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Shaun @ Tru6's Avatar
 
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SBA loan

anyone here apply for an get an SBA-backed bank loan?

interested in the process, details on the guarantee, etc.

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Old 06-03-2008, 07:28 AM
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My 2 cents worth:

I started the process a few years back, using the local Small Business Assistance Center (government funded center - not a "for profit" place).

Got tired of all the BS, paperwork, hoops, etc.

Decided to get my money the old fashioned way. (string of armed robberies in the late 90s, followed by drug trafficking in the early 00s)


Seriously, the SBA process sucked. And having the SBA backing does not get you a loan. The loan officer still has to like your product, your face, your tie, your credit rating, etc.

More than the SBA backing, it helps if you get the loan officer laid.


YMMV
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Old 06-03-2008, 07:59 AM
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I helped my sister get an SBA loan a few years ago.

Favorable terms, but you will jump through several hoops to get there.
Old 06-03-2008, 08:05 AM
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thanks guys. We've got good sales and a good story. I have average credit, mostly from not having an income but having lots of debt funding the company.

How does the guarantee work?
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Old 06-03-2008, 08:23 AM
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Quote:
Originally Posted by Shaun 84 Targa View Post
thanks guys. We've got good sales and a good story. I have average credit, mostly from not having an income but having lots of debt funding the company.

How does the guarantee work?

The government backs a portion making it more attractive to the bank.
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Old 06-03-2008, 08:27 AM
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Originally Posted by lendaddy View Post
The government backs a portion making it more attractive to the bank.
so in a default situation, who's on the hook for the full amount, for the government backed portion?
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Old 06-03-2008, 08:30 AM
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Quote:
Originally Posted by Shaun 84 Targa View Post
so in a default situation, who's on the hook for the full amount, for the government backed portion?

The US tax payer for the SBA backed portion and you for the balance.
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Old 06-03-2008, 08:38 AM
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Originally Posted by lendaddy View Post
The US tax payer for the SBA backed portion and you for the balance.
thank you Joel. Are you 100% on that? if true, I think we're OK. I have wealthy friends who have been closely following the company, as well as G9Girl, and offered to co-sign an SBA-backed loan as long as it's the unbacked portion that we're on the hook for. Our loan amount isn't huge, so an unbacked portion is manageable if the worst happens.
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Old 06-03-2008, 08:55 AM
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Quote:
Originally Posted by Shaun 84 Targa View Post
thank you Joel. Are you 100% on that? if true, I think we're OK. I have wealthy friends who have been closely following the company, as well as G9Girl, and offered to co-sign an SBA-backed loan as long as it's the unbacked portion that we're on the hook for. Our loan amount isn't huge, so an unbacked portion is manageable if the worst happens.
No not 100% but pretty sure. There are all kinds of "504" programs out there too. It's a jumblefukc if you ask me. I know only enough to be dangerous
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Old 06-03-2008, 09:02 AM
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It's a jumblefukc if you ask me.
seems to be the consensus. I'm meeting with the SBA tomorrow.
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Old 06-03-2008, 09:06 AM
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Shaun I've been through the SBA process successfully. I'm in a webinar meeting right now but I will be able to shed some light and give some advice here in an hour or so.
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Old 06-03-2008, 09:46 AM
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Great! thank you Jess.
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Old 06-03-2008, 09:47 AM
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OK there is a portion of the SBA loan that is guaranteed by the government. The amount of SBA guarantee is dependent on what the government's fiscal policy is at the time of the loan. The remainder of the loan is guaranteed by the lender. Any good bank SBA department should have an idea of this based on how much you are asking for.

Which brings up a good point....Make absolutely sure you are dealing with a good SBA department. You are going to have to go through a lot of hoops and fill out a lot of different forms to get your loan. You want an experienced SBA lender. Our loan was through a bank that was not experienced in SBA loans and it took four times as long to get the loan funded. We started our loan process in August and did not get funded until December. This delay was a direct result of a disorganized SBA department.

When you interview the SBA loan officer ask them how many SBA loans they do per year. Do not be intimidated by the loan officer, some of them act as if they are doing you a huge favor by meeting with you. Ask what their average time frame is from beginning to end. Ask if they have any business owners who have been through the process that would be able to answer questions from an owner's perspective. The bank should have a paperwork checklist for you. This checklist should be the same for each bank, I will try to list off some of the items from memory....
  • Personal credit reports for each owner or guarantor
  • Personal Financial Statement which consists of all assets, bank account balances, life insurance, securities, monies receivable, etc..
  • Business Financial Statement which will include your Profits & Losses, bank balances, assets including inventory, accounts receivable, expenses, also your projections (I think 5 year)
  • Business Plan

If you are using an asset for part of the guaranty, such as a house, they will have it appraised. This was part of our issue as our house is not in the same state as the business. At the initial meeting with the SBA officer I asked if they needed a phone number for an appraiser which they declined. Three months later they came to me and asked for the phone number!!!! Like I said, disorganization. A lot of banks will not take an out of state asset to guaranty the loan.

In our area we have Gateway Business Bank and they have a very good reputation for being organized with their SBA loans. I met with their representative recently and voiced my concerns about the SBA process based on my previous experience. He addressed all of my concerns and while he did ask some very tough questions he was very interested in helping us.

Get your business financials, P&Ls, business plan, and personal financials together before meeting with the SBA loan officer. Have your guarantor on board before going to the SBA. Showing up with your ducks in a row will put you in the driver's seat and you can find the bank that is a good fit for your business.

You own Little Traveler right? How long has the business been operating?

I have at least one of the forms I can email to you to start your organization. You'll have to fill out the form specific to the bank you choose but at least all of the information will be the same.
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Old 06-03-2008, 10:50 AM
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Wow, thanks Jess!

I'll have everything ready tomorrow.

I own 65% of LT, partner other 35, started in Fall 06, last year was our first year of sales, did very well, this year not as well as expected due to the recession and late ship of Spring, but still "strong" for a new label.

Did find out I can't use my friends as cosigners. If I default, the government pays the bank back, BUT, then comes after the signers on the loan. can't do that. I don't think a loan is going to happen unfortunately.

Interesting twist, they had a speaker at a "virtual company" cancel a Thursday seminar so invited me to speak on running a virtual company. We outsource pretty much everything.

Will let you know how it goes tomorrow.

S
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Old 06-03-2008, 01:19 PM
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Quote:
Originally Posted by Shaun 84 Targa View Post
Did find out I can't use my friends as cosigners. If I default, the government pays the bank back, BUT, then comes after the signers on the loan. can't do that. I don't think a loan is going to happen unfortunately.

Just curious....what good would a cosigner be to the bank if they held no recourse to collect from them on a default? Without a P.G. they are just references.
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Old 06-03-2008, 01:25 PM
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it was the government coming after you for their portion that I was concerned about. if the government guaranteed it and the taxpayers ate, that would work. but it turns out the government just takes your house or whatever. I could handle the bank coming after me/cosigner for the "20%" of the loan. it's the government portion that is the problem.

As to the governtment "free money" argument, my assumption was that it would be close to impossible to get an SBA loan thereby ensuring low default rates, so the taxpayers aren't really paying for small businesses to grow and potentially fail. And since small business is a major economic engine, I was hoping that was the case. It's not.
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Old 06-03-2008, 01:36 PM
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The SBA likes people who go to all the seminars like the ones SCORE http://www.score.org/index.html puts on. Do all the games and you will get your loan.
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Old 06-03-2008, 06:20 PM
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The SBA likes people who go to all the seminars like the ones SCORE http://www.score.org/index.html puts on. Do all the games and you will get your loan.
it's one reason I said OK to the seminar speaking thing on Thursday. Honestly don't have the time, but thought it would help.

I've been working with a SCORE guy for a year+. He's terrible.

to be honest, there's no way I'm going to get the loan. Good credit, good company, good plans...no collateral, none, and somehow I doubt showing "less than so-so" Bruce Anderson Market Update values for a 69E, 69S and 75 Carrera are going to impress them. In this environment, it's not going to happen.
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Old 06-03-2008, 06:47 PM
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We are also in a round of financing. It's a real pain to get it done with all of the endless forms.

Our business isn't as old as yours but we are growing revenues by 17% per month. Based on conservative numbers we are projected to turn a profit in November. In addition to the traditional financing we are also seeking investors, surprisingly it seems easier to find investors for our online business than it is for our brick and mortar LLC. Maybe the online businesses are easier to manage or for investors to keep an eye on, we still haven't found an investor for the online business that is the right fit.

Are you using the money to get into new markets or to expand your current market share?

Does Little Traveler have a website? There wasn't anything in your profile here at PP.
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Old 06-03-2008, 06:54 PM
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Jess, what is your business? PM me if you like.

we are seasonal, so a little different. Spring 07 sales were X and considered excellent starting off cold. Fall 07 sales were 3X. Spring 08 sales were 2.5X (spring is a smaller season than fall) and Fall 08 sales are 2X, but due almost entirely to our shipping Spring 08 so late, but certainly the economy is also a big part of it. Sales for better kids clothing are way down for this fall, even with established lines. Our sales reps say we are doing surprisingly well for a young line that missed a ship.

And there is the crux of the situation. If we had shipped on time for Spring, I wouldn't need a loan. this is just a cash flow situation for purchasing our fall production, 50% of which is paid on ship to our customers, rest is paid Net 30/60.

To make the loan worthwhile, and attractive though, it would also cover launching our Great Adventures of Joey & Rex book series/branding play (think Dora the Explorer, just starting off small with books, t-shirts, etc.) to where we could go to serious angel money to realize that dream. Little Traveler, as boy's clothing, will never be more than a $10M company, and that figure is 7-10 years away. Joey & Rex is pretty much unlimited if handled correctly.

And sure, we could also use a few $ to have a website built.

here is our Fall 08 linesheet: www.littletravelerusa.com/Fall08.pdf

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Last edited by Shaun 84 Targa; 06-03-2008 at 07:23 PM..
Old 06-03-2008, 07:19 PM
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