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Right Fit for SBA

In this episode of the #ItTakesaVillage podcast, we’re talking to Scott Schake, Senior Vice President at Central Minnesota Development Company, an SBA loan provider and small business financing expert. We’re also joined by our very own Villagers who specialize in SBA lending at Village Bank, Tim Walker and Kraig Kliber. If you’ve been asking questions about whether an SBA loan is right for your business’s goals, you’ll want to listen as these SBA experts discuss the loan financing options and the benefits of these for small business owners. They will answer the question “Is my business the right fit for an SBA loan?”

Here are the questions we covered:

  1. Can you tell us about the types of SBA loans that small businesses would be interested in?
  2. What does being an SBA Preferred Lender mean to a business owner looking for SBA funding?
  3. What are the benefits of the different SBA loan options for small businesses?
  4. What are the qualifications for the different types of SBA loans?
  5. If my business appears to be the right fit for an SBA loan, what should I do next?
  6. What are typical indicators for business owners that an SBA loan is a smart next step? 


Here are 10 key points to take from this episode:

    1. The SBA 504 program is a fixed asset financing program and does not finance for working capital, business acquisitions or things of that nature
    2. The 504 loan program does not replace the need for bank financing, rather it creates a partnership between your community bank and a Certified Development Company (CDC)
    3. The SBA 7a program can be used for working capital, business acquisitions, startups, expansions, etc.
    4. Village Bank approves our own 7a loans, which allows the process to be quicker
    5. 504 benefits for small businesses include:
      1. Higher leverage than a conventional loan (10% equity from the customer, rather than 20-30% in conventional loans) which preserves liquidity for small businesses to keep what they would have put down on the building in the working capital to fund growth,
      2. Long term fixed interest rate so borrowers don’t have to worry about rate increases for the life of the loan,
      3. Interest rate is typically below market (contact a banker for actual rates)
    6. 7a benefits for small businesses include:
      1. Equity contribution is less than a conventional loan
      2. Longer amortization helps with cash flow,
      3. With the SBA guarantee, the bank can look at collateral options that aren’t typically used
    7. Eligibility requirements include: for-profit business, average net income $5 million or less for the two years preceding application, tangible net worth less than $15 million
    8. Reach out to your banker to discuss your projects and options that align
    9. Prepare business and personal tax returns, financial statements, and projections
    10. All start-ups should look at the 7a program, as well as businesses looking at partner buyouts or acquisitions

 Learn more: SBA Financing


Get in touch with Scott by connecting on LINKEDIN.

The #ItTakesaVillage podcast by Village Bank brings leaders with expertise in finance, accounting, entrepreneurship, leadership, and branding into our Village to help entrepreneurs in our community. As an entrepreneur’s bank, we hear all the time that you want to know more about the financial nuances of starting and running a business. These questions are profoundly important and can be incredibly stressful. That's why we're inviting prominent leaders and friends of our Village to weigh in and build a Village of answers and connections on the #ItTakesaVillage podcast.

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