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  1. #1
    Senior Member Reputation points: 66298 Olderguy's Avatar
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    SBA 7A approval when broker's SBA lender denied it.

    One of you brokers called me about his client that got denied by his SBA bank due to DTI issue. He has over a dozen trucks and 4 MCA positions of $179,000 costing him $17,500 a month in payments. He had consolidated all the trucks and MCA's together on the 2202 schedule of liabilities and it got rejected.

    So I got the file and got him to change the P & L and balance sheet to separate the truck liability from the MCA loan liability. I submitted with separate 2202 liability forms.

    In addition, I had him get the depreciation and office salaries out of the tax return and that enhanced the P & L - as part of my submission as you can remove those to make the profitability look better.

    Here's the summary I submitted:

    We are seeking $350,000 in SBA 7A financing to:

    A. Consolidate business debt and reduce debt payments
    B. Obtain working capital to service current bids that are pending awaiting capitalization.

    We want to pay off $178,00 in 4 high interest business loans that have a monthly expense of $17,373. A SBA 7A at 6% will reduce this to $1,980 a month = saving us $15,393 a month. Note: We have several vehicles that are required for this industry - debt which is separate on the balance sheet and form 2202.

    We are in the process of submitting bids for several new clients. We need $150,000 in additional working capital for labor/materials/overhead to service this new business.

    Client A $275 a month
    Client B $400 a month
    Client C $22,000 a month
    Client D $2,600 a month
    Client E $300 a month

    Total new business bids: $25,5475 a month projected increase in revenue

    We are currently billing 103 different clients operating as a contract cleaning company. Covid has had very little impact on our business. During the height of the pandemic, we were performing deep sanitizing so operations grew in sales and net income.

    Total revenue for 2021: $1,025,000
    Net income: 126,854
    Depreciation: 51,500
    Net income w/o deprec. 178,354

    Total revenue for 2020: $761,109
    Net income (437)
    Depreciation: 138,672
    Net income w/o deprec. 138,235

    Total revenue for 2019: $461,435
    Net income: 12,825
    Deprec: 104,591
    Net income w/o deprec 117,416

    We have two SFR real estate properties and 1 ten acre of land with equity in all to collateralize this loan.

    Fico is a bit below 660 due to a recent purchase of several trucks and use of company credit card equity to help some employees.

    File was denied by a bank SBA lender due to DTI issue but the submission combined vehicles with business loans.

    @@@@

    I got a prequal for $350,000 and an approval for $250,000 collateralizing all property and land (including the vacant land) and all his trucks. I had them go back to underwriting and requested removing the trucks and raw land for collateral.

    After a week, they came back with $250,000 only collateralizing the two properties and business assets.

    The business owner would save $15,000 a month in MCA payments and get $100,000 in cash with a loan of $250,000 over 10 years at 6%. (The MCA would be about $140K at funding)

    Great deal. Borrower elected not to take it as he really wanted $200K cash out and didn't qualify. He is going to see if he can get LOC from his bank and may come back down the road. His Fico is marginal at 660.

    SBA 7A loans can be done if you have the experience and the above is how I was able to get one approved that got denied.
    Last edited by Olderguy; 03-25-2022 at 08:47 PM.
    Steve Benjamin
    Professional Business Loans

    1012 Contessa
    Irvine, CA 92620
    steveprobiz@gmail.com
    https://probizloans.net/
    Broker, Underwriter, general business loan expert
    949.228.1050


    @ 24 hour funding working capital loans
    @ Term loans from 3 years to 10 years at 9.5% and up
    @ Equipment financing up to 7 years
    @ Property loans - Hard Money and traditional - Primary, Investment, commercial, land, fix and flip, construction.
    @ SBA loans - 7A and 504.
    @ Private money equity and debt for major investments
    @ Personal Loans up to gross income from personal tax return.

  2. #2
    Senior Member Reputation points: 23085
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    Posts
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    Quote Originally Posted by Olderguy View Post
    One of you brokers called me about his client that got denied by his SBA bank due to DTI issue. He has over a dozen trucks and 4 MCA positions of $179,000 costing him $17,500 a month in payments. He had consolidated all the trucks and MCA's together on the 2202 schedule of liabilities and it got rejected.

    So I got the file and got him to change 8he P & L and balance sheet to separate the truck liability from the MCA loan liability. I submitted with separate 2202 liability forms.

    In addition, I had him get the depreciation and office salaries out of the tax return and that enhanced the P &
    - as part of my submission as you can remove those to make the profitability look better.

    Here's the summary I submitted:

    We are seeking $350,000 in SBA 7A financing to:

    A. Consolidate business debt and reduce debt payments
    B. Obtain working capital to service current bids that are pending awaiting capitalization.

    We want to pay off $178,00 in 4 high interest business loans that have a monthly expense of $17,373. A SBA 7A at 6% will reduce this to $1,980 a month = saving us $15,393 a month. Note: We have several vehicles that are required for this industry - debt which is separate on the balance sheet and form 2202.

    We are in the process of submitting bids for several new clients. We need $150,000 in additional working capital for labor/materials/overhead to service this new business.

    Client A $275 a month
    Client B $400 a month
    Client C $22,000 a month
    Client D $2,600 a month
    Client E $300 a month

    Total new business bids: $25,5475 a month projected increase in revenue

    We are currently billing 103 different clients operating as a contract cleaning company. Covid has had very little impact on our business. During the height of the pandemic, we were performing deep sanitizing so operations grew in sales and net income.

    Total revenue for 2021: $1,025,000
    Net income: 126,854
    Depreciation: 51,500
    Net income w/o deprec. 178,354

    Total revenue for 2020: $761,109
    Net income (437)
    Depreciation: 138,672
    Net income w/o deprec. 138,235

    Total revenue for 2019: $461,435
    Net income: 12,825
    Deprec: 104,591
    Net income w/o deprec 117,416

    We have two SFR real estate properties and 1 ten acre of land with equity in all to collateralize this loan.

    Fico is a bit below 660 due to a recent purchase of several trucks and use of company credit card equity to help some employees.

    File was denied by a bank SBA lender due to DTI issue but the submission combined vehicles with business loans.

    @@@@

    I got a prequal for $350,000 and an approval for $250,000 collateralizing all property and land (including the vacant land) and all his trucks. I had them go back to underwriting and requested removing the trucks and raw land for collateral.

    After a week, they came back with $250,000 only collateralizing the two properties and business assets.

    The business owner would save $15,000 in MCA payments and get $100,000 in cash with a loan of $250,000 over 10 years at 6%. (The MCA would be about $140K at funding)

    Great deal. Borrower elected not to take it as he really wanted $200K cash out and didn't qualify. He is going to see if he can get LOC from his bank and may come back down the road. His Fico is marginal at 660.

    SBA 7A loans can be done if you have the experience and the above is how I was able to get one approved that got denied.
    Nice work!

  3. #3
    Senior Member Reputation points: 81655
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    Florida
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    "office salaries out of the tax return and that enhanced the P & L - as part of my submission as you can remove those to make the profitability look better."

    This would open the accountant/cpa and merchant to BANK FRAUD !
    Dave Lambert, Business Development
    dave@fcbankcard.com
    Merchant Services Consultant
    High Risk Merchant Payment Solutions
    SBA 7(a) Loans & Short-Term Funding
    T/VM: 727-291-7890
    Office: 727-233-1111
    Skype: fc-financial

  4. #4
    Senior Member Reputation points: 66298 Olderguy's Avatar
    Join Date
    Sep 2021
    Location
    Irvine, CA
    Posts
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    Quote Originally Posted by Yankeeman07 View Post
    "office salaries out of the tax return and that enhanced the P & L - as part of my submission as you can remove those to make the profitability look better."

    This would open the accountant/cpa and merchant to BANK FRAUD !

    Dave - for a SBA submission, you can deduct officer salaries and depreciation from the P & L to show "net income without depreciation and officers salaries". In this case they didn't have officer salaries but they did have depreciation which I was allowed to remove show a better new profit. It's not fraud. It is not changing the tax return, it's getting information from the tax return.
    Steve Benjamin
    Professional Business Loans

    1012 Contessa
    Irvine, CA 92620
    steveprobiz@gmail.com
    https://probizloans.net/
    Broker, Underwriter, general business loan expert
    949.228.1050


    @ 24 hour funding working capital loans
    @ Term loans from 3 years to 10 years at 9.5% and up
    @ Equipment financing up to 7 years
    @ Property loans - Hard Money and traditional - Primary, Investment, commercial, land, fix and flip, construction.
    @ SBA loans - 7A and 504.
    @ Private money equity and debt for major investments
    @ Personal Loans up to gross income from personal tax return.

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