More Ride SBA Express

October 17, 2005
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DETROIT — The Michigan office of the U.S. Small Business Administration guaranteed more loans this year than any year in its history — a record 2,944 loans collectively valued at more than $446 million.

Of that total, 2,177 were SBA Express loans, which have been around since 1995 but appear to be growing more popular as of late. The SBA recently reported that its lending partners are taking greater advantage of "user friendly" programs like SBA Express. That could be because the Express program involves a more simplified process for the small business applying for a loan, as well as for the lender that makes and services the loan.

There's a lot less paperwork, and it's faster, too — turnaround time is within 36 hours, according to the SBA.

The SBA Express loan was designed to make capital available to businesses seeking loans of up to $350,000. The SBA guarantees up to a maximum of 50 percent of the loan, while the SBA guarantees up to 75 percent to 85 percent of other SBA loans, said Richard Temkin, director of the SBA's Michigan District

Not all lenders are SBA Express lenders, however. Lenders apply to the SBA for approval to be an SBA Express lender and, if qualified, are granted authorization to make their own eligibility determinations on Express loans, he said.

Since implementing the Express loan program, the SBA has twice expanded its reach to include more lenders. Temkin said currently there are 60 qualified lenders operating in Michigan that offer SBA Express loans.

The Express program doesn't require the lender to go through the traditional SBA approval process. Qualified lenders use their own forms and procedures — rather than the SBA's — to make and service loans.

"The number of Express loans has just kind of skyrocketed over the last several years," Temkin said. "It's a very user-friendly program. A lot of the qualified lenders use it quite a bit because it's easy for them. It's kind of a win-win for everybody."

Similar to most SBA 7(a) loans, maturities on Express loans are typically five to seven years for working capital and up to 25 years for real estate or equipment. For revolving credits, the borrower may take up to five years after the first disbursement to repay the loan.

According to the SBA, lenders and borrowers can negotiate the interest rate. Rates are tied to the prime rate and can be fixed or variable, but can't exceed SBA maximums. Lenders can charge up to 6.5 percent over prime rate for loans of $50,000 or less and up to 4.5 percent over prime for loans in excess of $50,000.

Todd Grimm, founder and president of Rose Technologies, may wish he'd had access to an SBA Express loan five years ago. He secured an SBA 504 loan in 2000 through what was then Old Kent Bank. He told the Business Journal it wasn't the best experience because of all the documentation required.

"The biggest disadvantage — and I understand that it has improved — was paperwork," he recalled. "There was a ton of paperwork to fill out. I don't suppose a mature business is any different from a young business; we all wear a lot of hats, and we don't have time for it."

Grimm said he became so frustrated by the process that he "almost walked away" from the loan altogether.

Temkin said the SBA Express program is open to expansion. Lenders who want to offer the loan option need only apply and get SBA authorization to do so.

"We will let them know what they need to do to offer the program and work with them to the extent necessary," he said. "It's not a real difficult process."     

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