Please Sign In and use this article’s on page print button to print this article.
Execs at four small companies tell how they were able to jump-start their businesses.
Filled with “must read” stories, industry news and reporter insights, exclusive interviews with local business leaders, and expanded Top 25 Lists.
Research the 3+ year digital archive, and People on the Move leads database download.
Start using the digital Book of Lists today. Print subscribers receive the printed Book of Lists when published.
Starting and growing your own business can be a dream come true – and it can be harder work than ever dreamed possible. To help jump-start their goals, more small businesses are turning to Small Business Administration loans.
“Fiscal year ’15 was a record lending year for the Pittsburgh area,” said Dr. Kelly Hunt, district director of the SBA’s Pittsburgh office.
The most common type of SBA loan in the Pittsburgh area is the General Small Business Loan 7(a), with a maximum amount of $ 5 million. But there are myriad SBA programs, including those for real estate and equipment, disaster and one that waives fees for veterans, Hunt said.
For the average lender, the biggest benefit, she explained, is the loans are guaranteed, alleviating some of the risk.
For the borrower, SBA loans may work when a company is relatively new and there isn’t enough traditional hard collateral to secure funding. Or it could be in an industry that normally presents an above average risk to banks, like hotels and restaurants.
Bowman Field Solutions
Union Standard Restaurant
During the last recession, many small businesses struggled with cash flow and profits, making historical financials an unreliable gauge for a company’s future ability to repay debt and support its operations. After the recession, banks and borrowers began looking for financing again.
“The SBA guaranty was a good bridge to allow the small businesses to get the financing they need and for the banks to mitigate some of the risk,” said Steve Bilko, SBA credit services manager at First Commonwealth Bank.
“Basically [SBA loans] allow the banks to do deals they otherwise couldn’t do, but it doesn’t substitute for viability of the business from a cash flow or repayment perspective,” said Dave Miller, loan development officer at Enterprise Bank.
Entrepreneurs need to remain mindful of their personal household obligations and debt situations, suggested Lindsay Cost, senior SBA product specialist at Huntington Bank.
“Their new endeavor might not necessarily be able to provide them with a salary that they’ve been used to,” she said. “Thinking through how those two sets of obligations are going to be met is a helpful exercise for small business owners and also helps them to realize that they might not be able to step away from their day job as quickly as they want.”
For banks having SBA preferred lending status, turnaround time for approval is normally expedient.
“Once a bank approves a loan, the eligibility check that you do with the SBA online is basically in real time so it’s immediate approval,” Miller said.
And the eligibility requirements are straightforward, he added. The business must be located domestically in the U.S. and the owners or principals must either be citizens or permanent resident aliens. The business must be for-profit, not caused any defaults or losses to the government, have no prior criminal convictions and be of good character.
And just how large can a business be to qualify? It depends on the type of business. Manufacturing businesses can have up to 500 employees; for wholesale industries that number drops to 100.
For service-based or retail-based businesses, the size standard is based on an annual revenue of up to $ 7 million.
Patty Tascarella covers banking, finance and the legal industry. Contact her at email@example.com or 412-208-3832. .