Invoice Factoring And Financing
Invoice factoring is the process of selling a business outstanding invoices in exchange for a lump sum cash payment. Invoices are sold to a third-party factoring company at a discount, so you wont get paid for invoices in full. And, once you sell an invoice to a factoring company, the factoring company assumes responsibility for collections.
However, this form of financing can be an effective way to access cash quickly without having to wait the 30 to 90 days customers usually have to pay invoices. For that reason, invoice factoring is a helpful strategy when you need short-term financing or help managing cash flow. In general, invoice financing amounts can extend up to $5 million with APRs between 10% and 79%.
Is It Hard To Get An Sba Loan
That largely depends on your financial situation. The SBA is looking to provide loans for businesses that may not otherwise qualify. However, that doesn’t mean the SBA is looking to invest in failing businesses.
If your business is in financial trouble not due to a natural disaster or a national economic event, like the COVID-19 pandemic it may still be difficult to be approved an SBA loan.
You may need to provide more documentation, and it may take longer, but the overall qualifications for the SBA are usually less stringent compared to those of a regular bank.
Where To Apply For A Sba Paycheck Protection Program Loan
Apply for this loan through any existing SBA 7 lender or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution. Start by consulting with your local lender to see if it is participating.
The SBA and the Treasury Department announced that the PPP would reopen the week of Jan. 11, 2021, for new borrowers and existing PPP loan recipients.
Initially, only community financial institutions, including community development financial institutions , minority depository institutions , certified development companies, and microloan intermediaries were able to make first-draw PPP loans beginning Jan. 11, 2021. Second-draw PPP loans through the same lenders started Jan. 13, 2021. First- and second-draw loans were available from small lenders with less than $1 billion in assets as of Jan. 15, 2021, and all participating PPP lenders were approved to make loans beginning Jan. 19, 2021.
Do not use any other road to apply for a PPP loan scammers will offer shortcuts to PPP loans, just as they did with the original program. The Federal Trade Commission filed a case against one such company on April 17, 2020. Only apply by first going to the SBA website. And know that the SBA will never ask for Social Security numbersor bank account or credit card numbersup front, the FTC cautioned.
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Common Uses Of The Sba 504
Business owners most often use the SBA 504 loan to fund large land and real estate projects. The 504 loan is usually paired with a loan from a traditional lender, with the costs split between the two. This structure is quite the win-win-win situation: it alleviates the burden on both the SBA and the lender, all while empowering businesses looking to complete projects up to $10 million.
Heres a look at some of the things you can use an SBA 504 loan for:
Purchasing a building. If your business is expanding into a new location, the funds from the SBA 504 can help. Any costs associated with the buying an existing building can be covered by the SBA 504 loan.
Acquiring or improving land. You can purchase land with the SBA 504, and make certain improvements specified by the SBA, such as street improvements, parking lots, landscaping, and utilities.
New construction. Renovations that modernize existing buildings are included in new construction, as is everything typically associated with new construction. Elevators, fire systems, security, bay doors, and any special requirements for your businesses physical location can be included in the SBA 504 loan terms.
A business owner cant use the funds from the 504 loan for working capital, which puts some limitations on the loans versatility.
Sba 7 Loan Debt Relief
The SBA Debt Relief program will pay principal, interest, and fees for six months on new 7, 504, and microloans made from March 27, 2020, to Sept. 27, 2020. The program also will pay principal, interest, and fees for six months on existing 7, 504, and microloans beginning with the first payment due after March 27, 2020.
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What Is An Sba Express Bridge Loan
The SBA Express Bridge loan disaster loan pilot program provides expedited direct loans of up to $25,000 for businesses that have been affected by declared disasters, including COVID-19. EBL loans are intended to be interim loans and have a maximum maturity repayment term of seven years. Businesses use these funds for disaster-related purposes while they apply for and await long-term financing.
Can I Use Sba Disaster Loan To Pay Myself
It seems clear you cant pay yourself unless its for work you do in your business. After all, the SOP states that EIDL cant be used to pay: Disbursements to owners, partners, officers, directors, or stockholders, except when directly related to performance of services for the benefit of the applicant.
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Gather The Required Documents
If your business is eligible, its time to gather your documentation. The SBAs website includes a loan application checklist to help identify the exact documents your business will need. Here are some common documents SBA lenders will require:
- Loan request amount and detailed allocation of funds
- SBA business plan
- Year-to-date profit and loss statement
- Year-to-date balance sheet
- Projected financials
- Proof of ownership
- Business tax returns
- Personal tax returns
- Personal financial statement
- Business lease
Tips For Accessing Small Business Assistance
- Many financial advisors specialize in helping business owners plan for the future. Finding the right financial advisor who fits your needs doesnt have to be hard. SmartAssets free tool matches you with financial advisors in your area in five minutes. If youre ready to be matched with local advisors who will help you achieve your financial goals, get started now.
- Learn more about how small businesses are dealing with the coronavirus crisis. Our guide can walk you through the small business relief programs, how you qualify and how you apply.
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Why Hire Us To Help You With Your Treasury Or Sba Debt Problems
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Support For Small Business Owners Directly Through The Sba
There are several other financial assistance options, outside of our normal 7 and 504 loan programs, available for small businesses which you may choose to explore. The American Rescue Plan Act has created two separate grants which are being offered directly through the U.S. Small Business Administration , with additional funding allocated for COVID-19 Economic Injury Disaster Loans.
SBA Disaster Assistance Loans
The U.S. Small Business Administration may be able to provide you low-interest federal disaster loans for working capital.
COVID-19 Economic Injury Disaster Loan
The U.S. Small Business Administration may be able to provide economic relief to small businesses and nonprofit organizations that are currently experiencing a temporary loss of revenue. Unlike the SBA Paycheck Protection Program , the EIDL is administered and funded directly through the U.S. Small Business Administration.
SBA Shuttered Venue Operators Grant Application
The U.S. Small Business Administration may be able to provide economic relief to Hard-Hit Small Businesses, Nonprofits and Venues affected by COVID-19 pandemic. Unlike the SBA Paycheck Protection Program , the SVOG is administered and funded directly through the U.S. Small Business Administration
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How The Sba Helps Small Businesses Get Loans
The SBA helps small businesses get loans, either directly through the Disaster Loan program or indirectly by guaranteeing a significant portion of an SBA loan made by a participating lender. The guaranty helps reduce the risk to the lender. The SBA sets detailed standards that these loans must meet. If the lender has followed SBA guidelines and the borrower defaults, the SBA will pay the guaranty amount to the lender.
Who Needs Sba Loan Forgiveness
Not every business that takes out an SBA loan succeeds. If you find your business is not turning a profit and you default on your SBA loan, you should consider SBA loan forgiveness.
After missing your first payment, you likely receive a late notice from your lender after about 10 days. Most lenders charge a late fee, so if you still can make a payment expect an upcharge. Try to keep a record of your payments because not every lender will alert you when youâve missed one.
Before contacting the SBA, the lender will first attempt to collect from the borrower.
Some lenders will attempt to refinance the SBA loan or work out a new loan repayment plan. They might offer interest-only payments for a short time or a complete loan restructuring. This is not considered defaulting on the loan.
Only businesses that actually default on their SBA loan can apply for loan forgiveness. Be aware that you may default on a loan without being behind on payments. This happens when you violate the terms of the loan like:
- Taking on additional debt
- Not seeking approval from the lender before accepting new shareholders
- Failing to provide yearly tax returns for the life of the loan
Defaulting on a loan due to a lack of repayment is much more common than violating the loan agreement terms.
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New Paycheck Protection Loan Funding For 2021
The 2020 Paycheck Protection Program loans are 7 loans to help small businesses affected by the ongoing public health and economic crisis. The PPP program was reopened for 2021 to include new loan availability and additional funding for businesses currently receiving PPP loans. First-time applications and second-time applications may be submitted through May 31, 2021. There is also new information about loan forgiveness options. Check with the SBA or your lender about the availability of these relief efforts.
Sba Express Bridge Loan
If you already have a business relationship with an SBA Express Lender, then a new Express Bridge Loan Pilot Program offers a quick turnaround on up to $25,000 to help bridge the gap until your SBA Economic Injury Disaster Loan is approved. Bridge funds can be paid in full or in part with proceeds from your EIDL once it is approved.
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Changes To The Ppp Loan Program That Target Very Small Businesses
On Feb. 22, 2021, the Biden administration announced several changes to the PPP program designed to make PPP funds available to the smallest businesses, including some excluded from previous relief efforts.
- Beginning Feb. 24, 2021, businesses with fewer than 20 employees will have an exclusive two-week window to apply for PPP funding. During this period, larger businesses will not be allowed to apply.
- The formula used to calculate PPP loans has been revised to allow sole proprietors, independent contractors, and self-employed individuals to receive more financial support.
- Eligibility rules have been changed to let small business owners with non-fraud-related felonies receive PPP loans as long as the applicant is not incarcerated at the time of the application.
- Also newly eligible are those who are delinquent on federal student loans.
- Non-citizen small business owners who are lawful U.S. residents, including Green Card holders and those here on a visa, also will be eligible and allowed to use their Individual Taxpayer Identification Numbers to apply for PPP relief.
What Are 7 Loan Amounts Fees & Interest Rates How It All Works
SBA 7 loans are granted and negotiated between merchants and SBA-approved funders. However, the SBA does provide some guidance in these areas.
What are SBA Loan Amounts Minimums and Maximums?
There is no official minimum loan amount for SBA 7 loans from the SBA. Funders may set minimum amounts. The maximum loan amount is $5 million. According to the latest figures available from the SBA, the average 7 loan amount in fiscal year 2015 was $371,628.
What are SBA Loan Fees?
Loans guaranteed by the SBA are assessed a guarantee fee. This fee is based on the loan’s maturity and the dollar amount guaranteed, not the total loan amount. The SBA-approved funder is responsible for paying the guarantee fee to the SBA and the funder has the option of passing that cost along to the merchant. According to the SBA, “The funds to reimburse the funder can be included in the overall loan proceeds.”
- On loans under $150,000, the fees will be set at zero percent.
- On any loan greater than $150,000 with a maturity of one year or shorter, the fee is 0.25 percent of the guaranteed portion of the loan.
- On loans with maturities of more than one year, the normal fee is 3 percent of the SBA-guaranteed portion on loans of $150,000 to $700,000, and
- 3.5 percent on loans of more than $700,000.
- There is also an additional fee of 0.25 percent on any guaranteed portion of more than $1 million.
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Sba Deferral On Existing Home And Business Loans
If you currently have an SBA Serviced Disaster Loan that was in regular servicing on March 1, 2020, then the SBA is providing automatic deferral on your loan through March 31, 2021. Note the following:
- Interest will continue to accrue on your loan during the deferral period.
- 1201 monthly notices will still be mailed but will show no payment due.
- Pre-Authorized Debit payments will not automatically be canceled. You must contact your servicer to do that.
- You may continue making payments if you wish. No contact is necessary.
- After the deferral period, you must resume payments and set up PAD if you canceled it earlier.
Dont Try To Resolve Sba Loan Issues Alone
Now you should have a basic understanding of SBA loans and what happens if you default on an SBA loan.
Applying for SBA loan forgiveness may seem like a better idea than filing for Chapter 7 bankruptcy, but not always. Every lender and loan is a bit different, so it can help to get a second opinion on what to do.
Donât try to resolve SBA loan issues alone. Speak to an attorney with the Protect Law Group!
The Protect Law Group has proven, nation-wide experience negotiating SBA debts and helping businesses file for bankruptcy.
Owe more than $30,000? Contact the Protect Law Group today for an SBA loan case evaluation
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The Huntington National Bank
Huntington is the #1 lender nationwide for SBA loans in terms of number of loans made. It makes 7, SBA Express and 504 loans. Its primary focus is in its SBA footprint states of OH, MI, IN, WV, PA, KY, IL, WI, and FL and it is expanding into MN and TN in 2020. Huntington also offer SBA Practice Finance Loans in all states east of the Mississippi for dental, veterinary and medical customers. It has dedicated teams who specialize in the intricacies of SBA programs and all customers follow an identical triage process to be placed in the best product for them based on where they are in their business lifecycle, making Huntington a good choice for borrowers looking for an experienced SBA lender.
How To Apply For An Sba Loan
You dont need to know all the ins and outs of the SBA loan program to apply for an SBA loan. All you need to do is to focus on finding an SBA lender to work with. While the SBA sets minimum standards, individual lenders may impose additional eligibility requirements, as long as they dont discriminate on a prohibited basis. That means you may find one lender requires higher personal credit scores than another. Or a lender may not work with businesses in certain industries, while another lender will. In other words, youll shop for an SBA lender just as you would shop for other types of loans.
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Understanding The Small Business Administration
The Small Business Administration offers substantial educational information with a specific focus on assisting small business startup and growth. In addition to educational events offered on the SBAs website, local offices also provide more personalized special events for small business owners.
According to its website, the SBA provides the following services to small businesses:
- Access to capital: The agency offers a variety of financial resources for small businesses including microlending, or small loans that are issued to those who wouldn’t otherwise qualify for financing.
- Entrepreneurial development: This is driven by counseling services and low-cost training provided by the SBA. This is available to both new and existing business owners.
- Contracting: The SBA reserves 23% in government contracting dollars for small businesses with the help of other federal departments and agencies.
- Advocacy: The agency acts as an advocate by reviewing legislation and protecting the interests of small business owners across the country.
The agency has helped small businesses across the country get access to loans, loan guarantees, contracts, and other services.