Turned Down for an SBA Loan
I get different reactions when I mention SBA loans for my clients. Some say, “Great” and we move forward to get them Turned Down By SBA financing. Some, however say it takes way too long and that may be true. Time is one of those factors that is different for every scenario and not every borrower or project has the same time constraints.
Unfortunately, time isn’t the only issue facing a business person trying to secure an SBA loan, whether it’s just a commercial real estate loan or a working capital line of credit or a combination of both.
What I am talking about is the myriad of ‘issues’, oftentimes small in the scheme of things, that get an SBA loan request denied. These types of issues are why we call many of our private commercial loan programs “SBA Alternative Loans”.
Following is a list of some of the reasons borrowers get Turned Down By SBA but it is far from a comprehensive list.
- Commercial loans with under 51% owner occupancy. Do you own and have a business in part of a commercial building? If, based on the # of square feet, your business takes up less than 51% of the building you may not qualify for an SBA loan.
- If your commercial building is in a mostly residential area you may not meet the criteria for an SBA loan.
You need to have a business that has been in business more than 2 years. The Small Business Administration likes to see a business history and actual books. A profit is good, too.
Less than good credit will hurt. They will tell you it doesn’t, but the fact is that poor credit will lead to greater scrutiny and, likely, an eventual turn down.
They will look hard at the origin of the money you do have so commercial loans with no proof of down payment funds is a deal killer. In banking terms it’s called seasoning so. Was it a gift? Is it a loan from some other lender? If you have had it on deposit for a while they might not question it, but if it just miraculously appeared in your account they will ask and make you prove where you got it. If they do not like what they hear they will say no to your loan request. 90 days may be the magic number…or not. It depends. They do not accept second position status in any line of credit instruments. They want to be at to top and number one.
Buildings and businesses with low occupancy may result in the fatal no, too. Low occupancy commercial loans are frowned upon. If you don’t have renters you look bad from the SBA’s viewpoint. Doing business means doing business, not holding an empty building.
The SBA is not into construction loans. They don’t like to build stuff. They like going businesses and enterprises, not speculation or development. If you want to build something you might need to consider other types of financing.
Turned Down By SBA
As with any other government program the rules can change at any time, but the above list will give you some guidance. As my Gramma used to say, “Remember you must make money.” When we start a business it exists to make money…to actually offer a product or service customers will purchase at a profit to the business. To be entrepreneurial is a worthy endeavor. Turned Down By SBA loan gives business owners the financing to grow what they are building, first through their own efforts and then to a higher level with a cash infusion.
Contact Us at 1-877-655-5625 or 1-828-689-4683 for Turned Down By SBA.
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