Hello all. My wife and I are trying to start a small retail business.
Unfortunately, like many others in this economy, when the housing market
fell, we wound up owing more on our home than it is currently worth, and as a
result, can not use it for collateral, even though we'd be more than willing
to. We keep running into contradicting information on SBA loans. It is our
current understanding that the SBA will underwrite 7a loans without
collateral (which is the whole point of guaranteeing 85% of the loan), yet we
have also been told the exact opposite, that there are no SBA 7a programs
that do not require collateral. Different websites say different things, and
unfortunately, I have been unable to find an answer one way or the other on
the actual SBA website. So do all SBA loans require collateral? Or are there
any SBA loan programs that would work for us (we need $150,000 - 160,000 to
start)? If not, do you have any advice on other programs or possible avenues
for financing our business? We have a very strong business plan, and are
confident in our success, we just need the startup capital. Thanks in advance
for any help you all can give us.
From what I recall from my SBA backed loan applications from a few years ago,
they require collateral for all loans (even microloans). It is precisely
because they offer the guarantee that they require the collateral. They will
do everything possible to avoid having to pay off your loan if you default.
But should the worst happen, they want the collateral.
Trying to find funding in the amount of $150k is going to be very difficult,
especially without collateral. Would it be at all possible to start smaller?
Start out of your home instead of brick and mortar? Or sell online to build a
customer base? This way you would also be able to keep your "day job" while
you start slow. It will give you time to build up savings for when you are
ready to go full on. And it will give the housing market time to stabilize so
your collateral will be avaiable too.
Hi, I have googled for you and found this link:
http://www.sba.gov/content/collateral-required-these-loans
The link says "Is collateral required for these loans?
Loans of $14,000 or less do not require collateral. Loans in excess of
$14,000 require the pledging of collateral to the extent it is available.
Normally the collateral would consist of a first or second mortgage on the
damaged business property. In addition, personal guaranties by the principals
of a business are required. The SBA will not decline a loan for lack of
collateral, but you must pledge available collateral."
So it would appear that collateral is required for loans of over $14000.
Since you need $150,000 it would seem to me that you need collateral.
kmurray | Community Moderator |
6/12/2012 - 7:46 am
Hi,
If you've already checked out our information about SBA Loan Programs, another option may be to reach out to a local resource for advice from small business experts with one of SBA's resource partners like SCORE, Women’s Business Centers and Small Business Development Centers located across the country. They provide free business counseling to individuals looking to start or expand a small business. These organizations can help you with the process of starting your business. Visit SBA Direct to find your local SBA resource partners by entering your zip code.
This blog from last week also offers information about securing a loan. This post also offers options for funding in the way of peer-to-peer lending and crowdfunding.
Best of luck!
bizplanhelper | Window Shopper | 6/15/2012 - 3:05 pm
they require collateral for all loans (even microloans). It is precisely
because they offer the guarantee that they require the collateral. They will
do everything possible to avoid having to pay off your loan if you default.
But should the worst happen, they want the collateral.
Trying to find funding in the amount of $150k is going to be very difficult,
especially without collateral. Would it be at all possible to start smaller?
Start out of your home instead of brick and mortar? Or sell online to build a
customer base? This way you would also be able to keep your "day job" while
you start slow. It will give you time to build up savings for when you are
ready to go full on. And it will give the housing market time to stabilize so
your collateral will be avaiable too.
cooldude | Window Shopper | 6/13/2012 - 11:09 am
http://www.sba.gov/content/collateral-required-these-loans
The link says "Is collateral required for these loans?
Loans of $14,000 or less do not require collateral. Loans in excess of
$14,000 require the pledging of collateral to the extent it is available.
Normally the collateral would consist of a first or second mortgage on the
damaged business property. In addition, personal guaranties by the principals
of a business are required. The SBA will not decline a loan for lack of
collateral, but you must pledge available collateral."
So it would appear that collateral is required for loans of over $14000.
Since you need $150,000 it would seem to me that you need collateral.
Hope you found this information helpful.
kmurray | Community Moderator | 6/12/2012 - 7:46 am
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