Tapping into government backed SBA loans

November 2014
By Lisa Wood, MBA, Senior VP, Medical Industry Specialist, IBERIABANK

The practice of medicine may be challenged by a litany of government rules and regulations, but in times of financial need, federally backed loans may prove to be a prescription for success.

Since its founding in 1953, the U.S. Small Business Administration has delivered millions of loans, loan guarantees, contracts, counseling sessions and other forms of assistance to small businesses − including medical practices. More recently, the Recovery Act and Small Business Jobs act signed into law by President Obama has provided entrepreneurs and small business owners with greater access to capital, providing $42 billion in lending supported by the SBA during a time when traditional lending was largely frozen.

The SBA provides loan guarantees for a variety of specific purposes, including working capital, the refinancing of existing debt, the purchase of equipment, acquisition of real estate and practice acquisitions.

It is important to note that the SBA does not make direct loans to entrepreneurs and small businesses. Instead, the SBA establishes guidelines for loans which are made by traditional lending resources such as banks. The SBA guarantees that accepted loans will be repaid, reducing the risk of the lender. Terms associated with SBA loans can vary whenever the government alters its fiscal policy to meet current or projected economic conditions.

In addition to traditional financing opportunities, most commercial banks have an SBA department. When preparing a loan application, it is a good idea to check with your lending institutions to see if they have an SBA division. If not, visit www.sba. gov for more information and a list of local lenders that participate in the program.

SBA loans are government guaranteed − helping a bank approve a loan it might otherwise decline. SBA loans typically allow for a longer term of repayment compared to typical bank loans. SBA loans for equipment can extend to 10 years while typical bank terms are limited to five years, for example. Real estate purchases can be financed over 25 years with an SBA loan instead of the 15 to 20 years offered by banks.

A practice acquisition can be financed over seven years with SBA compared to three to five years at a bank. Minimum down payments are also lower, some as low as 10 percent.

SBA loans fall primarily into two categories: the 7A, covering working capital, equipment purchases, tenant improvements, practice acquisitions and the refinancing of existing debt, and the 504, primarily for the purchase of real estate. Under the 504 qualifications, the applicant must occupy 51 percent of the building being purchased.

SBA loans can offer assistance for special circumstances as well: disaster recovery, for businesses within a declared disaster area; veteran /military community loans offering assistance to eligible small businesses from which an essential employee was “called up” to active duty; special purpose, CAPLine loans to help small businesses meet short- term and cyclical working-capital needs; or the planning, design or installation of approved pollution control facilities.

A number of misconceptions surround SBA loans. Many assume that SBA loans offer limited assistance, carry a financial premium and require a lengthy and complicated application process.

In reality, SBA loans − designed to help start, maintain or expand successful small businesses − can help secure loans up to $5 million. SBA offers a wide range of programs, many of which waive fees for loan applicants. Applying for an SBA loan requires the same essential information as a traditional bank loan. Many preferred lenders can process an application as quickly as a traditional loan.

Visiting the SBA website is a good starting point to find out about the program. Next, visit a local bank or lending institution that participates in SBA programs to learn about loan requirements as they relate to your particular situation.

Lending professionals can help prepare the forms, documents and loan package that will ultimately be submitted to the SBA.

In addition to the federal SBA website, local information can be found by visiting your bank or lending institution or by going online at This site can also provide information on small business health insurance marketplaces.

Commercial loans can be an important, effective means of launching, maintaining or expanding a business or a medical practice. In situations where traditional financing is impractical or unavailable, consider investigating the opportunities available from the SBA. An SBA loan just might be your prescription for success.