Multiple sources of repayment - Lending 101 - Saab General Bulletin Board - Saabnet.com
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Multiple sources of repayment - Lending 101
Posted by Geoff (more from Geoff) on Tue, 27 Sep 2005 16:58:15
In Reply to: I don't think they will, NickR, Tue, 27 Sep 2005 04:21:38
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Most banks will not make a loan unless there are at least two "ways out." They drill that into our heads on the first day of training (in my case, 26 years ago).
The primary source of loan repayment is the cash flow from your business.
The secondary source of repayment (for whatever is owing in case the business tanks and primary source has been inadequate to pay off thre whole 100 cents) is liquidating the assets of the business and then calling on your personal guarantee if needed.
With SBA loans, the fractional government guarantee is a "third way out," which covers any residual loss the bank suffers in case the assets of the business and your personal resources (cash, real estate equity, etc.) haven't made up the shortfall from the primary source.
If you are working with an SBA loan broker, they should be able to screen your proposal to see if it is bankable. Also, if I recall correctly, the SBA guarantee fee you pay is $22,500 (3% of 75%) for a $1 million loan. Not cheap.
Posts in this Thread:
- OT: Anyone have experience with SBA loans?, andym, Tue, 27 Sep 2005 03:46:24
- Thanks to all..........., andym, Tue, 27 Sep 2005 18:23:27
- Re: I am on the collection end of SBA loans......, paul de k, Tue, 27 Sep 2005 10:55:39
- Re: OT: Anyone have experience with SBA loans?, Saab good car, Tue, 27 Sep 2005 05:58:08
- I don't think they will, NickR, Tue, 27 Sep 2005 04:21:38
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