Has anyone come across any Prime minus SBA lenders?

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July 10, 2024

by a searcher from Harvard University - Harvard Business School in Miami, FL, USA

I am particularly curious about lenders that serve self-funded search structured deals.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
^redacted‌ thank you for the tag. There are definitely some lenders offering fixed rates on SBA loans and those rates are all over the place. Some are short-term fixed rates and some are long-term fixed rates. However, typically the lenders offering fixed rates are only doing it for the strongest deals, and often they will pass on doing many deals, especially deals that are higher risk. Higher risk transactions are those with some of the following characteristics; 1) Lower down payment; 2) High goodwill value in the deal; 3) under-collateralized: 4) lower DSCR ratios; 5) weak guarantor post-closing liquidity; 6) guarantors with minimal direct industry experience; 7) weak guarantor new worth to loan amount; 8) customer concentrations; and 9) inconsistent revenues or cash flow. If your deal has one or more of the above statistics, it is less likely to get approved with a lender offering a fixed rate.

We always work with our lenders offering fixed rates on transactions first to see if we can make that work, but often if a deal has one or more negative attributes, it can be hard to get those lenders offering those rates to approve the deal. Always happy to take a look and see what we can get done. I have seen many customers working directly with a lender offering fixed rates get taken for a ride by the lender just to have them either not approve the deal or approve it with a different interest rate structure in the end. So be sure your deal is one that will qualify for the better interest rate or be sure to have backup options if you are not confident it will. You can reach me at redacted if you need any additional assistance.
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Reply by a searcher
from Emory University in Tucson, AZ, USA
From our experience working with various banks - from conservative nationals to regional family-owned and independent business banks - we've found that while rates may vary slightly based on deal characteristics, there are other key factors to consider:

- Property acquisition (banks often prioritize "dirt")

- Loan holding and selling practices (to investors or held on books)

- Variable vs. fixed rates (majority use variable)

Consider looking beyond rates and learn how the bank will support your growth post-acquisition. We've learned to approach business banking differently than consumer financing, seeking a banker who will be a supportive partner for unexpected opportunities (it's always last minute opportunities it seems) and long-term growth.
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