Term Loans
Term Loans are a standard debt financing facility with standard payments (usually monthly) with a maturity and amortization schedule, ranging from anywhere in 6 months to 30 years in length (depending on use). Term loan sizes for small and medium-sized businesses can be as small as a few thousand dollars, and can range up to $5,000,000 for loans with SBA-enhancements, and well above that for other traditional facilities.
The repayment associated with most term loans are made monthly, although some alternative lenders will require payback be made on a weekly or even daily basis.
Term loans vary in size, structure and uses depending upon the commercial lending institution. A term loan from a bank may have a very different underwriting criteria than that of a mid prime lender that specializes in buying-out high-interest merchant cash advances. Term loans are usually collateralized with the borrowing company’s assets (building, land, equipment, accounts receivable, cash flow, etc.). While each lender has their own requirements, its common for a blanket lien to be placed on all the company’s assets when a term loan is provided to the business.
While each lender is different, a term loan provided by a conventional, private investment bank or SBA-preferred lender usually requires and extensive amount of business and personal financial documentation for due diligence during the underwriting of the loan. Traditional commercial lenders will require that the business prove it has an acceptable debt-service-coverage-ratio to ensure the lender will get paid back.
Borrower Minimum FICO: 680+
Minimum Time in Business: 3 years
No More than two NSF's over the past six months of consecutive bank statements
Term Loans are a standard debt financing facility with standard payments (usually monthly) with a maturity and amortization schedule, ranging from anywhere in 6 months to 30 years in length (depending on use). Term loan sizes for small and medium-sized businesses can be as small as a few thousand dollars, and can range up to $5,000,000 for loans with SBA-enhancements, and well above that for other traditional facilities.
The repayment associated with most term loans are made monthly, although some alternative lenders will require payback be made on a weekly or even daily basis.
Term loans vary in size, structure and uses depending upon the commercial lending institution. A term loan from a bank may have a very different underwriting criteria than that of a mid prime lender that specializes in buying-out high-interest merchant cash advances. Term loans are usually collateralized with the borrowing company’s assets (building, land, equipment, accounts receivable, cash flow, etc.). While each lender has their own requirements, its common for a blanket lien to be placed on all the company’s assets when a term loan is provided to the business.
While each lender is different, a term loan provided by a conventional, private investment bank or SBA-preferred lender usually requires and extensive amount of business and personal financial documentation for due diligence during the underwriting of the loan. Traditional commercial lenders will require that the business prove it has an acceptable debt-service-coverage-ratio to ensure the lender will get paid back.
Borrower Minimum FICO: 680+
Minimum Time in Business: 3 years
No More than two NSF's over the past six months of consecutive bank statements
Who Qualifies can qualify for an SBA 7(a) loan?
While exact requirements can vary by lender, in general, to achieve 100% CRE financing, a borrower will need:
Other than general and mixed use buildings, which are generally eligible, other eligible building types for up to 100% SBA 7(a) financing include:
SBA 7(a) Loans Can Also Offer 100% Construction Financing
SBA 7(a) loans don’t only allow eligible business owners to purchase an existing building with zero down, they can also allow them to build an entirely new structure for their business. However, to achieve 100% construction financing with a 7(a) loan, a borrower will need to have especially strong financials, and their business will have to occupy at least 60% of the finished structure (as opposed to the 51% minimum for property acquisitions.)
100% CRE Financing Does Not Apply to Business Acquisitions
If you want to get an 100% commercial real estate financing with an SBA 7(a) loan, you’ll need to fully own the business already. In order to buy a business and a building, you would need at least 10% down— though 5% of that can come from a seller note.
SBA 7(a) Rates
The SBA 7(a) program offers several loan options ranging up to $5 million, with terms that extend to 25 years. Funds can be used to cover working capital, equipment purchases and the cost of business expansion. Loans may come with either variable or fixed rates. Keep in mind that variable rates can fluctuate depending on publicly available base rates and require approval from the SBA.
SBA Working Capital | Debt Refinance Loans
Loan Size - to $350,000
Loan Description - SBA 7(a) loan
Interest Rates
• $30K to $49K Prime Rate plus 3.75%
• $50K to $350K Prime Rate plus 2.75%
Loan Term - 10-year term with no prepayment penalty
Borrower Minimum FICO: 680+
Minimum Time in Business: 3 years
No More than two NSF's over the past six months of consecutive bank statements
Security
• Blanket lien on business assets
• Personal guarantee by all 20% owners
This is an estimate and actual costs may vary
While exact requirements can vary by lender, in general, to achieve 100% CRE financing, a borrower will need:
- Great personal and business credit
- A significant amount of collateral
- Debt service coverage ratio (DSCR) of 1.25x or greater
- History of stable and positive cash flow (1.5 years typically required)
- The business must occupy at least 51% of the property in question
- The building must be a general use or multi-use property (properties with highly specific uses are much riskier for both lenders and the SBA)
Other than general and mixed use buildings, which are generally eligible, other eligible building types for up to 100% SBA 7(a) financing include:
- Medical and dental offices and clinics
- Office condos
- Professional office buildings
- Pharmacies
- Auto-repair businesses (including tires, muffler repair, and transmission firms)
- Pre-schools
- Certain fast-food/quick service restaurant buildings
SBA 7(a) Loans Can Also Offer 100% Construction Financing
SBA 7(a) loans don’t only allow eligible business owners to purchase an existing building with zero down, they can also allow them to build an entirely new structure for their business. However, to achieve 100% construction financing with a 7(a) loan, a borrower will need to have especially strong financials, and their business will have to occupy at least 60% of the finished structure (as opposed to the 51% minimum for property acquisitions.)
100% CRE Financing Does Not Apply to Business Acquisitions
If you want to get an 100% commercial real estate financing with an SBA 7(a) loan, you’ll need to fully own the business already. In order to buy a business and a building, you would need at least 10% down— though 5% of that can come from a seller note.
SBA 7(a) Rates
The SBA 7(a) program offers several loan options ranging up to $5 million, with terms that extend to 25 years. Funds can be used to cover working capital, equipment purchases and the cost of business expansion. Loans may come with either variable or fixed rates. Keep in mind that variable rates can fluctuate depending on publicly available base rates and require approval from the SBA.
SBA Working Capital | Debt Refinance Loans
Loan Size - to $350,000
Loan Description - SBA 7(a) loan
Interest Rates
• $30K to $49K Prime Rate plus 3.75%
• $50K to $350K Prime Rate plus 2.75%
Loan Term - 10-year term with no prepayment penalty
Borrower Minimum FICO: 680+
Minimum Time in Business: 3 years
No More than two NSF's over the past six months of consecutive bank statements
Security
• Blanket lien on business assets
• Personal guarantee by all 20% owners
This is an estimate and actual costs may vary
