Affordable, “Recession-Proof” Financing Options for Small Businesses

On July 11, 2022, for the first time ever the exchange rate between the US dollar and the EURO reached parity. With the volatility of a recession and uncertainty looming across the global market, small business lenders and community banks will certainly think twice in providing loans. What is abundantly clear is that small business owners will continue to rely on financing to sustain and grow their businesses. This article explores several recession-proof ways small businesses can take on business financing without the worries of the recession affecting their options.

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

Recessions never good for the economy. BUT…sometimes recessions can be good for small businesses.

While there would be few who would suggest that a recession is good, during recessions there can be

opportunity for small businesses to thrive.

For instance, some industries like grocery stores, home health care, bars and restaurants with liquor sales, maintenance services, and the sweets industry tend to gain quite well. Regardless, small business owners right now should be thinking about the next 12 months and how they can capitalize on consumer demands which come along with a recession.

Small business owners need to position themselves now for the future. They should budget for balancing the everyday costs of running their businesses and focusing on increased efficiency. However, the most important thing small business owners should be working on now is their mindset. Their mindset should be to play like you are losing. This amplifies consideration of efficiency, effectiveness, and streamlining waste. This also allows small business owners to focus on risk.

The need for business financing.

Without a doubt, the small business financing industry is back after the pandemic. Companies like eNOVA (who owns OnDeck) posted record earnings in 2021. Other small business lenders have pushed forward with earnings and expanded. Credibly, a major small business lender based in Michigan announced that it had secured at $50M credit facility for its small business lending division in July of 2022.

Record profits infers record lending to small business owners. That is, if lenders are lending more than ever, small businesses are taking more than ever. With the return from the pandemic, small business owners need access to capital that not only makes sense, it must be helpful.

Recession-Proof small business financing.

With small business lenders thriving, so are programs which small business owners should be focusing on before the recession hits. While some would indicate that we are already in a recession, with the parity of the Dollar and the EURO the admission of recession appears to be coming soon.

Small business owners need to look at the signs and find financing products which are recession-proof. That is, recession-proof products tend to have the following commonalities:

  • The terms allow for cash flow which does not kill profit margins.
  • Financing products carry terms which are reasonable. Many times, while rates for longer terms seem to be lower, they are much more expensive because you have the financing longer.
  • The product allows you to save while you pay back the financing.

Small Business Grants

Small business grants are free money for small businesses which are provided by government, non-public, and for-profit entities. Most small business grants provide business owners an avenue to apply for a bigger goal. For instance, the US Department of Labor has hosted grants to small businesses in places of high poverty for the development of careers and creation of new jobs.

While it takes time and effort to research and apply for grants, the end game can be worth it as small business grants are funds which do not need to be paid back. However, grants are not always rosy. As I wrote in a recent article:

Purpose – Along with most grants is purpose. That is, grants have purposes. For instance, State grants or Federal grants may focus on a bigger picture such as developing jobs or creating a new product that might help the public.

Restrictions as well as Reporting – Grants have restrictions and reporting requirements which generally ensure that the grant is being used the correct way. Further most grants have time limits for attaining results and reporting those results to an overseeing organization or entity.

Matching Funds – Many grants come along with a requirement for the organization to match the funds from the grant with their business’s funds. Matching funds can be tricky as many small business owners apply for grants with matching funds and do not even know that matching is a requirement.

To help you get started, we always keep and refresh small business grants which are available to small business owners (https://www.backofficedepot.com/smallbusinessgrants).

Term loans

Term loans are easy to apply for and usually provide small business owners terms from 1 year out to 5 years. Approvals are based on underwriting guidelines specific to the industry, amount of loan, monthly revenue, credit score, business credit score, and time in business.

Small business term loans usually have set fixed interest rates and payments can be daily, weekly, bi-weekly, or even monthly. For most term loans under $150K the only documentation needed tends to be an application, business bank statements, as well as proof of business. Some lenders ask for taxes if your funding request is for more than $150,000 or on a case-by-case basis.

Average Range for Borrowing: $1,500 to $550,000

Rate(s): 7% – 38% APR

Credit Score Requirement: 600

To apply for pre-qualification (no credit pull) for a Small Business Term Loan Click Here.

Equipment Term Loans with Rebate

Some equipment loans carry rebates which can be advantageous for small business owners. That is, a

lender will lease to the small business a piece of equipment and provide a rebate at an amount which is parallel to the costs of the equipment loan. For instance, if it is determined that the equipment loan is for $25,000, the equipment is then amortized with interest over 60 monthly payments, without origination or fees. Then, upon receipt of equipment, a rebate is provided for the business owner for the equipment at the amount the equipment costs.

What is beneficial about the loan is that to an extent, equipment is tax deductible under Chapter 179 of the IRS Tax Code so what you are paying back is tax deductible. Also beneficial is that this loan is not one that counts as an MCA position and having a longer term make the payments more affordable than traditional term loans.

Average Range for Borrowing: $20,000 to $100,000

Rate(s): 15% – 20% APR

Term(s): 5 years

Credit Score Requirement: 680

Business Credit Score: Paydex Score of 80

To apply for pre-qualification (no credit pull) for a 5 Year loan click here.

Line of Credit

Lines of credit have the most flexibility. For instance, the beauty of a line of credit is that you only draw what you need when you need to. Applications for lines of credit are fast and have flexible terms.

Range for Borrowing: $1,500 to $250,000

Rate(s): 7% – 28% APR

Term(s): Variable

Credit Score Requirement: 680

To apply for pre-qualification (no credit pull) for a line of credit, click here.

Short Term Loan

Short term loans are those which go from 6 months to 5 years. Most short-term loans have weekly payments and little underwriting requirements. Further, credit is less important and while rates tend to be higher for small business owners, there is minimal paperwork needed and funds can be disbursed in as fast as 1 hour.

Average Range for Borrowing: $2,500 to $500,000

Rate(s): 8.99% – 34% APR

Credit Score Requirement: 450

To apply for pre-qualification (no credit pull) for a line of credit, click here.

Consolidation Loan

Consolidation loans present a host of different options for small business owners who already have debt or would like to combine working capital already taken. There are different consolidation programs available which small business owners can use to ensure that they have the maximum economic performance they can have.

For originators, loan consolidation is an art. There are virtually dozens of ways to consolidate loans which can be helpful. Once you apply, our team will craft an option which provides you a simple, affordable road map for consolidation and beyond.

Average Range for Borrowing: $25,000 to $500,000

Rate(s): 9.0% – 39% APR

Term(s): Up to 3 years

Credit Score Requirement: 500 and up

To apply for pre-qualification (no credit pull) for a consolidation loan, click here.

Equipment or Vehicle Loans

Perhaps one of the best loans small business owners can take is for equipment or vehicles. With relatively low rates, equipment or vehicle loans can be efficient and lower in cost than working capital loans or merchant cash advances. Plus, the benefits are that the loan does not usually go on the business owner’s personal credit and has a longer term, up to 6 years.

Further, many lenders do not count an equipment loan towards working capital loans or merchant cash advances, so small business owners may be able to acquire more capital. Some equipment and vehicle lenders may also provide additional working capital as well.

Average Range for Borrowing: $25,000 to $150,000

Rate(s): 6.0% – 21% APR

Term(s): Up to 6 Years

Credit Score Requirement: 600

To apply for pre-qualification (no credit pull) for an equipment or vehicle financing, click here.

Asset-Based Loans

Asset-based loans are loans that are collateralized with either equipment or real estate. Loans that have collateral attached to it are usually cheaper than regular term loans and less risks for lenders to provide funds.

Asset-based loans for small business owners can be a great way to access lower-cost working capital and the terms can be beneficial as well. Also, asset-based loans usually carry simple monthly interest, which means you pay interest by the month, not the term. If the borrower pays the loan back earlier, they can save on the interest as they do not pay the months that they do not have the loan. This is a similar loan product to a line of credit.

Average Range for Borrowing: $10,000 to $500,000

Rate(s): Simple Monthly Interest (starting at 1.5% per month)

Term(s): Up to 5 Years

Credit Score Requirement: None

To apply for pre-qualification (no credit pull) for an asset-based loan, click here.

Dr. Thomas 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.

Plenty of Blame to Go Around: Who is to Blame for The Biggest Fraud in American History?

Over the last year, we have written extensively at the breadth of fraud associated with the Federal Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) Programs during the COVID-19 Pandemic. In recent weeks, the US Small Business Administration Office of the Inspector General (OIG) released a scathing report of the performance of the US SBA during the COVID-19 Pandemic and its attention to fraud during the PPP program. Not only are some small business owners and some lenders to blame for fraud, so is the US Small Business Administration. Clearly, they failed to adequately do their part in preventing fraud, ultimately leading to what some have called the biggest fraud in the history of the United States.

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

How bad was the fraud?

Bad. In past articles we have highlighted the many FRONTLINE ZEROES OF THE PANDEMIC. That is, the countless losers who have defrauded the people of the United States by using a host of strategies to collectively secure millions of dollars and in most cases misappropriately use the funds which were to keep America’s businesses open. In a previous article, we underscored this from a report made by Ken Dilanian and Laura Strickler of NBC.

They called it the largest fraud in the history of the United Stated:

“Even if the highest estimates are inflated, the total fraud in all Covid relief funds amounts to a mind-boggling sum of taxpayer money that could rival the $579 billion in federal funds included in President Joe Biden’s massive 10-year infrastructure spending plan, according to prosecutors, government watchdogs and private experts who are trying to plug the leaks.

“Nothing like this has ever happened before,” said Matthew Schneider, a former U.S. attorney from Michigan who is now with Honigman LLP. “It is the biggest fraud in a generation.”

Most of the losses are considered unrecoverable, but there is still a chance to stanch the bleeding, because federal officials say $600 billion is still waiting to go out the door. The Biden administration imposed new verification rules last year that administration officials say appear to have made a difference in curbing fraud. But they acknowledge that programs in 2020 sacrificed security for speed, needlessly.”1

What the cases of COVID-19 Loan Fraud demonstrated

While there are a bunch of cases which have different ways in which PPP or EIDL fraud were conducted, the justice department has already brought criminal charges against hundreds of small business owners for fraud since 2020. The Biden Administration currently has implemented tougher oversight and investigation since Biden took office which has shown hundreds of millions in fraud were committed – More is to come.

What have been the lenses of COVID-19 fraud which have been prosecuted?

A nice overview of the Justice Department’s investigations have been made by the Project on Government Oversight (POGO). They have kept a great database on their website here:

https://docs.google.com/spreadsheets/d/1Z8p-hj2E_VgM3-lRo4eG2CI__iKpiu4UK_SRPqRI7sU/edit#gid=0. A review of their database suggests the following were the main cases of COVID-19 fraud:

  • Accused individuals allegedly falsified payroll documentation to justify either getting a loan or getting a bigger loan than they were eligible for;
  • Accused individuals allegedly created fake tax documents used for verifying details in loan applications;
  • Accused individuals allegedly created bogus companies to get loans;
  • Accused individuals allegedly used defunct companies to get loans;
  • Accused individuals used stolen identities or aliases while applying for loans;
  • Accused individuals allegedly falsified ownership of existing legitimate businesses;
  • Accused individuals also obtained Economic Injury Disaster loans (some of these individuals have been accused of fraudulently obtaining these loans as well).

More of the article can be found here

Who is to blame for the fraud?

This is an interesting question: But there is plenty of blame to go around. While we could explore this topic on many angles, we have selected three main areas: small business owners, lenders, and the US SBA.

Small Business Owners

Small business owners have extensively been prosecuted for fraud in the aforementioned areas and others. What is clear, many small business owners tried to take advantage of the Federal Government. What is not understood is how these people thought they were not going to be cross-checked from the IRS on data such as 940/941.

If there is thing, small business owners were eager to get help that was needed. However, some small business owner clearly saw opportunity to score some easy and free money.

We have underscores other things small business owners did which regard the level of stupidly or ineptitude.

Articles

Maseratis, Jaguars, Mercedes, Investments, Swimming Pools…. Getting Caught for PPP/EIDL Fraud.

Getting Caught: Small Business Owners Committing EIDL and PPP Fraud.

Fake 940/941s, More Lamborghinis, Rolexes and Real Estate Oh My.

The Frontline Zeroes of the Pandemic.

Lenders

Without a doubt, many lenders were to blame for much of the PPP fraud. Banks, who generally oversee SBA loans make the process to acquire loans very difficult continued tough oversight during the Pandemic. However, other lenders like FINTECH companies have been blamed for poor oversight, and at a minimum have been investigated for allowing PPP loans to be fraudulently received.

Bloomberg reported about a University of Texas at Austin study in 2021 that Fintechs were found to be five times more likely to ok suspicious PPP loans.

As a company who sent many of its client’s applications to lenders including FINTECHs, we could clearly see the level of oversight differences. For instance, PNC Bank required much more back up for their loans and reviewed documentation with a fine-tooth comb. Other lenders like Cross River Bank prided themselves in using technology to speed up the review process. Clearly, one can see how many more SBA loans would be provided if banks did “technologically driven automation” to underwrite and review loan applications.

Clearly, there is much blame to go around, but there clearly was poor oversight with many of the SBA providers. Congress has recently held hearings and brought to light these issues.

Small Business Administration

While policy makers in Congress were quick to point fingers at the lenders and further call for going after fraudulent business owners, The United States Small Business Administration is one who many have suggested to share the blame.

In May the SBA Inspector General issued a report which reviewed PPP loans and how the SBA contributed to what is considered one of the best and worst government programs ever.

Among the findings, the Office of the Inspector General found:

  • There were no established procedures for PPP which could track and address potentially fraudulent applications. Therefore, lenders, many of who were not equipped with trained underwriting staff were left to look for fraud or accuracy.
  • There were no fraud risk frameworks established before the program was released.
  • The SBA was unable to handle the speed of which the program was delivered and employed.
  • Lenders had little guidance for how to handle certain situations, such as finding multiple processes to handle cautionary reviews or uncommon questions.
  • There were few steps established which checked for the accuracy of information, such as if someone had created a false 940 or 941 form.

The full report, which can be found here, describes the COVID-19 fraud and how the SBA contributed to the fraud in the report. In the report, the Office of the Inspector General said:

“The Office of Inspector General (OIG) found that the Small Business Administration (SBA) did not have an organizational structure with clearly defined roles, responsibilities, and processes to manage and handle potentially fraudulent Paycheck Protection Program (PPP) loans across the program. In addition, the agency did not establish a centralized entity to design, lead, and manage fraud risk. This problem occurred because the agency did not establish a sufficient fraud risk framework at the start of and throughout PPP implementation. Management stated this was partly due to the speed of the delivery of PPP and the continuous and rapid discovery of different kinds of fraud schemes. Lenders also were not always clear on how to handle PPP fraud or recover funds obtained fraudulently from the PPP that remained in the borrower’s account. SBA did not provide lenders sufficient specific guidance to effectively identify, track, address, and resolve potentially fraudulent PPP loans.

In the end of the report, the OIG recommended that the SBA establish clearly defined and detained roles, procedures and adopt procedures for finding fraudulent loans.

References

1 – https://www.nbcnews.com/politics/justice-department/biggest-fraud-generation-looting-covid-relief-program-known-ppp-n1279664

Dr. Thomas 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.

8 Affordable Small Business Financing Options for The Post Pandemic Era

While the Economic Injury Disaster Loan (EIDL) and the Payroll Protection Programs (PPP) were beneficial for small business owners, as they say, “all good things must come to an end.” What it does not mean is that there are not great options out there for small business owners to take advantage of. We know that traditional bank loans and lines of credit are rarely out there but that does not mean access to financing has to be hard or expensive.

In this article, we will share a list of 8 different financing products which are easy to attain, and in some cases will cost you nothing.

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

What’s out there for small business owners?

In the post EIDL/PPP era, what is out there for small businesses? We get that question a lot from clients to we put together a list of 8 options for small business owners. Also, you can apply through our platform as we do not charge clients broker fees or add on extra origination charges, ultimately making the product more affordable than going through loan brokers or directly through a website for business funding.

Small Business Grants

Small business grants are free money for small businesses which are provided by government, non-public, and for-profit entities. Most small business grants provide business owners an avenue to apply for a bigger goal. For instance, the US Department of Labor has hosted grants to small businesses in places of high poverty for the development of careers

and creation of new jobs.

While it takes time and effort to research and apply for grants, the end game can be worth it as small business grants are funds which do not need to be paid back.

To help you get started, we always keep and refresh small business grants which are available to small business owners (https://www.backofficedepot.com/smallbusinessgrants).

Term loans

Term loans are easy to apply for and usually provide small business owners terms from 1 year out to 5 years. Approvals are based on underwriting guidelines specific to the industry, amount of loan, monthly revenue, credit score, business credit score, and time in business.

Small business term loans usually have set fixed interest rates and payments can be daily,

weekly, bi-weekly, or even monthly. For most term loans under $150K the only documentation needed tends to be an application, business bank statements, as well as proof of business. Some lenders ask for taxes if your funding request is for more than $150,000 or on a case-by-case basis.

Average Range for Borrowing: $1,500 to $550,000

Rate(s): 7% – 38% APR

Credit Score Requirement: 600

To apply for pre-qualification (no credit pull) for a Small Business Term Loan Click Here.

Equipment Term Loans with Rebate

Some equipment loans carry rebates which can be advantageous for small business owners. That is, a lender will lease to the small business a piece of equipment and provide a rebate at an amount which is parallel to the costs of the equipment loan. For instance, if it is determined that the equipment loan is for $25,000, the equipment is then amortized with interest over 60 monthly payments, without origination or fees. Then, upon receipt of equipment, a rebate is provided for the business owner for the equipment at the amount the equipment costs.

What is beneficial about the loan is that to an extent, equipment is tax deductible under Chapter 179 of the IRS Tax Code so what you are paying back is tax deductible. Also beneficial is that this loan is not one that counts as an MCA position and having a longer term make the payments more affordable than traditional term loans.

Average Range for Borrowing: $20,000 to $100,000

Rate(s): 15% – 20% APR

Term(s): 5 years

Credit Score Requirement: 680

Business Credit Score: Paydex Score of 80

To apply for pre-qualification (no credit pull) for a 5 Year loan click here.

Line of Credit

Lines of credit have the most flexibility. For instance, the beauty of a line of credit is that you only draw what you need when you need to. Applications for lines of credit are fast and have

flexible terms.

Range for Borrowing: $1,500 to $250,000

Rate(s): 7% – 28% APR

Term(s): Variable

Credit Score Requirement: 680

To apply for pre-qualification (no credit pull) for a line of credit, click here.

Short Term Loan

Short term loans are those which go from 6 months to 5 years. Most short-term loans have

weekly payments and little underwriting requirements. Further, credit is less important and while rates tend to be higher for small business owners, there is minimal paperwork needed and funds can be disbursed in as fast as 1 hour.

Average Range for Borrowing: $2,500 to $500,000

Rate(s): 8.99% – 34% APR

Credit Score Requirement: 450

To apply for pre-qualification (no credit pull) for a line of credit, click here.

Consolidation Loan

Consolidation loans present a host of different options for small business owners who already have debt or would like to combine working capital already taken. There are

different consolidation programs available which small business owners can use to ensure that they have the maximum economic performance they can have.

For originators, loan consolidation is an art. There are virtually dozens of ways to consolidate loans which can be helpful. Once you apply, our team will craft an option which provides you a simple, affordable road map for consolidation and beyond.

Average Range for Borrowing: $25,000 to $500,000

Rate(s): 9.0% – 39% APR

Term(s): Up to 3 years

Credit Score Requirement: 500 and up

To apply for pre-qualification (no credit pull) for a consolidation loan, click here.

Equipment or Vehicle Loans

Perhaps one of the best loans small business owners can take is for equipment or vehicles. With relatively low rates, equipment or vehicle loans can be efficient and lower in cost than working capital loans or merchant cash advances. Plus, the benefits are that the loan does not usually go on the business owner’s personal credit and has a longer term, up to 6 years.

Further, many lenders do not count an equipment loan towards working capital loans or merchant cash advances, so small business owners may be able to acquire more capital. Some equipment and vehicle lenders may also provide additional working capital as well.

Average Range for Borrowing: $25,000 to $150,000

Rate(s): 6.0% – 21% APR

Term(s): Up to 6 Years

Credit Score Requirement: 600

To apply for pre-qualification (no credit pull) for an equipment or vehicle financing, click here.

Asset-Based Loans

Asset-based loans are loans that are collateralized with either equipment or real estate. Loans that have collateral attached to it are usually cheaper than regular term loans and less risks for lenders to provide funds.

Asset-based loans for small business owners can be a great way to access lower-cost working

capital and the terms can be beneficial as well. Also, asset-based loans usually carry simple monthly interest, which means you pay interest by the month, not the term. If the borrower pays the loan back earlier, they can save on the interest as they do not pay the months that they do not have the loan. This is a similar loan product to a line of credit.

Average Range for Borrowing: $10,000 to $500,000

Rate(s): Simple Monthly Interest (starting at 1.5% per month)

Term(s): Up to 5 Years

Credit Score Requirement: None

To apply for pre-qualification (no credit pull) for an asset-based loan, click here.

Dr. Thomas 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.

Applying for an SBA loan? What brokers and banks cannot do to small business owners.

Hundreds of thousands of small business owners apply for loans from the US Small Business Administration (SBA) each year. However, small business owners should know what SBA agents and banks can and cannot do before applying. This article shares some things that small business owners should watch out for when applying for an SBA loan.

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

Small business owners are easy targets.

According to the SBA, over 50% of all small businesses have borrowed money in the past 5 years. And continually one of the most popular loan products we are asked about are the SBA 7a, Express, and 504 loan products.

One thing we regularly see is that many small business owners are taken advantage of by banks or brokers. With so much misbehavior and shenanigans out there, we wrote this article to outline several things that banks, and brokers cannot do to small business owners while they apply for an SBA loan.

Two reasons why banks and brokers take advantage of small business owners

The team at BRP Onesta helps small business owners start, maintain, and grow their businesses. Each year we see hundreds of small business owners who are taken advantage of for two basic reasons:

  1. Small business owners do not know the rules so they will do whatever is asked of them by banks or brokers.
  2. Brokers know that SBA loans do not pay much. That is, unless the SBA loan is for millions, merchant cash advances, equipment loans and term loans pay much better than SBA loans. Therefore, it is not uncommon for brokers to ask for up-front fees or due-diligence costs. In many cases, brokers lie to small business owners by telling them the costs are reimbursed at the closing or refundable if the loan does not fund.

Things that SBA banks and brokers would love to do but are prohibited from doing so.

Small business owners beware – these are things that small business owners we interact with typically are asked to do or participate in.

Due Diligence Costs: Due diligence costs are fees paid up front for legal fees before submitting the loan. Not only is this practice illegal,

Commissions, referral fees, broker fees: These fees are common in different loans, including equipment and real estate loans. Even Merchant Cash Advances and term loans have these structured in different ways. Banks are not allowed to charge any commissions, broker fees or referral fees. In some cases, fees can be assessed if provided using SBA Form 159.

Fees for legal services: Most banks do not charge fees for legal services unless the lender is being billed by an attorney at an hourly rate for set services.

Fees for services: This is a common issue with loan brokers who promise small business owners that they will be working on their SBA loan package for them. Sometimes these services can be approved if provided on SBA 159 (after loan approval) but up-front fees like due diligence are not allowed and illegal. If you are a small business owner and you are asked for an upfront fee, you are probably getting ripped off.

Add-On Interest is charged one time, in advance, and added to the loan balance. The amount of interest in not compounding or decreasing according to loan balance. This is not allowable. And while SBA loans do not allow for some early payback without penalty (usually because of the guarantee from SBA), SBA loan interest is based on balance remaining.

What do small business owners do to protect themselves?

It is imperative that small business owners do things to protect themselves as they apply for SBA funding. Even if small business owners do not get approved for an SBA loan, they should not be taken advantage of.

Small business support companies like BRP Onesta provide realistic, free origination on SBA and other loans. We are honest, care about the business owner, and work with the business owner to provide a pathway for funding, even if he or she is not ready.

If you would like to have free qualification review for an SBA loan, please contact us at any time. We can usually provide a pre-approval in 5 minutes.

Dr. Thomas 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.

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

Sign Up for Our Secret Sauce Newsletter and receive 1 Tradeline for Business Credit for Free Click Here

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.