Can A Business Owner Have Multiple SBA 7(a) Loans? Yes!

Knowledge has the power to get you paid! Success in business banking is part science and part art! The science part is the combination of tools and knowledge you need to get the job done.  The art part is using the tools and knowledge to come up with a sales pitch that “hooks” the business owner! Once hooked, business owners will give you the opportunity to win their business! Mastering business lending products is the type of knowledge that leads to success in business banking!

SBA loans are very popular with lenders and business owners! The SBA guarantee mitigates risk and allows lenders to stretch and approve more business loans which results in more capital for business owners to grow their businesses.  Can a business layer on new SBA loans to existing SBA debt? Yes, it is possible! But there are some hurdles to watch out for. The main hurdles are lack of collateral, lack of debt service coverage support, and total SBA loans outstanding. 

First, let’s tackle multiple SBA 7(a) loans:

Typically, a lender will take a blanket UCC filing when it funds a SBA 7(a) loan.  A blanket UCC pledges all of the business’ assets to the lender.  This means that there isn’t any more collateral for additional debt. Let’s say that a business with an existing SBA 7(a) loan wants to buy new equipment or purchase another business (aka a competitor).  Can you offer a SBA 7(a) loan?  Yes! The new equipment would be the collateral and the assets of the business being purchased would be the collateral. The only other thing you need to worry about is that there is enough debt service coverage to support the new loans. So long as the new SBA 7(a) does not have to rely on the collateral that is already pledged to existing SBA 7(a) loans, you should be fine! The last hurdle is total SBA debt. As long as total SBA guaranteed debt doesn’t exceed $5 million, you are good to go!

Second, let’s tackle SBA 7(a) loans to existing SBA 504 borrowers:

The 504 & 7(a) loans are two separate products. You can offer both as long as the business can support both loans! I once helped a business owner purchase a competitor using a SBA 7(a) loan to acquire the business and a SBA 504 loan to acquire the property in which the competitor was located.  What if a business with an existing SBA 7(a) loan wants to purchase owner-occupied commercial real estate?  You can offer to finance the real estate purchase with a SBA 504 loan or another SBA 7(a) loan so long as the total SBA guaranteed debt doesn’t exceed $5 million and the business can debt service the total debt.

If you make it a point to master business lending products, it is less likely that you will leave money on the table! There are still too many business bankers who lose opportunities because they did not know how to structure a solution for their clients or prospects! Don’t be that type of business banker!

Bizpetrol has information, insight and tools that will help you become a Business Banking Superstar!  You can start elevating your business credit skills using the free Commercial Lending Toolkit at www.bizpetrol.com. You can see all the Business Banking articles (like this one) at www.bizpetrol.com/blog. You can access a series of how-to business banker guides at https://www.bizpetrol.com/Downloads-Free.