Barbara is a certified public accountant and Jack has 30 years of restaurant experience. But lenders consider startups, and restaurants in particular, to be high risk -- especially during this credit crunch. Barbara says that she and Jack are willing to invest about 20 percent of their own cash toward the 'purchase of property, renovation, equipment, parking lot, and all outside work and loan fees. To borrow the remaining 80 percent, she wants a 504 loan that is sponsored by the U.S. Small Business Administration. Under 504, a bank usually makes a 10-year, conventional loan covering 50 percent of the hard-asset cost. Because it is typically secured by real estate, the lending risk is greatly mitigated. Up to 40 percent more is funded by a SBA-guaranteed debenture. The debenture is similar to a 20-year second mortgage with current rates running around 7.25 percent. This SBA program requires that one permanent job be created or retained for each $50,000 of debenture. Full-service restaurants comply easily. The job-creation requirement may be waived to meet the government's targeted goals. But the 504 program does not provide working capital funds. Moreover, startup businesses need enough initial cash to cover operating expenses through break-even, including a livable salary for its owners. Restaurants often take longer to break even and thus their working capital needs are greater. So, not surprisingly, Barbara and Jack are seeking an SBA 7(a) working capital loan in addition to the 504 real estate and fixed assets funding. 'Can they both be obtained at the same time? she asked. I told her that they could. When I found information about SCORE on the Internet, I wrote and asked my question. That is how we got to you,' Barbara says. Piggy-backing a 504 loan with a 7(a) is a good way to meet both hard-asset and working capital needs. The same lender that makes the conventional first mortgage is the best candidate to do both loans since they control the collateral. Otherwise, additional collateral may be required. Creative financing is available for economically sound proposals if you know where to look for it. Jerry Chautin is SBA's 2006 national Journalist of the Year' award winner and a volunteer business counselor SCORE, Counselors to America's Small Business offering free business advice.

Tough - bad situation - why will they not re-approve the SBA loan? Seems like an easy decision to me (former commercial lender) - just might have to go back to the credit committee. There are commercial mortgage companies that may be able to help you as well. They can help you purchase the current building - including the renovations if there is other equity involved. These companies (non-bank lenders) can also get cash out of your other real estate (if they have substantial equity). Might be away for you to get by until the economy turns around and other avenues reopen.

Barbara is a certified public accountant and Jack has 30 years of restaurant experience. But lenders consider startups, and restaurants in particular, to be high risk -- especially during this credit crunch. Barbara says that she and Jack are willing to invest about 20 percent of their own cash toward the 'purchase of property, renovation, equipment, parking lot, and all outside work and loan fees. To borrow the remaining 80 percent, she wants a 504 loan that is sponsored by the U.S. Small Business Administration. Under 504, a bank usually makes a 10-year, conventional loan covering 50 percent of the hard-asset cost. Because it is typically secured by real estate, the lending risk is greatly mitigated. Up to 40 percent more is funded by a SBA-guaranteed debenture. The debenture is similar to a 20-year second mortgage with current rates running around 7.25 percent. This SBA program requires that one permanent job be created or retained for each $50,000 of debenture. Full-service restaurants comply easily. The job-creation requirement may be waived to meet the government's targeted goals. But the 504 program does not provide working capital funds. Moreover, startup businesses need enough initial cash to cover operating expenses through break-even, including a livable salary for its owners. Restaurants often take longer to break even and thus their working capital needs are greater. So, not surprisingly, Barbara and Jack are seeking an SBA 7(a) working capital loan in addition to the 504 real estate and fixed assets funding. 'Can they both be obtained at the same time? she asked. I told her that they could. When I found information about SCORE on the Internet, I wrote and asked my question. That is how we got to you,' Barbara says. Piggy-backing a 504 loan with a 7(a) is a good way to meet both hard-asset and working capital needs. The same lender that makes the conventional first mortgage is the best candidate to do both loans since they control the collateral. Otherwise, additional collateral may be required. Creative financing is available for economically sound proposals if you know where to look for it. Jerry Chautin is SBA's 2006 national Journalist of the Year' award winner and a volunteer business counselor SCORE, Counselors to America's Small Business offering free business advice.

Tough - bad situation - why will they not re-approve the SBA loan? Seems like an easy decision to me (former commercial lender) - just might have to go back to the credit committee. There are commercial mortgage companies that may be able to help you as well. They can help you purchase the current building - including the renovations if there is other equity involved. These companies (non-bank lenders) can also get cash out of your other real estate (if they have substantial equity). Might be away for you to get by until the economy turns around and other avenues reopen.