Small Business Administration (SBA) & Rural Development Loans
We at Midwest Business Solutions, d/b/a Pactola can help you set up an SBA or RD loan program in your institution and also assist in getting you signed up with SBA. We also can set up a Lender Service Provider (LSP) Agreement between you and us. This allows us to perform services such as loan packaging, underwriting, document prep, closing, and after closing servicing. We offer these services to our equity owners.
We also work with RD agencies across the country in underwriting, packaging, and presenting the loan for approval with RD. We also prepare closing documents and can service these loans after closing.
Contact us today and let us help your institution grow with these loans to serve your members.
SBA Application Toolkit
These loans are partially guaranteed by the U.S. Small Business Administration (SBA) or the U.S. Department of Agriculture's Division of Rural Development (RD). These are designed to help small businesses get essential financing with affordable terms. The benefit to the lender is that a portion of the loan has a guarantee attached to it. This allows you to count only the unguaranteed portion in your loan totals as related to regulatory limits.
A common misconception is that an SBA or RD loan is available only for start-up companies. In reality, you will find that the vast majority of businesses owned by your members may actually qualify, even if the business has been in existence for years. The determining factor is if the business is classified as an eligible small business according to federal guidelines and what purposes the funds will be used for.
Some of the advantages of SBA or RD Financing are:
- Extended repayment terms : either program offers loans with longer amortizations than what most lenders would accept for a similar loan without a guarantee.
- Lower down payments : The guarantee may often reduce the amount of money needed to purchase real estate, equipment, inventory or other business assets.
- More generous underwriting requirements : In many cases, SBA or RD loans can provide businesses access to financing when they would not qualify for a conventional business loan.
- Lower out-of-pocket closing costs : Some of the up-front costs may be financed, thus allowing the business to preserve working capital.
- A partial government guarantee : This allows the Credit Union the ability to count only the unguaranteed portion against their regulatory loan cap limits. The guarantee also helps mitigate the risk from a lack of history or collateral.
Loans At a Glance
SBA 7a Loan Program
Best match for borrowers who need funds to expand, purchase another business or manage cash flow
- Loan amounts: Up to $5 million
- Benefits: Often easier to qualify; longer maturity terms, lower down payment on fixed assets
- Standard terms: Working capital up to 7 years; equipment up to 10 years; real estate up to 25 years
- Structure: SBA guarantees up to 75% (guaranteed portion capped at $3.75 MM)
- Pricing: Fixed and variable rate options
SBA 504 Loan Program
Best match for borrowers planning to expand business through land acquisition, building acquisition, construction and equipment finance
- Loan amounts: No maximum
- Benefits: Lower down payments, favorable terms and pricing
- Standard terms (SBA): 10 years for equipment or 20 years for real estate
- Structure: Up to 40% or $5 MM maximum funded by the SBA
- Pricing: Favorable pricing; fixed for 20 years