by : jeffvo CRE

Small Business Financing

There are several financing options for small businesses. The U.S. Small Business Administration (SBA) works with agency to set loan’s guidelines for small business owners. The agency doesn’t lend money directly to small business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations, and micro-lending institutions. The SBA reduces risk for lenders and makes it easier for them to access capital. That makes it easier for small businesses to get loans.

There are two types of SBA loans – 504 and 7(a)

Why choose SBA 504 financing?

SBA 504 loans can be used to buy, build or renovate commercial real estate properties, or to purchase equipment that has a life expectancy of 10+ years.  When you compare, the SBA 504 program has distinct advantages over the 7(a) program or conventional financing.

Advantages

  • As low as 10% down, preserves your working capital
  • Below-market, FIXED interest rates
  • Lowest up-front costs
  • Closing and other soft costs can be rolled into loan
  • No maximum loan amount
  • Multiple loan limits removed when energy efficiencies are implemented
  • No additional collateral required

To be eligible for a 504 Loan, your business must: 

  • Operate as a for-profit company in the United States or its possessions
  • Have a tangible net worth of less than $15 million
  • Have an average net income of less than $5 million after federal income taxes for the two years preceding your application

SBA 504 Loan Comparison vs. SBA 7(a) vs. Conventional

Compare financing options in the chart below, then contact our SBA loan experts to learn more.

SBA 504SBA 7(a)Conventional
Down Payment10% minimum10-15% minimum25-40%
Interest RatesSBA second mortgage at below-market rates, fixed for 25 yearsTypically variable; tied to primeVaries by lender
FeesIncluded in SBA loan; approximately 2.65%Paid out-of-pocket; typically about 2.75%Paid out-of-pocket; approximately 1%
Project SizeNo maximumMaximum loan amount $5 millionNo maximum
CollateralNo additional collateral requiredAdditional collateral typically required for 90% financingTypically no additional collateral required
Prepayment PenaltyYes, for first 10 years, declining each yearYes, typically in first three yearsVaries by lender
by : jeffvo Featured

Storytelling is Important

“You will never, never be powerful unless you stop hiding your defects.” Nassim Nicholas Taleb

One of the communication skills I’ve been trying to work on is storytelling. Communication is one of my weaknesses as it is with storytelling. Storytelling has become a key communication between my son and I. My son is my number one audience.

“Everybody has strengths and weaknesses. The key to success is understanding one’s weaknesses and successfully compensating for them. People who lack that ability fail chronically.” Ray Dalio

School rewards the same set of hard skills. Financial modeling. Operations. Excel. In the real world, none of these are the most important skill. And that skill is Storytelling. Here’s why…

We live in a digital age. Technology is eating everything. Skills are more commoditized than ever before. And business is more competitive than ever before. Storytelling is not & will not be commoditized.

Storytelling gives us an opportunity to prove who we are as entrepreneurs, particularly in a competitive space. We work with clients and business owners of various backgrounds. Helping them secure a location to build their business that generate income for them and their family shows we are doing the right thing. When we secured a listing with a prominent landlord, we told the story why handing us the listing was worth it. Sharing the stories and the obstacles each business went through give us legitimacy.

Great storytelling is the crystal key to make things happen for yourself as a builder.

Grow audience requires preparation and repetition. Think about your audience the same way a business thinks about a potential customer. You are solving a problem for someone. Your goal is to take them from inaction to action. Great storytelling helps them understand why action is in their best interest.

What value and incentives are you adding to your audience. Catering your story to your audience is about understanding:

  • who they are
  • how they like to be spoken to
  • what incentives drive them

I remember being super nervous speaking in front of 200-300 audience on a conference at a trade mission. It was nerve-racking and intense. But with preparation, you built confidence and skill to hone your talk. Two ways to achieve nervous equilibrium:

  • Preparation
    • Bulleted notes, simulate your exact environment, anticipate audience questions.
  • Perspective
    • It is an incredible privilege to have a captive audience & even if you bomb it, it’s an amazing learning experience.

For now, my number one audience is still my son. Who’s your number one audience? Let’s start from there.

Jeff Vo's Blog