42 episodes

Finally a podcast that reveals valuable insights and best practices regarding the SBA loan program and application process, brought to you by SBA veteran, Ryan Smith, Principal Broker & Founder of ThinkSBA®. ThinkSBA® is a one of a kind Loan Brokerage serving small business owners and entrepreneurs in their quest to purchase real estate, acquire a business or franchise or obtain working capital.

My SBA Loan Pro Podcast Ryan Smith

    • Business
    • 5.0 • 8 Ratings

Finally a podcast that reveals valuable insights and best practices regarding the SBA loan program and application process, brought to you by SBA veteran, Ryan Smith, Principal Broker & Founder of ThinkSBA®. ThinkSBA® is a one of a kind Loan Brokerage serving small business owners and entrepreneurs in their quest to purchase real estate, acquire a business or franchise or obtain working capital.

    Collateral Assignment of Life Insurance Requirement For SBA 7(a) & 504 Loan Programs

    Collateral Assignment of Life Insurance Requirement For SBA 7(a) & 504 Loan Programs

    Life insurance is a contract between a policyholder and insurer where the insurer promises to pay the insured's beneficiary an agreed amount upon their death. The most common application is between heads of household and their dependents.

    Life insurance is also used by commercial lenders as a risk mitigation strategy for loan applicants of privately held, family owned businesses.

    In the same vein the SBA requires that loan applicants obtain a collateral assignment of life insurance for the lender's benefit when the business is formed as a sole proprietorship or single member LLC and is otherwise dependent on one owner’s active participation.

    Examples of businesses dependent on one owner's participation include businesses where special training or licenses are required such as doctor's offices, assisted living facilities, contractors, mechanic shops, etc.

    The required face value amount of the insurance policy for 7(a) loans is determined by the operating businesses industry classification code, loan amount, length of loan term and available collateral.

    On the other hand, Certified Development Companies (CDC) which fund the 504 2nd Deed of Trust, also known as the Debenture, are mandated to require a collateral assignment of life insurance with a face value amount equaling the Debenture minus the available collateral's discounted liquidation value based on the following schedule:


    Commercial real property including buildings: 75% of appraised value.
    Residential real property including buildings: 80%. of appraised value
    Land only: 50% of appraised value
    Equipment: 50%.of appraised value
    Leasehold improvements: 5%. Of appraised value
    Furniture and fixtures: 5%. Of appraised value

    Now, pay close attention to these three important points.


    A collateral assignment of term Life insurance is acceptable to meet the SBA’s requirement. No lender should ever require universal or whole life insurance which are generally more costly..
    A loan applicant may assign to the lender or CDC an existing policy that meets their underwriting criteria.
    A lender can waive the requirement to obtain life insurance if a licensed insurer provides written documentation that the loan applicant is unable to obtain life insurance. Some lenders require denial letters from a minimum of two licensed insurers.

    As a best practice, I recommend loan applicants discuss the requirement to obtain life insurance with their loan broker or SBA business development officer upon or before the loan is submitted to underwriting or is scheduled to be presented at loan committee.

    The length of time it takes to obtain life insurance is between one to six weeks, or more depending on the life insurance company’s pipeline density, underwriting practices and the loan applicant's age and health status.

    • 4 min
    SBA 7(a) & 504 Real Estate Purchase Loan Application From Start To Funding

    SBA 7(a) & 504 Real Estate Purchase Loan Application From Start To Funding

    The most frequently asked question I receive by far is how long does the loan application process take to complete from start to finish.  The quick answer is 45 - 60 days. The honest answer is it takes as long as necessary to complete all steps in the process.

    The next logical question is what are the steps.  Here is a list of each step in order with an explanation.

    Before I begin, I want to emphasize the timeline starts from the day the lender receives the monetary Deposit, usually $2,500 or $5,000 and the signed Letter of Interest or Term Sheet.

    Step 1: Loan Application Needs List.  This needs list is sent to the Applicant by the Lender in preparation for underwriting.  Included are General Application Forms and SBA Forms 1919, 413 and 912 if necessary.  It typically takes 2 - 4 days for the lender to generate this needs list from receipt of the monetary Deposit and signed Letter of Interest.

    Step 2: Underwriting.  The amount of time to underwrite the loan is 1 - 3 weeks depending on the lender's pipeline density, available underwriters and support resources and outstanding information required by the underwriter to render a decision.

    Step 3: Credit Decision. The credit decision is announced upon completion of underwriting or the conclusion of ”loan committee.”  Some lenders shepherd loan requests through individual underwriters in an underwriting loan center. Other lenders maintain a decision making body referred to as “loan committee.”  It takes 5 - 10 days for an underwriter to review a loan application and either return to the applicant with questions or a credit decision, meaning the loan is either approved or declined.  Loan committees decide a loan in the committee meeting which is typically held    one day per week or every other week.

    SBA 504 loan requests require a separate SBA Approval called an Authorization which may add an additional 5 - 10 days to the entire application process.

    Step 4: Commitment Letter. The commitment Letter outlines conditions required to close the loan and is sent to the Applicant 2 - 4 days after loan approval. This step begins the process of ordering third party reports and the collection of closing documents.

    Step 5: Third Party Reports & Closing Documents.  A real estate appraisal is ordered by the lender to be performed by an SBA approved third party appraisal company. The appraisal may take 2 - 3 weeks to complete with an additional 2 - 5 days for lender review.  If a business acquisition is included with the real estate purchase, a business valuation is also ordered which also takes 2 - 3 weeks with an additional 2 - 5 days for lender review.

    Step 6: Quality Control / File Audit. Once all closing documents and third party reports have been completed and approved the lender conducts a final review of all required documents and reports necessary to close the loan which takes 2-5 days. The lender orders loan documents to be prepared for signature when the file is deemed complete.

    Step 7: Loan Document Preparation. This step takes 1-3  days before loan signing may be scheduled.

    Step 8: Loan Document Signing. Loan signing takes place immediately after escrow receives lender instructions and loan documents.

    Step 9: Bank Funding. Loan is funded after the lender receives signed loan documents from escrow and escrow confirms all requirements to close the loan have been met by the Applicant and Seller.

    • 6 min
    SBA 7(a) Business Acquisition Loan Application From Start To Funding

    SBA 7(a) Business Acquisition Loan Application From Start To Funding

    The most frequently asked question I receive by far is how long does the loan application process take to complete from start to finish.  The quick answer is 45 - 60 days. The honest answer is it takes as long as necessary to complete all steps in the process.



    The next logical question is what are the steps.  Here is a list of each step in order with an explanation.



    Before I begin, I want to emphasize the timeline starts from the day the lender receives the monetary Deposit, usually $2,500 or $5,000 and the signed Letter of Interest or Term Sheet.  

    • 5 min
    ThinkSBA Small Business SBA Loan Experts

    ThinkSBA Small Business SBA Loan Experts

    Applying for a small business loan can be stressful, grueling and confusing when you hear the dreaded NO from your bank.  Does this sound familiar?

    Hello, my name is Ryan Smith, Principal Broker and Founder of ThinkSBA.

    If you are listening to this podcast it’s likely you are a small business owner or entrepreneur who is purchasing real estate, acquiring a business or franchise or are in need of working capital to grow or start your business.

    If this describes you, you’re in the right place.

    I started ThinkSBA because, as a former banker, I was tired of saying no to good people with good businesses.  And now I don’t have to.

    That’s because I’m not constrained by one bank or one credit platform. I work with local, regional and nationwide lenders to find the loan that meets your unique business demands.

    My process is simple, yet effective.

    First, I get to know you, your company and business goals.

    Second, I conduct a thorough financial analysis to determine which lenders are the best fit.

    Third, I engage the lenders, receive proposals, and then you choose which lender funds your loan.  Don’t worry, I am with you every step of the way.

    And just like that, I’ve put the power to determine your company’s financial future back into your hands.

    The best part, the majority of the time I am paid by the lender, not you.

    Yes, it can be that simple with your cooperation and my years of experience leading the way.

    If you’re ready to discuss your purchase or acquisition visit the ThinkSBA website at thinksba.com and click the Get Started button in the top right hand corner of the homepage.

    If you’re not quite ready but want to learn more about SBA guaranteed loans, feel free to browse the My SBA Loan Pro podcast library and please remember to subscribe and leave a review.

    Have a great day!

    • 2 min
    SBA 7(a) Business Acquisition Loan Series - Seller Discretionary Earnings

    SBA 7(a) Business Acquisition Loan Series - Seller Discretionary Earnings

    Seller Discretionary Earnings referred to as SDE equals net profit, which is the sum of annual revenue minus expenses, plus add-backs of seller discretionary spending.

    SDE directly impacts enterprise value, buyers equity injection, loan amount, seller carry   amount, and debt service coverage ratio which ultimately determines whether a loan application is approved or declined.

    Common expenses added back by sellers beyond Interest, Tax, Depreciation and Amortization include officer salary and benefits, meals and entertainment, travel, automobile loan payments, cell phone and internet bills and personal care items.

    I've also witnessed seller discretionary add-backs of child care, alimony, child support and a whole host of other questionable expenses. I don't recommend business owners expense these items if their exit strategy is to earn maximum enterprise value in an arms length sale transaction.

    Sellers are incentivized to add back expenses, even questionable one’s, primarily to inflate the businesses enterprise value.

    Sellers feel justified adding these expenses back due to their years of blood sweat and tears starting and operating the business and also because they are convinced these expenses are unique to them and are indeed discretionary.

    On one hand, sellers are correct, as the word discretionary means available for use at the discretion or choosing of the user.

    However, lenders literally review hundreds of profit and loss statements each year with nearly all of them including most, if not all, of these aforementioned expenses.

    Therefore, though these expenses may be discretionary they are also so common most lenders expect buyers to also expense these items thereby nullifying their discretionary nature.

    Sellers should expect that in almost every case meals and entertainment, travel, automobile loan payments, cell phone and internet bills and personal care items will not be added back by lenders.

    Proceeding with the loan application without accurately assessing SDE may set up a scenario where the loan is conditionally approved but the business valuation derived is less than the sale price.

    If this happens, In almost every case there are three possible outcomes: The applicant is required to inject more equity, The seller is required to carry a larger loan amount or the loan application is declined.

    That’s why it’s important to structure the loan for success, in compliance with all SBA policies and procedures prior to submitting the loan application.

    One last thought and recommendation for business owners preparing their business for sale.

    Be extra careful to hire a business broker who understands how lenders allocate seller discretionary expenses to ensure the businesses purchase price is aligned with the buyer's ability to qualify for financing.  If you need one, I’m happy to make an introduction to a respected business broker in your area.

    • 5 min
    Demystifying The SBA Loan Application - Crossing The Finish Line!

    Demystifying The SBA Loan Application - Crossing The Finish Line!

    The most important step in the SBA loan application process is closing the loan. This is obvious, right?  You would think so. However, many applicants make the mistake of focusing their attention on closing after it’s too late, and they've missed a critical step or piece of information that inevitably prevents them from closing the loan.

    An SBA loan is considered closed after a loan number has been assigned by the bank and boarded to their loan management platform, applicant and bank funds have been moved into escrow or a construction account, deeds of trust have been recorded and/or licenses obtained and escrow finally and formally notifies all parties its job is finished.

    Unfortunately, many SBA loan applications never close.  This is extremely frustrating for the applicant who has invested time, money and other precious resources with nothing to show for it. No new business, no new office building, no working capital. I know this because many applicants who are referred to me or find me on Google have personally experienced this frustration first hand.

    Reasons for the loan application stalling out prior to close include inadequate bookkeeping and financial reporting, improper legal entity documentation and structure, applicant non-disclosure of prior adverse credit, criminal background or other malfeasance, insufficient asset value resulting from a real estate appraisal or business valuation, discovery of soil or water contamination from a Phase 1 environmental report, ineligible business applicant, individual guarantor or purchase contract, inability to obtain proper licenses and certifications and/or uncooperative and unreasonable partners, sellers, contractors or landlords and the list goes on.

    The good news is there is a tried and true method to successfully close an SBA loan and avoid the frustration of watching your hopes and dreams disintegrate into thin air.

    Are you ready? You must Identify and mitigate all obstacles and impediments, if possible, that will keep the loan from closing, and this is key, you must do this prior to submitting the loan application.

    You can attempt this on your own but let’s face it, you don’t have the time or desire to become an SBA expert.  You can choose to work directly with a lender but you just never know if they’re the right fit for your specific loan request.

    I recommend hiring an expert loan advisor and broker, like me Ryan Smith, who can help you structure the loan for success, in compliance with all SBA policies and procedures, from the very first conversation.

    Following my tried and true method will give you the best opportunity to successfully close your SBA loan application and become the proud owner of a new business, office building or obtain that much needed working capital to grow or start your business.

    • 4 min

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