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11-22-2013, 09:27 AM #1
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- Join Date
- Sep 2012
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Two biggest obstacles are loan size and collateral. There is no appetite for under $250k in the broker world. You can't get them done.
Then there is collateral. Although commercial real estate isn't "required" to get a deal funded, good luck getting one done without it. Some exceptions are medical practices and things like that. Loans without RE collateral still require the guarantor(s) to put up personal collateral because business assets typically fall far short. SBA guaranties require 1-1 collateral in some form or another. Personal real estate is often tied to the guaranties. This has many caveats to the borrowers. Having a $500k lien (typically second position behind their primary mortgage) against their $300k house traps them from being able to do any type of cash out refi or equity line.
SBA deals are expensive. The cost of a commercial appraisal and phase 1 environmental is $4-5k. That's out of pocket. Even smaller bank originated "working capital" sba loans come with plenty of restrictions on use of funds.
SBA loans are zero competition to our market, have a very low success rate, and those that qualify typically have traditional bank resources for capital.
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