Article by Roger Schlueter
The Business that uses a Public Program (SBA or FHA) to help get approval of a Commercial Loan needs to set aside more time to process the loan. A direct Conventional Commercial Loan from a Bank can be closed soon after the bank gets their Real Estate Title Work, Appraisal and Environmental completed. Their Commercial Loan Department types up the loan papers and the loan officer goes over them and has the borrower sign the papers. The loan is done except for the filing of Documents like Deeds of Trusts and UCC’s. This process can take as little as one day on a simple loan with no real estate or other documents to file or approve. On the flip side the loan can take from One Week to up to Several Months on a large deal or a deal with Real Estate that will need an appraisal and environmental due diligence.
Public Programs usually need some entity to approve the project and this entity may be in another city or state. This entity may put conditions on the loan that were not in the original Loan Proposal. I am very familiar with the SBA Process so let’s take a look at a typical Loan Process from initiation to closing using the SBA 7a Loan Guarantee Program. This Example is with no delays.
Example:
Joe blow Borrower needs a loan to purchase a Building, Equipment and Working Capital for a new or existing business venture. He needs to borrow $300,000 broke down as follows: $200,000 for a building, $80,000 for Equipment, and $20,000 for Working Capital.
Step 1 (Week One) :
Borrower goes to his local bank after writing a loan proposal and having all the information that is needed by the loan officer. You can very seldom have all the info needed by the loan officer and the loan officer needs several items that the borrow gets to the banker within this Week One.
Step 2 (Week Two) :
Banker needs One Week to write the loan up per his banks specs and get approval from his Bank Board or Committee. The Bank Approves the loan but wants a SBA Guarantee on the loan through the Small Business Administrations SBA 7a Loan Program.
Step 3 (Week Three) :
Borrower, Bank or Consultant needs to Write Up the SBA 7a Application and Prepare the Loan Package to be sent to the SBA Loan Center in Sacramento California. Borrower hires a loan packager by the name of Roger Schlueter to Package the SBA 7a Loan and fill out all forms and documents. He promises one week for a Turn-Key Loan Package ready for Signatures.
Step 4 (Week Four) :
Loan Packager schedules a day (three days out) when the Borrower, Bank and Packager can meet to sign the loan documents. The bank then looks over the loan package and the next day Mails the Package Overnight or Emails the Package to SBA.
Step 5 (Week Five) :
SBA Received the Loan Package and goes over the Package with a Fine Tooth Comb, and finds some small problems or questions that they need answered. The letter is dated and is emailed two days after the letter is written.
Step 6 (Week Six) :
Bank Receives the SBA Letter with several questions which are very easy to answer and the bank and consultant write up the answers the next day and email them to the SBA analyst who is working on the project.
Step 7 (Week Seven) :
SBA Sends the Authorization to the Bank. This Authorization is the document that details the Terms and Conditions of the Loan Approval and the Loan Closing. The bank looks over the Authorization for any problems or misunderstandings and starts closing process.
Step 8 (Week Eight) :
Bank complies with the details of the Authorization and has the documents prepared to close the loan. This closing will happen the next week and will need the Borrower and the Banker to Execute all documents and initiate all filings and recordings.
The Process from start to finish took Over Eight Weeks or Two Months and this is considered a fairly quick close for a SBA Guaranteed Loan from the Small Business Administration. The process can take longer if Appraisals and Environmental Reports are not ordered until the Bank receives the SBA Approval thru the Authorization. This may be done because the Borrower pays for the Appraisal and Environmental Reports and sometimes wants to make sure the bank and SBA Approvals are set before paying for the Documents.
Remember to schedule extra time for any Loan that is associated with a Public Program like the Small Business Administration of the FHA. Always seek to add Loan and Purchase contingencies for Financing, Due Diligence (appraisals and environmentals), and closing for any Real Estate or Purchase Contracts that you are signing. There could be severe penalties for getting the Real Estate or Purchase Agreement Extended or Amended.
Please address any questions or comments to this Blog or to roger@rogerschlueter.com or visit my Website at www.schlueterfinancial.com