SBA 7a loans are excellent loans for physicians in need of medical practice financing for any of the following:
medical practice purchase
building purchase, refinance or construction
medical practice refinance
medical practice expansion
partner buyout
equipment financing if rolling equipment into larger loan
SBA lenders offer medical practice financing for most practice types as well as physical therapy practices and pharmacies and they have a special affinity for dentists, veterinarians, ophthalmologists and optometrists. Some will also finance successful chiropractic practices (especially those that offer medical care) and some will finance concierge practices as well as functional medicine.
SBA Medical Practice Financing Benefits
SBA medical practice loans can be an excellent choice for many physicians in that they are typically more flexible than a “bank loan.” Keep in mind that SBA loans are also “bank loans,” it is just that they effectively have an insurance policy from the SBA that gives them more latitude to offer financing they otherwise might not offer and they can be a good fit for doctors with excellent credit or those with imperfect scenarios such as:
Less than perfect credit
Lack of experience
Poor cash flow
Turnarounds
Projections-based transactions
Loans with real estate
25 Year Loans For Real Estate
If you are purchasing a practice and a building and the building is the larger percentage of the transaction then you can get a fully amortized loans up to 25 years and in many cases, the loan can be fixed for the entire 25 year term.
100% Financing
100% financing is available for existing practices that are expanding, moving or renovating.
Loans are available for practice, equipment and building financing. Some lenders will work off of your projected income for the new location, while others will only make the loan if your existing practice and your historical cash flow is enough to service the proposed debt. New or existing buildings can also be financed and ground up construction is definitely possible.
Additionally, it is also possible to get financing for a new practice IF you can show that you have been operating as a separate entity within another practice. For instance, we recently worked with a doctor who was part of a 3 doctor practice and each had separate patients and each could provide a separate P & L and production reports, so even though the doctor was not on her own we were able to show that she was independent and therefore eligible for 100% financing.
Down Payment Options
The SBA is flexible with regard to the source of a required down payment should you need one, for instance, in the case of a “startup.” Typically you would only need 10% down and the possible sources include:
Cash that is borrowed as long as you have another source of income (or income from spouse) to repay the borrowed funds
410k from a former employer (these can be used tax and penalty free in some cases)
Gifts
“Investors” – typically friends or family whom you give a small percentage of ownership of the practice in exchange for the down payment funds
Seller held funds – seller held debt can only represent half (usually 5%) of the required down payment and must be on “full standby” (no payments) for as long as you have the SBA loan. Many sellers are okay with this arrangement as long as they are getting what they consider to be a fair price for the practice.
Keep in mind that SBA practice loans do not have a prepayment penalty, so you are free to refinance it at any time and SBA medical pactice financing for an existing, profitable practice without real estate are available for up to 10 years with as little as 10% down up to a max loan amount of $5 million.
NON-SBA Medical Practice Loans
In some cases it is actually easier for doctors, dentists and veterinarians to get non-SBA medical practice financing and 100% financing is available. 100% financing is available for startups as well as for existing practices. Startup financing is available with attractive terms and sometimes available with lower payments on the front end of the loan.
Existing profitable practices (acquistion or refinance) can get truly excellent terms.
Summary of SBA 7a Loan for Physicians:
Banks and lenders favor doctors since they are typically better credit risks than many other businesses and are typically unaffected by downturns in the economy
Existing practices purchasing real estate can get a loan with zero down and possibly fixed for 25 years
SBA allows flexible sources for down payment
Construction money is available for existing practices with zero down and for startups with a down payment of at least 10%
Because of the SBA guarantee and a healthy secondary market, SBA medical practice loans are one of the few types of commercial loans most banks and lenders will do in almost any economy
Please click here for more detailed information about SBA financing for doctors.
The SBA 504 Refinance Loan program is officially back. Guidelines have been released with more to come shortly. Here is what is known so far:
· Special Use or Single purpose buildings like hotels and assisted living facilities ARE eligible up to 90% LTV even though they would typically require more equity to get SBA financing as long as all the debt to be refinanced consists of secured long-term fixed assets.
· The business must be at least 2 years old.
· The debt to be refinanced must be at least 2 years old
· The loan to be refinanced must be current during the last 12 months
· Real estate, long life heavy equipment and machinery can be financed at 90% LTV
· Cash out for operating expenses including debt consolidation is limited to 75% loan to value. (This hurts as the industry was hoping for 90% loan to value like the original version of the program offered, but this is understandable).
· Existing “government backed” loans are not eligible to be refinanced (i.e. the program cannot be used to refi an existing 504 loan, an SBA 7a loan or a USDA loan).
SBA will start accepting loan files from lenders on June 24.
Breaking News 12/18/2015 : Congress has just approved the return of the 504 Refinance Program
The 504 refi program had a very short, but successful life a few years ago and quite frankly not that many people in the SBA lending industry thought it would ever come back, but today it was written into law and it will be permanent.
This could be a HUGE deal for business owners needing to refinance their real estate, buildings and equipment.
It will likely be 4 to 6 months before the program is rolled out and we won’t know exactly what the rules will be, but hopefully they will be similar to what they were the last go round.
This post as well as our web page located here will be updated as information becomes available.
Golf course loans are possible again IF you have had a solid last few years.
We recently assisted a client with a $3.4 million refinance of their golf course and the key to getting the loan approved was consistent cash flow for the last few years and solid guarantors.
So, yes…it is possible to refinance a golf course or to get funding to purchase a golf course, but the course’s financials must be solid for the last few years.
As anyone in the industry is aware, the Recession ruined a lot of courses and the ones that survived had a pretty rough few years (and some ugly tax returns to go with it), but there are those that are coming back and just might be finance-able.
The deal we recently completed was a pretty typical SBA loan, although we had the added challenge of helping to negotiate with the current loan servicer who represented the company that bought the loan from a lender that went under and let’s just say that the company that bought the loan did not necessarily have the best interests of the client at heart when they purchased it. (i.e. the terms the borrower’s thought they had weren’t necessarily the terms).
Long story short…we got it done and the client was able to get a good rate, fully amortized over 25 years and they are happy to be rid of the other “lender.”
The “Fine Print” About Golf Course Lending
There are some caveats to this story and any excitement should be tempered by the fact that there are still very few SBA lenders willing to even look at a transaction and with such a small number of active lenders doing a limited amount of loans (no lender wants to have too many golf courses in their portfolio in any economy), it will be tougher for you as a borrower to stand out, but if you have 2 years of tax returns showing a healthy profit and current financials showing solid cash flow and good trends…then you have a shot.
Please contact me if you would like more info about SBA golf course loans: jking (at) green commercial capital (dot) com or 1-800-414-5285
SBA loan rates for the 2 largest SBA programs – the 7a and the 504 – are quite a bit different from one another because the programs themselves are quite dissimilar.
The programs are similar in that they can be used for the purchase or construction of owner occupied commercial real estate. The 7a can be used for the refinance of commercial real estate as well as other business debts, and the 504 in rare instance of a major expansion can be used for refinancing real estate or equipment, but beyond that there are some major differences and these differences are partially responsible for the difference in rates and terms.
The 7a program can be can be used for a multitude of different business purposes including:
business debt consolidation
business acquisition
financing or refinancing equipment
purchase, refinance or construction of owner occupied commercial property
working capital
inventory
The 504 program is only used to finance commercial real estate (including FF&E) or long-life equipment.
SBA loan rates for commercial real estate transactions can be amortized over 25 years with the 7a program, whereas loans for working capital or business acquisitions can only be 10 years.
SBA 7a loans can also have a “blended maturity” when the loan is used for multiple purposes as when you are purchasing a business with a lot of goodwill and a lot of “long life” equipment. The SBA lender can finance the equipment piece of the loan over the remaining useful life of the equipment and the goodwill over 10 years giving you a blended maturity.
7a rates for commercial real estate loans can be anything from a “Prime plus” variable rate to a full 25 year fixed rate.
Most of the very active 7a lenders prefer to offer an SBA loan rate at a set margin above the Prime Rate and it is typically anything from 1 to 2.75% above Prime. Typically these “active” lenders will have more flexible underwriting criteria than the few lenders who will offer a true fixed rate.
The good news is that Prime is at an all time low of 3.25%, so for now at least, any of these rates can be considered “good.”
A 5 year fixed rate is also gaining in popularity as more lenders are willing to offer it. The loan is fixed for 5 years and then adjusts after that. Most of the active lenders prefer to offer something between 5% and 6% at the moment.
There are other options as well including a 10 year fixed with a 25 year amortization (for commercial real estate transactions), but again this is relatively rare and the rate would be higher than the 5 year.
SBA 504
The 504 program is only for commercial real estate and equipment (no working capital, etc.) although there are lenders who will offer a “companion 7a loan” for stronger transactions if you need working capital.
SBA loan rates for the 504 are actually 2 (really 3) loans because in 504 lending there is a first mortgage, a 2nd mortgage and a bridge loan, although it is not as cumbersome as it sounds.
The rate for the first mortgage is negotiated with the lender and in the case of real estate is very commonly a 5 year fixed rate with a 25 year amortization.
The one constant with 504 rates is the 2nd mortgage which is typically a “below market” 20 year fixed rate. The rate is based on the monthly sale of a debenture (bond) on Wall St. The rate for the second is currently in the 5.20% range.
If you are considering an expansion of your business that involves any of the following:
buying a building
constructing a building
expanding your existing building
acquiring land
purchasing expensive equipment
Then you may be able to do the expansion while refinancing some of your existing debt using the little known “permanent” refinance provision of the SBA 504 program.
Like any type of commercial funding, there are numerous eligibility criteria, but the key factor for this program is that you can only refinance 1$ of current debt for every $2 of expansion COST.
This program could be excellent for businesses opening another location or buying or constructing a retail space to compliment their manufacturing operations.
It could also be ideal for many industries where it is common to have multiple locations, for instance:
hotels
day cares
restaurants
car washes
mini-storage facilities
retail businesses
gas stations
convenience stores
many others
Many business owners assumed that when the “temporary” 504 refinance program expired last Sept that they missed their chance at getting low rate, long term financing, but this program may allow those with expansion plans to kill two birds with one stone by refinancing their existing debt while expanding their operations.
Please click here for more info or feel free to e-mail me at jking (at) greencommercialcapital (dot) com for more info.
The Creed Act is gaining momentum. Yesterday the Senate Committee on Small Business and Entrepreneurship led by Senators Mary Landrieu and Jim Risch approved legislation that would bring back the 504 refi program.
The vote is a big step in the process that would lead to the return of the program, but the really big news is that the legislation would make the refinance provision a PERMANENT part of the 504 program.
Updated – March 15, 2013:
The SBA has just announced that they support the return of the refinance provision of the 504 program via the CREED ACT. The Creed Act would renew the 90% loan to value “temporary” 504 refinance provision allowing many more businesses to re-structure their current financing and access capital while rates are still very low.
It remains to be seen if the legislation will be passed, but this is a big step in the right direction.
New Bill Gives Hope to Small Businesses
It’s way too early to know if a program that was helping a lot of small business owners refinance their commercial property and equipment loans will be coming back, but a new bill that allegedly has bi-partisan support has been introduced.
The legislation is called the The Commercial Real Estate and Economic Development Act (or CREED Act) and it was put forth by Senators Mary Landrieu and Jeanne Shaheen.
504 Refinance Program Expiration
For those who don’t know, the (temporary) 504 refinance program that was introduced a few years ago died an untimely and premature death this past September just as it was gaining traction with lenders and small businesses.
The program allowed business owners to refinance older, higher rate and usually shorter term debt with lower rate, long term debt, but it also allowed business owners to refinance at up to 90% of the appraised value of their buildings or equipment.
90% Loan to Value with Cash Out
The 90% guideline was a crucial component of the program as many business owners who had been unable to refinance conventionally due to lack of equity now had an option.
This new proposal would extend the program for 5 years and it comes at a time when lenders are getting healthy and many small businesses are starting to rebound from the recession. It could be a huge catalyst for these businesses as having the ability to refinance business debt – both commercial real estate and other debt – could have a dramatic impact on cash flow, further helping their recovery.
Some of the Benefits:
Many businesses have maturing loans (and less equity) then they had before and they cannot meet their current lender’s guidelines for new loans or for an extension. This gives business owners a more flexible option since they can finance all the way up to 90% ltv.
Business owners can access equity in their buildings to get working capital and to pay other eligible business expenses.
Rates are at or near all time lows.
It is a “zero subsidy program” meaning that fees paid by small businesses who get the loans pay for the program. i.e. This program does not cost the taxpayers.
These are low risk loans for lenders making the odds of approval higher than with conventional financing.
Click here for a full rundown of the current refinance provisions as well as the full anticipated guidelines of the new legislation.
SBA 7a: Bridge Financing or Good Long Term Loan? Or Both?
It’s pretty much an accepted fact that small and mid-sized businesses are still having a hard time getting access to capital and many banks (unless they are active SBA Lenders) aren’t much help unless your business is rock solid and hasn’t skipped a beat these last few years.
What many business owners and a growing percentage of banks have figured out is that the 7a loan program is a very versatile and much more “approve-able” loan than a conventional bank loan or line of credit.
What’s to like about the 7a:
if a large enough percentage of the loan proceeds include real estate, then you can get a 25 year fully amortizing loan with no balloon.
it is available for any legitimate business use including business debt consolidation and working capital.
7a loans are “cash flow” loans, so if the business has good cash flow it is usually eligible for financing.
it is much more “approve-able” than a conventional loan because of the SBA guarantee provided to the bank/lender.
you can sometimes get it fixed for 5 years or even 25 years at a time…although a 25 year fixed rate is very difficult to come by, and if a lender likes you enough to fix the loan for 25 years then you might qualify for conventional financing.
lenders like the loans because they are typically very profitable.
the loans only have a 3 year prepayment penalty and the last year is only 1%.
The lender gets the benefit of the SBA guarantee during construction, so it is one of the few ways that lenders are even willing to consider construction projects.
it is available up to $5 million.
What’s not to like:
1. SBA loans have a “guaranty fee” sometimes above 3.5% of the loan amount, which can be an awful lot of money on a large loan. As painful as this can be, keep in mind that:
the fee is financed into the loan
the SBA 7a might be the only financing you can qualify for at the moment – or it might be the only type of financing that truly meets your needs.
the program could not exist without it.
The second reason the loan might not be ideal is that the 7a loan is almost always a variable rate pegged to Prime.
This is why I say it makes for good, bridge/temporary financing, because Prime – while at an all-time low at the moment – will eventually go up, but given the state of the market (and the fondness that banks and lenders have for the program) it might be the only type of financing offered to you.
This is why as a business owner you need to be aware of what you are getting into. Sure, it is not uncommon for a bank loan to be pegged to Prime, and sure you are getting a great rate now because Prime is so low…and sure, the Federal Reserve has said that they will not touch short term rates until at least 2014…but we all know that your rate will rise if and when the economy recovers.
So What Do You Do?
The best advice is to take the loan now assuming it is right for the needs of your business, but if you are uncomfortable with an adjustable rate loan, then mark your calendar for 2 to 3 years out to look into refinancing when the prepay penalty is only 1% or expired…or work with a good SBA loan consultant who will remind you to do so 😉
In other words, use the loan as bridge financing to refinance your building or your business, but be aware that you may need to re-address the situation in a few years.
Hopefully, the economy will continue to recover and financing will loosen up over the next 3 to 5 years anyway and you will have more options when the time comes. And if the economy doesn’t recover for a while, well then Prime will stay low anyway and you won’t have to worry about your variable rate.
By the way, you can also prepay the principle on the loan up to 25% per year.
PleaseClick here for more information about the 7a loan program.
The temporary SBA 504 refinance program has kind of suddenly become a big success (after a very sloooow start) and it has helped many small business owners refinance their current loans, consolidate debt and reduce their monthly expenses, but time could be running out for business owners to take advantage of this program because it is set to expire September 27th.
This is too bad, because it has provided a rare opportunity for business owners to get long term 90% loan to valuefinancing on their buildings – half of it fixed for 20 years at historically low rates.
Industries that were hit hard by the recession like hospitality and manufacturing have benefited from the program. In fact, SBA loans to refinance hotels were very hard to come by until this program started to take hold with lenders.
504 Refinance Deadline Looms
The program – originally part of the Small Business Jobs Act – was supposed to last 2 fullyears through September of this year, but much to everyone’s chagrin it does not look like it is going to be extended.
The reason for all of the “chagrinning” is that the program in it’s current form didn’t even hit the streets until 14 months after it was supposed to…which means it didn’t do a lot good for 14 of the 18 months it’s been available to date.
The delays in rolling out the program are immaterial at this point, but what is important is that deals are now getting done and the program has sparked a lot of lending and pumped life into some sectors of the commercial real estate market.
Financing of Business Expenses
One of the reasons the program has gained so much traction lately is that the SBA tweaked the program last Fall to allow “cash out” for legit business expenses including such things as business credit card debt, equipment purchases, building renovations, repairs and maintenance, salaries, rent, etc. Unfortunately, the program is set to expire just as word is getting out about all of the great things you can use the program for…and just when lenders are starting to get healthy.
So, if you own a building and you run your business out of itand you think you could benefit from refinancing, then you might want to take a fast (but thorough) look at the 504 refinance program before it dies an untimely death.
For more detailed info on the program guidelines, click here.
A Glimmer of Hope
3 Senators have just introduced a new bill – S.2364 – that would extend the refinance provision for another year. Senators Olympia Snowe, Mary Landrieu, and Jeanne Shaheen have introduced the legislation in the hopes that the program could be extended.
Word on the street is that it is not likely, but it’s a new bill, so you never know…stay tuned.
The SBA 504 refinance program finally received a much needed boost this month when SBA decided to let business owners tap the equity in their buildings to pay for business expenses.
They effectively created a “Cash Out Refinance” for business expenses/expansion because a refinance can now include expenses incurred by a business in the past AND expenses “to be incurred” in the next 18 months.
This update to the guidelines was part of the original legislation but had not been worked into the program until now. The update also includes more attractive guidelines for refinancing properties with a lot of equity.
Low Loan to Value Loans Can Now Be Refinanced
Prior to this recent change, it was difficult to refinance a property where the business owner had a lot of equity because the original guidelines said that the first mortgage had to be 50% of the appraised value and you could only refinance what was owed on the property, so in this case there was little to no value in structuring a refinance as a 504.
Now however, the new guidelines state that the existing debt can be split between a new first mortgage and the SBA 504 second mortgage which puts the new first mortgage lender at a much lower loan to value (25% to 50%) and removes a lot of the risk for the lender.
What does it mean?
It means that business owners with verifiable equity in a building can now put that equity to good use in their businesses.
What can be financed?
Business expenses like rent, utilities, salaries, inventory, (paying off/consolidating) an existing Line of Credit.
How can this help?
A business owner can “recoup” money spent in the past AND/OR they can now finance some of their future growth with excellent long term financing of 20 to 25 years.
For a full rundown of the new SBA 504 Refinance Guidelines – click here.
