Photo Credit: Chris Goldberg
The Small Business Administration (SBA) recently announced new revisions to its loan process which should offer easier access for small businesses to obtain loans. But does it really succeed in offering small businesses a significantly greater access to the funding needed for growth?
The two revisions impact SBA’s 7(a) and 504 loan programs. As summarized by the National Federation of Independent Businesses, “The 7(a) program is the SBA’s basic loan offering provided by traditional bank loans whereas the 504 program involves loans for real estate or machinery that are split between a bank and a Certified Development Company.”
NFIB further summarizes the changes involved in these programs:
-“The SBA is eliminating the personal resources test for these loans, and will no longer require applicants to detail their individual wealth and personal assets, which had been used to weed out borrowers who could finance expansions themselves.”
-“The SBA is now allowing borrowers taking out 504 loans to use a variety of resources as collateral, rather than just that which the loan is being used to purchase.”
-“In addition, 504 loans can now be used to finance projects begun more than nine months before a loan application is made.”
To an extent, mainstream media outlets have weighed in on the changes by the SBA. The Washington Post, for example, covered the changes in an article entitled “The Small Business Administration just made it a little easier to secure a loan” while the San Francisco Business Times covered it under the article, “SBA makes it easier for small business owners to get loans.”
The full extent to which these changes will actually resolve fundamental issues facing bank loans is not fully clear. As Evan Singer, general manager at SmartBiz noted, “Fast access to inexpensive capital is one of the biggest challenges facing small business owners.”
There’s the possibility that many of the same issues persist regarding bank loans. As long as a business owner’s credit history is still a major factor in the rubric of determining whether one qualifies for a bank loan, it’ll continue to prevent small to medium sized businesses from effectively managing to expand with access to capital.
While the SBA’s progress toward offering more accessible loans is a step in the right direction, it doesn’t necessarily solve fundamental programs with bank loans.
Capital Solutions offers both invoice factoring and purchase-order financing. With invoice factoring, eighty to ninety percent (80-90%) of an invoice or purchase order may be provided by Capital Solutions to business owners as a cash advance prior to payment by the customer. This 80–90% of the invoice is granted to the business owner so that he or she can use those funds at his or her discretion.
The remaining ten to twenty percent (10-20%) is held in reserve with the factor. When the payment is received, the factor releases the reserve less the charges incurred back to the company. Purchase-order financing is a great choice for businesses that have orders ready to fulfill, but lack the cash flow to pay the supplier up front.
For more information on any of the financing options offered by Capital Solutions, Inc., call 1-800-901-3299 or click on the Contact Us tab and fill out the necessary information.
