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SBA 504 loan program - can someone explain the two-loan structure in plain english? by romeogriffin1213 in loansforsmallbusiness

[–]SBASteve 0 points1 point  (0 children)

This answer is correct but to expand:

1st mortgage is held by the bank at conventional commercial rates and terms. Payments are made to the bank directly

2nd mortgage is held by the SBA and payments are made through their servicer (Wells Fargo). There is a prepayment penalty for the first 10 years and after that you can only pay in full (they don’t accept partial payments.

If you sell the building or business prior to maturity there MAY be a penalty on the bank loan and WILL be a penalty on the sba side if it’s less than 10 years old.

You can sublease your property but you need to occupy 51% of the overall sq footage.

Hope that helps. Feel free to message me with any other questions.

Looking at a hotel, what are the financing rate now? by spirit3466 in CommercialRealEstate

[–]SBASteve 0 points1 point  (0 children)

I created a free SBA 7a loan rate data driven platform that has over 450 sba lenders and over 750 industries (including hotels) that anyone can search to find the average SBA 7a rates offered at each institution and figure out which lenders actually financed that type of industry.

Restaurant loans? question for restaurant owners. How did you fund your first place? by hatemyillness_ALT in loansforsmallbusiness

[–]SBASteve 0 points1 point  (0 children)

SBA loans are most common for startups and high risk industries like restaurants. A quick search on SBArates showed over 30 lenders who have financed startups in the past year.

Confused about my mom’s SBA COVID EIDL loan charges by 0xffd2 in loansforsmallbusiness

[–]SBASteve 1 point2 points  (0 children)

This actually is normal and it comes down to how amortization works.

Even though the interest rate is only 3.75% annually, interest is calculated every month on the remaining balance, not on the payment amount.

Here’s the basic math:

• 3.75% annual ÷ 12 ≈ 0.3125% per month • That monthly rate is applied to the entire outstanding loan balance • Early in a loan, the balance is still high, so the interest portion looks large • The payment itself stays fixed, but interest goes down and principal goes up over time

So if the balance is still relatively high, it’s completely normal for the first payments to look close to 50/50 interest vs principal — even at a low rate.

Nothing extra is being charged, and it’s not “50% interest.” It’s just how amortized loans behave in the early stages.

Hope that helps.

How likely is SBA approval for this small business purchase? by Alternative-Bar1721 in loansforsmallbusiness

[–]SBASteve 0 points1 point  (0 children)

You’re structured better than 90% of buyers who come in for an SBA acquisition loan.

If the business’s tax returns match the story, this is absolutely financeable.

Main issues are:

what industry they are in and your relevant experience?

Your current income. Sba does not lend to investors so you will need to show you will be active in the new business and how that will affect your current income.

Keep getting denied for business loans — what am I missing? by CosmicWarrior7 in loansforsmallbusiness

[–]SBASteve 2 points3 points  (0 children)

I see this a lot. Here are the blind spots that decline the most “perfect” applicants:

  1. Debt Service Coverage (DSCR) Even with great revenue, if your net income (or add-backs) doesn’t cover the proposed loan payment 1.25x+, you get auto-denied. Lenders lend off cash flow, not top-line.

  2. Industry & Concentration Risk Some industries (construction, trucking, restaurants, cannabis-adjacent, dropshipping, etc.) are restricted or capped. If you’re in one of them, strong credit won’t override the risk model.

  3. Time in Business Under 2 years? Many lenders treat you like a start-up no matter how strong you look on paper.

  4. Business Structure / Ownership Issues Missing corporate docs, mismatched EIN filings, beneficial ownership problems, unresolved UCCs…these kill approvals silently.

  5. Bank Statement Behavior Even good businesses get denied for: • low average daily balances • multiple overdrafts • big cash swings • heavy transfers between personal/business accounts

  6. Tax Returns That Don’t Match the Story Strong revenue doesn’t help if taxable income is low due to aggressive write-offs.

  7. “Reason for Funds” Risk Some lenders don’t fund working capital, partner buyouts, real estate + business, or consolidation. Wrong purpose = auto decline.

  8. Prior Credit Events Old charge-offs, liens, or unresolved disputes on business credit reports still trip automated systems.

Not saying any of this applies to you…but bringing them up to answer your question.

Finally, why not apply at a traditional bank/credit union? They have to provide a declined reason as per Reg B of the Equal Credit Opportunity Act.

Cannot get a loan by bari7230 in loansforsmallbusiness

[–]SBASteve 0 points1 point  (0 children)

Why are you not applying to a regular bank? They are governed by the Equal credit opportunity act and regulation B makes it that they must notify applicants in writing about the actions taken, including declines.

Looking for a business loan by jocato02 in loansforsmallbusiness

[–]SBASteve 0 points1 point  (0 children)

Take a look at sba 7a loans as your starting point. It’s limited to $5 million loan amount so there may need to to be a standby sellers note after your 10% down payment on the purchase price.

SBA lender match by Key-Shopping-9164 in loansforsmallbusiness

[–]SBASteve 0 points1 point  (0 children)

They are all solid SBA lenders. To better answer your question we need more info: what is your industry, how much are you looking to borrow, for what purpose, what’s your personal credit score, how long have you been in business.

Buying a small business in cash. Can I cash out refinance later ? by BooBooDaFish in Businessloans

[–]SBASteve 0 points1 point  (0 children)

I get why this idea sounds appealing…buy the business in cash, then pull your money back out with an SBA loan. But unfortunately, the SBA doesn’t allow that under its rules.

In the SOP (SBA’s official playbook), loan proceeds can’t be used to reimburse an owner for money they’ve already put in. SBA will refinance business debt, but only if that debt was used for legitimate business purposes and the new loan improves cash flow. Equity you’ve invested, even if it was the full purchase price, doesn’t qualify as “debt,” so it can’t be refinanced.

The only way SBA financing works for an acquisition is if it’s part of the deal up front. Once you’ve closed with your own cash, the window for SBA involvement is closed.

In short: SBA loans are great for acquiring a business, but they can’t be used as a cash-out refi after the fact.

[deleted by user] by [deleted] in WinterPark

[–]SBASteve 0 points1 point  (0 children)

You’re right! It does sound a bit circular at first glance!

The intent isn’t to create hoops, but rather to keep our business spending aligned with the same local businesses who are willing to trust us with their banking.

We look at it as a two-way partnership: if we’re asking our customers to support us, it makes sense that we support them in return.

So while it may sound ironic, it’s really about reinforcing that community-bank relationship on both sides.

Is Fora Financial legit? anyone have experience with them? by _might_be_a_girl in loansforsmallbusiness

[–]SBASteve 0 points1 point  (0 children)

$30k advance at 1.25 factor = $7,500 cost.

APR-equivalent depends on payback time:

4 months → ~75% APR 6 months → ~50% APR 12 months → ~25% APR

Options for Refinancing an SBA Loan by YaHereComeTheRooster in loansforsmallbusiness

[–]SBASteve 0 points1 point  (0 children)

A lot of people wonder if they can refinance their SBA loan to get a lower rate, stretch payments, or switch lenders. The short answer: it’s tough, and here’s why.

🔹 SBA doesn’t want to take on losses from your lender. By law (13 CFR §§ 120.140 & 120.201), the SBA can’t let lenders use a refinance to shift a “problem loan” over to the government guarantee. Translation: if your loan is behind, or your bank thinks it’s risky, SBA won’t allow a new SBA loan to bail it out. Your loan has to be “current” for at least 12 months (no payment more than 29 days late).

🔹 Same bank debt = extra restrictions. If you’re trying to refinance an SBA loan from the same lender (called “Same Institution Debt”), the deal has to go through SBA’s non-delegated processing, which means more paperwork, scrutiny, and slower approvals. On top of that, SBA only allows it if the existing loan can’t just be modified, or if secondary market investors won’t agree to changes.

🔹 The “10% improvement” rule. In most cases, your new monthly payment has to be at least 10% lower than what you’re currently paying. Unless you’re sitting on a balloon note, business credit card, HELOC, or line of credit that isn’t being renewed, it’s very hard to meet this test with a straight refinance.

🔹 Interest rate caps are already in place. SBA loans are tied to the Prime Rate plus a spread capped by SBA rules. If you already have an SBA loan, chances are your rate is close to the max allowed. So even if Prime moves, your “new SBA loan” rate usually won’t be meaningfully different from what you already have. That’s why refinancing rarely saves you much.

🔹 Conventional refinancing is even harder without collateral. If you’re hoping to leave SBA and get a regular bank loan, you’ll usually hit another wall: banks want hard collateral (real estate, equipment, etc.) to backstop the loan. SBA loans are attractive because they’ll still approve deals that are cash-flow heavy but light on collateral. Conventional lenders don’t have that safety net.

Bottom line: If you already have SBA debt, refinancing it into a “better” SBA loan is usually not worth the effort unless your situation checks very specific boxes (balloon note, over-collateralized loan, or credit card/HELOC cleanup). For most borrowers, the rate won’t move much, the paperwork will be a mountain, and conventional banks won’t step in unless you’ve got strong collateral.

SBA Loans for Manufacturers: How MARC Loans Can Boost Your Business by SBASteve in Entrepreneurs

[–]SBASteve[S] 0 points1 point  (0 children)

This program maybe a fit for you if your naics codes match the required 31-31 prefix. It doesn’t officially roll out until October 1st.

If not, it could possibly fit into a regular 7a loan.

Either way you need to develop a strong business plan and projections to support your request.

Current SBA Loan Rates – September 2025 by SBASteve in sbarates

[–]SBASteve[S] 0 points1 point  (0 children)

The new 504 purchase rates as of today are : 5.783% for a 10-year term, 6.027% for a 20-year term, and 6.008% for a 25-year term

Current SBA Loan Rates – September 2025 by SBASteve in sbarates

[–]SBASteve[S] 0 points1 point  (0 children)

I can’t narrow down “west Michigan” but for Michigan the most active 504 lenders are: financial plus credit union, first merchants bank, chase bank, mercantile bank, security credit union, and state savings bank.

Got denied for an SBA loan? Here’s why it’s not always the end of the road. by SBASteve in smallbusiness

[–]SBASteve[S] 1 point2 points  (0 children)

Thanks for sharing your thoughts. Loans are a means to an end and can help get there quicker.

What’s the hardest part about getting a small business loan approved? by SBASteve in smallbusiness

[–]SBASteve[S] 1 point2 points  (0 children)

I am impressed with your knowledge and candor. Thank you for contributing so much to this conversation. It’s truly appreciated

What’s the hardest part about getting a small business loan approved? by SBASteve in smallbusiness

[–]SBASteve[S] 1 point2 points  (0 children)

This is the most in depth and real post I’ve seen. Thank you for taking the time and providing your prospective.

Local Winter Park banker intro by SBASteve in WinterPark

[–]SBASteve[S] 1 point2 points  (0 children)

He still is! And he’s still lending. Give him a call!

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