Welcome Alternatives to the SBA 7(a) “Express Loan” Program

The Small Business Administration’s flagship government-backed 7(a) or Express Loan program isn’t the credit source to entrepreneurs and other business owners that it once was. Volume and bank participation are down, while credit requirements and processing time are both up. Not a good trend.

Banks are bailing on the SBA’s 7(a) loan program
Banks are bailing on the Small Business Administration’s government backed 7(a) loan program. For Q1 2008, volume for 7(a) loans was down about 20%. For rural entrepreneurs it was worse – down almost 30%. Business Week, The Squeeze is On, June/July (2008).

Why? One reason is bank participation. Bank of America – the leading 7(a) lender in 2007 – made 44% less loans in Q1 2008. Capital One Financial – the number three lender in 2007 – made less than half the number of loans it normally would over the same period. Adding to the problem, almost 400 banks have left the program in the last 2 years.

Processing times and credit requirements increase
With banks loaning less, one would think that processing times for these government backed loans would decrease, as well. Unfortunately, the opposite is true. Take the experience of Wendy Kobler of Huntsville, Alabama. Although “advertised” loan review time was 72 hours, actual review time was two weeks. Then, the loan officer scrutinized three years’ worth of her personal and business finances and asked a lot of questions about her net worth, including the value of her home. “The loan officer was looking at anything he felt could pay back the loan,” she said. (Business Week, The Squeeze is On). Her experience is not unusual. According to the Federal Reserve, in April of this year, 55% of domestic banks reported tightening credit standards for commercial loans, up from 30% in January.

With a key government-backed loan program designed to kick in during an economic downturn on the ropes, business owners need options when seeking $50,000, $250,000 or more to grow their businesses. Luckily, the private sector provides alternatives.

Alternatives to the SBA 7(a) loan program
Private lenders, such as Advance Restaurant Finance, LLC stand ready to fill the void left when banks stop lending through the SBA’s government backed loan programs. In addition, unlike the time consuming, document intensive government backed loan process, ARF’s loan process is streamlined and quick.

After ARF’s underwriters review a few key documents, such as bank statements, a typical applicant will have an answer in 72 hours or less. Once approved, ARF’s borrowers usually have the money in 5-7 days. From $5,000 to $1,000,000, restaurateurs and other retailers are increasingly turning to ARF for their business loan needs. Loaning money since 2001, ARF has helped tens of thousands of borrowers who either have been turned down by their banks or who are simply weary of the government backed loan process. In addition, more than 95% of the loans ARF makes are unsecured, requiring no collateral.

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