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Gene (00:03):

Hey everybody, this is Gene Marks and welcome to another episode of the Hartford Small Biz Ahead Podcast. Thank you so much for joining. The economy… is it in a recession? Is it not in a recession? It kind of depends on who you ask and who you’re working with and where you’re located and what industry you’re in. But there’s no question a lot of economists are befuddled as to whether or not there will be a slowdown in 2013… sorry, 2023. Did I say 2013? There is one thing for sure, that we are seeing and that is more challenges in the financing environment. Interest rates are up significantly over the past year, and a lot of my clients, that are looking to refinance their loans are coming across some challenges, paying a lot more for their interest.

Gene (00:54):

In some cases, almost double digits. Other companies, smaller companies, companies with maybe less of a credit history or financial history, are also having challenges, more challenges getting financing, particularly from traditional banks. And if they do get financing, some of the options that are available to them, can be pretty expensive. But do they have to be, the answer to that is really no. If you’re looking for financing this year, whether you’re a startup business or whether you’re a small company or even an established business with a number of employees, my advice to you is to talk to the small business administration. In fact, not just the SBA, but you wanna talk to an SBA lender and you can find those SBA lenders just by going to sba.gov and searching for SBA lenders. And you will find a search tool that will help you find SBA lenders in your state and located near your business.

Gene (01:49):

And an SBA lender, just so you know, it’s generally a bank. I mean, in some cases they can be a community investment funds or other types of entities like that. But for the most part and generally it’s a bank. There are a number of banks around the country, many that have been certified by the SBA. They’re preferred lenders. By the way, that’s who you’re looking for, preferred lenders, who can lend out money under the SBA’s loan programs. And there are three loan programs that you should be aware of because you’re eligible for them as a small business. The most popular one is called the Section 7(a) loan program. Under this program, you can get 5 million bucks in financing. You can use it for working capital and inventory and property and equipment or real estate, or to buy another business. The SBA guarantees this loan. They guarantee all the loans for the bank. So if you’re a bank and you issue, an SBA loan, you’re only exposed for a certain amount. It’s like 10 or 15%. So that’s good and it’s a lot of encouragement for these banks to get…

Gene (02:58):

The loans out there. There are smaller loans, even under this section 7(a) program. If you’re only looking for a few $10,000 or something like that, there’s something called express loans. And there are even specific targeted loans under the 7(a) program for companies that are looking to import products or involved in International Trade. The interest rates that you’ll find under these loans are at market rates. The SBA has a stated rate and they really can’t vary too much from it. And the repayment terms of these loans, depending on what you’re gonna use it for, could be as much as 25 years. So that’s the most popular loan program you really should talk to an SBA banker about it. Even if you have a good relationship with your existing banker, I mean, that’s all well and good, but if they’re giving you trouble refinancing or you have loans coming due, it could be a really great option.

Gene (03:47):

Now, there are two other loan programs that the SBA offers that you should also be familiar with. One is a micro loan program and there you can take up to $50,000 very quickly in financing. They turn ’em around within, they promise within a few days. That can be used for working capital inventory or supplies or furniture or machinery and equipment. Now, those loans do have a slightly higher interest rate and shorter payment terms. It certainly won’t be up as high as 25 years. It’s more like six years. And you can’t use these micro loans to pay off existing debts or to purchase real estate. But, if you’re looking for quick money to put a deposit down on a property or a piece of equipment or to buy some inventory really quickly, the micro loan program may be something that you should really be looking into.

Gene (04:35):

There’s also something called a 504 loan program, and that’s used if you wanna purchase or construct, a new building or an existing building, or a long-term machinery, or you want to modernize your infrastructure around your business, streets or your driveways. These are all loans that are the 504 loan program. They’re offered through certified development companies. Again, you can find them on the SBA website but they are at market rates of interest, various terms of maturity. The bottom line is here is that before you go out and start looking for financing for your business, if you finance stuff on your credit card or if you go to the sites that offer a lot of private lenders that are out there, and it’s fine to do that. You probably qualify for an SBA loan.

Gene (05:27):

And don’t forget that these bankers as well, they’re mandated to get these loans out there. They get certified to participate in the program. And if they’re a preferred vendor or preferred banker and they want to continue to work with the SBA, they’ve gotta get loans out there. Now, you do have to go through due diligence with the banker. You don’t just sign a piece of paper and you’re done. You’re gonna have to show tax returns or financial history. Or more importantly, the banker…

Gene (05:56):

Needs to work with you to make reasonable projections, reasonable ones, about how you’re gonna pay off debt over a period of time, as well as sustain your business. So this isn’t just like they’re throwing money out at you and you run away with it. You gotta go through a process. The banks are in the middle of this. And be aware, even though the government, will cover a bank up to 85% of a loan. If a bank is still stuck with 10 or 15% of exposure, it’s still lost money to them. So the bank wants to make sure that the loans going out are reasonable and are good. But listen, I’m just saying to all my clients this year, if you’re looking to refinance, if you’re looking for new debt, if you’re a startup, if you’re a very small business without that much credit history, you gotta go to the SBA.

Gene (06:44):

You gotta work with an SBA banker, you gotta push ’em. You can talk to more than one SBA banker, by the way. Just if one rejects you, you can still go to another SBA banker so that you’re not limited there. But I’m telling you, the terms of the deals are very, very competitive and they have all the encouragement in the world to get the money out there to small businesses like yours and mine. So I would strongly suggest that you talk to an SBA banker this year. It’s gonna be a challenging year for financing. We know that. So this is a good opportunity, to take advantage of while it’s still there. All right. Well, thanks for listening this week. My name is Gene Marks, and you have been listening to the Hartford Small Biz Ahead Podcast. If you need any advice or tips or help in running your business, please visit us at SmallBizAhead.com or SBA.TheHartford.com. Again, my name is Gene Marks. Again, thank you for listening. We will see you again next week with another tip and thought to help you run your business. Talk to you then.

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