Thomas Tramaglini

SBA Loans for Small Business Owners: The Complete Beginners Guide

Research over the last 10 years suggests that about 1 in 5 small business owners qualify for SBA loans. Yet, when it comes to loans, small business owners are primarily interested in an SBA loan. In a series of blogs, we explore SBA loans and what small business owners can do to get qualified.

By Thomas W. Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com

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Introduction

For years, BRP Onesta has originated millions of dollars in SBA loans for small businesses. Clients and prospects almost always request SBA loans when seeking funding for their business. Yet, while the small business owners we interact with want an SBA loan, the majority of our interactions yield that they know little about SBA loans.

Why are SBA loans so sexy?

What is so attractive about an SBA loan? Two reasons are that they carry low interest rates and have long terms. Small business owners can use loan proceeds for a host of purposes (equipment, machinery, buildings or working capital). So, when a loan has some of the attributes I listed, of course SBA loans would be the first choice.

What is an SBA Loan?

Although I will spend some time to do a bit deeper of a dive on the subject in future blog posts, it is important to describe what an SBA loan is. Also, for the purposes of this blog I will NOT include Economic Injury Disaster Loans (EIDL) or Payroll Protection Program (PPP) loans in the context of my description. An SBA loan is a loan (from an approved SBA lender) which the majority of the loan is guaranteed by the U.S. Small Business Administration. Guidelines for these lenders to use for SBA loan programs are set by the SBA and once an SBA loan is approved by the bank, it is sent to the SBA for their review and approval.

See Different Loan Opportunities for Small Business Owners to Take Advantage Of

Most Small Business Owners Do Not Qualify for SBA Loans

Indeed, SBA loans are sexy to many small business owners. Yet, a small number of small business owners get funded with an SBA loan. One dataset and report that I love to comb through comes from Fed Small Business, a workgroup coming from the 12 Federal Reserve Banks and small business partners (about) (Small Business Credit Survey). Each year, the group conducts a survey of small business owners from all 50 states. Questions vary from borrowing to organizational health. Results provide a generalizable set of data for researchers to paint a picture of the status of small businesses. In laypersons terms, their survey is a measuring stick of that describes different aspects of small business health in the United States with approximately 90% accuracy.

In the last SBCS survey that provided an accurate description of small businesses and SBA loans, around 1 in 5 businesses were able to secure SBA loans as compared to other sources of borrowing capital. Considering how sexy SBA loans are to small business owners it is disheartening and eye-opening that such a low number of small business owners actually can secure such funding.

We Curate Small Business Grant Opportunities Here

Small Business Owners Need to Know More About SBA Loans

Clearly, there is a disconnect of some type considering the high percentage of small business owners who tell us they want SBA loans but in reality, qualify for one. So, we decided to write a series of small business blog posts that address this gap. We aim at better educating small business owners and provide ways that small business owners can prepare for applying for an SBA loan. The focus will be to answer many of the questions that we are asked each day at BRP Onesta.

Some of the topics that we will explore will include:

  • What types of SBA loans are there?
  • Are SBA loans forgivable?
  • Where to apply for an SBA loan?
  • How do small businesses qualify for an SBA loan?
  • What is the SBA loan process?
  • What options are there for small business owners who do not qualify for an SBA loan?
  • How can the typical small business owner get pre-approved for an SBA loan and what pitfalls they should avoid?
Is There Hope?

Yes, of course there is hope. Up front, no, all small business owners will not qualify for an SBA loan. However, while only 1 in 5 small businesses seem to be able to qualify for an SBA loan, with support organizations like ours (www.backofficedepot.com), our ratio is much higher. From January 2016 – present, about 62% of our clients were able to qualify for SBA loans after work we did to support their application process and applying at the right bank. The bottom line is that in 2020 the SBA reported that there were 31.7 million small businesses in the United States and there is plenty of funding out there for small businesses to use to grow their brand, their products, services, and their customer base and we want to help small businesses find their way forward with the best possible margins.

Contact Our Team Today To See If You Qualify For An SBA Loan
Do you want to apply for an SBA loan? Do you think you are ready to qualify now? Do you want to find out if you can get pre-approved for an SBA loan before you apply?
If you answered YES to any of these questions, please contact our team at any time for a free, no-obligation phone consultation with one of our specialists. We will set up a time with you and go over what you are looking for, what we think you can qualify for, and what we can do to get you to the finish line.
We also have a host of small business funding opportunities, from equipment loans to small business grants which we keep updated each week (click here)

Dr. Thomas W. Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow. BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

Are You on The Lending Blacklist? You might be surprised.

Lenders are getting smarter.  So we share a few tools that online and MCA lenders use to gauge fundability.

By Thomas W. Tramaglini, BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com

Our company routinely works with small business owners to stabilize or grow their businesses.  One important step that small business owners require our assistance is with the attainment of capital for their businesses.  In a previous post, I discussed some of the statistics of how many small businesses are looking to borrow money for their business. Whether for consolidation of debt, expansion, real estate, or equipment, underwriting of any loan or advance, we generally are asked by small business owners what the lenders are looking for in order to get an approval.

Through professional conversations with brokers of merchant cash advance and online loans in the past, brokers seemed to have lenders who they suggested did not thoroughly vet client applications ultimately providing funding to small business owners who probably should not have been funded.  While this has not been our experience, clearly the shenanigans of the merchant cash advance and online loans have been in existence for some time.

So, we decided to explore some ways that lenders vet possible lenders in the online and alternative lending space.

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In no way can one blog (or probably a book) do any justice to go through the art (and it is an art) of how banks or lenders go about their approval processes.  We did however, find three tools that online lenders (i.e., OnDeck, PayPal) and alternative lenders (MCA, equipment) favor in vetting their applications.

What are the lenders looking for?

Simply put, there are many different variables that go into an approval.  Yet, regardless of how strong a small business’ financials or bank statements look, one attribute that will kill any deal is whether a business has ever had issues paying back capital (defaults, slow pays, Judgements, fraud, etc.).

Three Tools that Lenders Use Which Unofficially Serve as A Blacklist

Clearinghouse Data

Online and alternative lenders use different clearinghouses who curate a multitude of data.  From publicly reported data to credit records, these datasets provide a robust amount of information about potential borrowers and businesses.  There are a few clearinghouses our there (others like Chex Systems) but here are a few that we know are commonly used.

LexisNexis

LexisNexis provides business research and risk management services to various industries. These include lenders, insurance companies, vendors and more. These companies use LexisNexis to verify personal and business credit history (PayNet does this too), public records (PACER), and application history. And they use LexisNexis to assess risk on applicants. Inaccurate information, data which doesn’t match your application, or negative items in your LexisNexis report can have a drastic negative impact on your business. This is especially true during the application process.

Business owners can request a copy of their LexisNexis report and decrease the probability of surprises during the application process.   Click Here to Request Your Report

DataMerch.com

Founded in 2015, DataMerch.com is a popular tool for online and alternative lenders.  Lenders who belong to DataMerch.com upload their lending experiences ultimately painting a picture of many small businesses who have taken loans and merchant cash advances with their companies.  Recently, DataMerch.com reported that they now have over 50,000 records on file.  

Why is this important?  DataMerch.com provides lenders a robust database so they can better inform their approval process.  These records provide categorical data such as suspicious activity, slow payers, split payers, and COVID-19 Hardships.  Lenders can also find out if small businesses have taken on recent or defaulted funding that might not appear in a business’ bank statements.  Regardless, small business owners should know that lenders are not stupid and if you have had issues with your MCAs or loans, you will probably have some issues taking another loan or MCA.

NYS Court System

One place that online and alternative lenders check for issues with loans, MCAs or just other issues which might be a red flag for borrowers is the New York State Unified Court System (New York State Courts Electronic Filing).  This website yields a host of legal cases from New York State but importantly, most alternative lenders are in New York so anytime there is a default, and a lender files a Judgement, that Judgement is listed. 

If you are a small business owner and default on a loan or merchant cash advance and you are served with a Judgement, it will likely be listed here.  The good news is that you can satisfy your Judgement which will be listed on the site after doing so.  The bad news is that once you have a Judgement listed on this website it becomes very difficult to ever get funding for your business ever again.  In some ways, have a Judgement posted on this site can be worst than a bankruptcy. 

Would you like to see if you have anything listed?  https://iapps.courts.state.ny.us/ is the link that used to access the files.

So what?

I wrote this Blog because when our clients get declined for loans or merchant cash advances, they tend to ask us why?  Although lenders do not share much information with us, we do know that lenders are getting smarter about who they provide funds to.  That is, lenders want to (and should) know that someone requesting to borrow funds will pay back their debt.

Over the years, we have seen just about everything small business owners have done to get funded.  Specifically, we could write a book about some of the shenanigans some business owners who have negative payment histories have pulled to get funded.

When our clients or small business owners get declined for loans or merchant cash advances and ask why? Notwithstanding that many times the clients do not tell us they had issues with paying a loan or merchant cash advance, they should understand there are tools that lenders use, and it is very possible they are blacklisted. 

So, if you are a small business owner who has had issues with paying back a lender, lenders are getting more informed, and they should be aware of this.  Lenders are not stupid and if you had issues paying back a loan or merchant cash advance, rightfully so you will probably not be able to access more capital for your business.  In fact, you will probably not find an easy road finding capital for another business as well.

Read Other Blog Posts at www.backofficedepot.com/blog or www.tomtramaglini.com

Dr. Thomas W. Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

Small Business Grant Opportunities Updated.

By Thomas W. Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com

Are you a small business owner and looking for a grant to support your business?

Our team at BRP Onesta continually looks for and list grants that are available for small businesses on our website.  We also assist small business owners who are in pursuit of grants just need help. 

Check our list out.

Dr. Thomas W. Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.