Which Loan is Right for Your Business
Small Business Loan Options and Tips. Finding the right loan for your small business can be hard work. Christopher Hurn, an expert in commercial capital gives some helpful tips on how you can get the best loan for your business.
Ivy Hartman: Finding defining for your small business can be daunting and our guest today is the Co- founder, President and CEO, one of the fastest growing companies in America. He started his business in order to help your small business. And before starting his own company, Chris serves as the Chief Financial Officer for a large commercial real estate brokerage company. And he’s also providing a strategic organizational advice for small businesses. Chris is the CFO of Mercantile Commercial Capital and Chris, tell us a little bit more about what kind of options are out there for small business owners as for as loans and credits go. Chris Hurn: Well, right now, unless you’re an absolute cream credit, you’re going to have a real tough time I think getting commercial bank to lend you money. At least on terms that are favorable for the growth of your small business. So what I think is going to be much more prominent in the days forward is going to be utilizing some of the existing programs that are out there. Things like from the US Small Business Administration. Things like the 7(a) Program for instance which is a tremendous program that’s best used for start up for working capital financing or business acquisition financing or another program they have is the 504 Loan which is what my company specializes in. And that’s where a little bit more mature small businesses are ready to actually create wealth for themselves by owning a commercial real estate. Ivy Hartman: And there, give me tips for how small business owner can prepare for applying for one of these things. Chris Hurn: Sure. I think in the soft and economic times we have right now, it’s a time to go back to basics. I think people need to preserve cash as much as possible. They need to ask for terms from their vendors if they’re going to go and actually borrow money from their bank or their non-bank lender; they really need to be extra prepared then be prepared if their company depends on it entirely. And that means if you have a plan for how you’re going to use the loan, you’ve got to go to the INS degree, explain exactly what the proceeds are going to be used for. This is not time for somebody just too sort of wing it. People really have to be well-prepared when they go and visit their bankers so it’s really going to be really difficult to get conventional bank financing. You’re going to be much more successful if you go the SBA route these days and I think that’s really the path to growth for a lot of these small businesses. Ivy Hartman: That’s funny because piggy bank’s on my last question for you. If there are pros and cons to the SBA loan programs versus some other private loan programs that a small business owner might seek out. Chris Hurn: Well, what you’re going to find is there’s a lot of midst of misperceptions. I’ve said for years that there are a lot of people love small businesses. If you say SBA, they immediately think it’s a four letter word. And the reality is it’s not. It’s really meant to be there to the small business owner. We can a lot to try and overcome some of the midst of misperceptions that are out there which your going to find is for instance, commercial real estate. Most banks these days, when they’re ready to lend money for commercial real estate which allows them aren’t because of their so in relief focus for the credit cards that’s been happening. When they do it, they would probably go to need 20% to 25% down. Loan the value. So they’re going to finance seventy five to eighty percent of the projects. You’re going to have to come out of pockets. Pay for your closing cause. You’re probably going to have a fifteen or twenty year amortization and you’re not going to get that kind of interest rate since you could have got a couple of years ago, nor is going to be fixed very long. And it will balloon after a set period of time, usually in three or five or seven years. And so that’s not real favorable for the small business owner. By contrast, if you do an SBA program, you can generally get 90% loan to cause financing. So they’re going to take all the cost of your total project; closing cost, soft cost, purchase price, etcetera, put it all together and finance 90% of that amount. So it’s a true 10% down. You’re going to have a little bit longer amortizations, in fact in the case of a 504 Loan; forty four percent of the entire loan payment at the borrowers going to make is actually the least expensive capital that’s available to small business owners. It’s usually about a hundred and fifty basis points or 1.5% cheaper than with any bank can offer small business owners. It’s a tremendous program fixed for twenty years. There are little things like that, that the more educated a business owner becomes, they’re going to see there’s a lot of options that are out there and ironically enough, there are a lot of existing option that have been out there for a long time. Ivy Hartman: What’s the best way to prepare when you’re going to seek out some of these loans? Chris Hurn: Well, the best way to prepare as I said is you need to know exactly what every dollar’s going to be spent for. You need to have your game plan. You need to know exactly what the proceeds are going to be for. You’ve got to be able to anticipate the questions if the banker’s going to ask. You’re going to, the more prepared you are overall, if you don’t really wing it, if you really go in and you know if you have a little bit of a, I know it sounds silly but actually have practice what your spiels going to be in the mirror and that sort of thing. You’re going to be that much more polished. You’re going to stand apart from the mediocre majority and that’s what bankers are looking for. Ivy Hartman: However, off camera, you and I talked about how small business owners don’t have a lot of time for that kind of interaction with their banker. Chris Hurn: No, they don’t. That’s why they got to prepare like their businesses’ life depend it on these days. I mean, in order to get through the soft and economic times, they really got to spend some time and focus on this if they want to get the growth capital they need. Ivy Hartman: Perfect. Chris thanks for your tips. That’s very good advice. If you’d like more information on some of the stuff we discussed today with Chris, you can go to his website at www.504experts.com. You can also look for segments here at SBTV.com from Chris. Keep it right here on SBTV.com, where small business is our only business.