Ever dream of being your own boss, hanging a shingle on Main Street or bringing a product to market? You're in good company. According to statistics from the Small Business Administration's (SBA) Office of Advocacy, there were 649,700 new businesses started in 2006.
Many make their dream become a reality with the help of SBA loans for startup capital, to purchase real estate or to start new divisions within an existing company.
But since the SBA doesn't make direct loans to consumers, one way to get such a loan is to connect with a local lender who has an established history and the necessary expertise with SBA loans, says Brian A. Fisher, vice president of commercial and business banking at FirstMerit Bank.
SBA loans are attractive options for new businesses because there can be flexibility with the terms and required equity, Fisher says.
"The first step in applying for a loan, which will eventually be guaranteed by the SBA, is to look for a bank that's a SBA-preferred lender," Fisher says. "Those banks, like FirstMerit, have already been authorized to submit loans on its behalf, the underwriting is sufficient and the bank is in good standing with the SBA."
Next, assemble a team of trusted advisers. "That should include a banker, accountant, attorney, insurance agent and, in many cases in Northeast Ohio, a small-business development center," Fisher says.
Your team can help develop your business plan, which is necessary for a loan proposal. It should cover three big questions a lender will likely ask: How much money do you need? Why do you need it? How will you be paying it back?
"An ideal borrower is really a prepared borrower who has taken the time to research his or her strengths and weaknesses as a potential business owner," Fisher says. "He or she has also taken the time to research the market, the product and similar companies (potential competitors)," says Fisher.
In addition, it's important for the borrower to have good credit. "How one handles his or her personal credit is an indication of how that person will handle the business and the business' credit. It's a strong indicator of how that loan is going to perform," he says.
While the timetable for the loan process varies with the complexity of the deal and preparedness of the borrower, it's possible to complete the process in 30 days or less.
"At FirstMerit we are always looking to grow our SBA portfolio and provide new business owners with the capital and support to get their businesses off the ground," Fisher says.
To that end, the bank strives to give its customers quick loan decisions. "We have local decision makers in each region so we're able to turn things around pretty quickly," he says. "Once we have a completed loan package, we are committed to a 48-hour turnaround to give an approval, denial or the next step for our customers."