents, SBA Regulations & public notices, etc. When in need of clarification – or operational expertise – we’ve gone directly to the most knowledgeable SBA lenders we know.

Some of our primary sources are listed below – we won’t bore you with a full list:

• The Congressional Act H.R. 5141 (83rd Congress), passed on July 30, 1953
• The SBA Updated SOP 50 10 5(J) Lender and Development Company Loan Programs, (with technical corrections) January 1, 2018 – 413 pages
• Report from the Congressional Research Service for members of Congress R41146 – Small Business Administration 7(a) Loan Guaranty Program, updated October 31, 2018 – 50 pages.
• Code of Federal Regulations – CFR (the codification of the general and permanent rules published in the Federal Register by the departments and agencies of the Federal Government) CFR Title 13, Volume 1, Chapter 1, parts 1-199.
• SBA fee documentation information – updated SBA form 159 effective November 1, 2018 & information notice (CONTROL NO: 5000-18012) September 14, 2018.
• 115th Congress: H.R.4743 – Small Business 7(a) Lending Oversight Reform Act of 2018, June 21, 2018 and Senator James Risch’s Committee Report 115-265

Contact Us

You need a strategic, cost effective solution to your financing needs and a funding partner you can trust. Let us put our decades of banking and structuring experience to work for you – contact Speritas Capital Partners about your eligibility for an SBA loan today.

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