Current Restaurant Loans Options

Restaurant owners have limited options for commercial mortgages, relative to other companies and building types. One of the most common SBA loans. Although not perfect, may be a viable option. For one, they are still reliable and are still closed. Two, it does not offer some of the lowest fixed rates available and the highest level of funding for loans restaurant.

Interest rates for loans restaurant are currently mid 6% 's in the mid 7%' s depending on the details of the transaction. Combine that with 85% financing on purchases and 85% financing on refinances and is easy to see why the SBA has had an enormous impact on American small businesses.

Compare that to traditional bank financing, the rates are about the same, but you should get out of his pocket 30-40% of the purchase price. Refinance Loan is more limited and more difficult to close and loan values ​​are normally limited to 50-60% as well. Again with the SBA's programs you can go up to 85% loan to value on refinances loans restaurant.

The SBA programs have received a lot of criticism over the years, some justified, some not '. One of the biggest complaints are the time and bureaucracy. A key to avoiding the long time is to work only with PLP lenders. Unless your loan will be approved and signed twice, once by the bank financing and secondly by the SBA. If you work with a PLP lender the loan will only be entered once, and you will avoid at least a month late. It 's common to close the SBA loans in 60 days which is perfectly in line with all commercial loans.

Another major criticism is that the fees are excessive. The seventh SBA loan usually has a 2.75% front end "SBA guarantee fee" and the 504 has an average of 2.5% for half of the loan. However, it is important to realize that not all creditors and the way in which deals structure are the same. For example, we work with a bank that can absorb / pays this fee to the borrower. So, the borrower gets all the benefits of a long-term loan at a fixed rate with zero costs.

In terms of fixed rates depending on how you structured the loan. With the SBA 504 can easily reach 7 to 10 years fixed rates, with 25-year amortization schedule. With the seventh SBA more are floating, but can be offered as a 3, 5 and although rare, the rates of 10 years fixed. We are currently working with two banks offering the seventh as a fixed loan 5 years for restaurants. Again, such a comparison more bank finance no more than 3 -5 years, and amortization schedules rarely exceeds 20 years with loan to value restrictions of 50 060%.

The programs of the SBA can provide a lot of flexibility compared to traditional bank financing. Again, keep in mind that not all banks / lenders that use the SBA guarantee are the same. So if you have been refused by a bank that offers SBA loans, does not mean you are not eligible for SBA financing, the bank can only mean that the current funding, not like your deal. The SBA is the lender, are a guarantee of funding for bank financing in the event of default by the debtor. At the end of the day the bank is still on the hook for the loan and the banks' appetite for deals and guidelines vary widely. And the way they structure the bank loans vary as well. Again, for example 99% of banks offer the seventh as a floating rate, however, we have access to a 5-year fixed, seventh program .......