SBA 7a Loans Have New Advantages

When people talk about SBA loans, they typically have nothing good to say about them. Many people have heard from a friend that they take extremely long to close and the is MUCH more paperwork involved. They immediately write-off SBA loans and feel that they are not worth their time to even apply. This couldn't be further from the truth.

With the economy is in a tailspin, the government always feels it is necessary to step in and make some changes in an effort to boost the economy. We are all familiar with or have heard of the government stimulus packages. While many of us know that they are supposed to help, many of us do not know how.

One important way the stimulus packages are helping small businesses is through SBA 7a loans. These loans can be secured by equipment and real estate and many changes have been made to make these loans extremely attractive. Here are a couple of the key changes:

1. SBA 7a loans now allow cash out - You may now use an SBA 7a loan to pull cash out of one of your existing properties.

2. The government is now paying the SBA guarantee fee - This fee was always paid by the borrower, but because of the stimulus package is now waived.

3. Standard businesses will now be able to qualify based on net worth (not to exceed $8.5 million) and average net income (after federal income taxes for the preceding two completed fiscal years not to exceed $3 million).

4. An increase to 90 percent of the loan guarantee - This makes lenders much more willing to make these loans.

5. The Obama Administration also announced a $15 billion plan to purchase mortgage-backed securities to create lender liquidity - This will increase the amount of lenders willing and able to make these loans.

6. This is a Prime based loan with low spreads so many lenders are offering rates as low as 5.50%

These changes help more people qualify for loans at great rates and allow them to start, grow, or expand their business in an economy that is struggling. The paperwork is practically the same as a conventional loan and SBA are currently closing much faster than some conventional loans.

Right now, every small business owner should look closely and carefully at the SBA 7a loan and see if these changes can make a difference for their business.