As SBA lending continues its return to pre-recession levels, now is a good time to consider SBA financing given the current rate environment, says Todd Harrington, Chief Sales Officer for CIT Bank -- Small Business Lending at CIT Group Inc. This topic is one of many discussed in CIT's 2012 U.S. Small Business Outlook, the latest in a series of in-depth executive Q&As featured in CIT's Executive Spotlight series (cit.com/executivespotlight).

Opportunities Exist
 
Consumer confidence and consumer spending need to return to healthy levels to get small businesses growing again. "As key indicators improve, businesses that have successfully made it through the down market will have opportunities to acquire competitors and under-valued commercial properties," says Harrington. "Lenders need to be able to understand these opportunities and be available to finance these transactions to allow the small business owner to capitalize on the near term value plays that will set the table for growth in years to come."

Advantages over Traditional Banks

There are benefits of an SBA 7(a) loan over traditional bank loans. The SBA 7(a) program offers longer repayment periods (up to 25 years) than a typical conventional financing (up to 15 to 20 years). "Additionally, they can offer loan to value terms of up to 90 percent on an owner-occupied real estate deal," says Harrington. "This compares favorably with conventional real estate loans in the small business space that will usually offer a 15 or 20 year amortization with a balloon of 5 to 10 years of payments at the end. With an SBA structure, there are no balloon payments, so the SBA borrower does not have the worry of having to look for a bank to refinance that large lump sum that comes due."

Securing an SBA Loan

There are still a number of challenges with regard to getting funding in today's economic environment. Small business lenders look at a number of factors beyond the financial strength of the business. "You need to be aware that personal credit is an important component of a lender's credit decision," says Harrington. "A strong personal credit history can increase your chances of getting an approval just as a weak personal credit history can undermine the loan decision."

It's important to have a good business plan that shows the impact of the financing you are considering. "Include at least one to three years of projections and be able to address any major negative or positive trends in the numbers," Harrington adds. "Lenders want to see that you are on top of the financial performance of your company."
 
Individuals can go to 2012 U.S. Small Business Outlook to view the entire executive spotlight. Other recent Q&As featured in CIT's Executive Spotlight series (cit.com/executivespotlight) include the Communications & Technology Financing Outlook, 2012 U.S. Energy Sector Outlook and the Commercial Aviation Industry Outlook.