Question #
What are the key considerations when using an SBA loan for business deals, particularly concerning interest rates and loan assignment?
Answer #
It has been a while since I used an SBA loan to develop some storage, but I am in a deal where we are using it now for a boat and RV development.
We are racing to get it closed by Sept.
14 because the deal was underwritten at today’s interest rates, and if rates go up and the deal is not closed…well, it has to be underwritten at the new rate.
Actually, that is not correct.
I learn many things with every deal I am involved in, and here is one thing I learned I didn’t know about SBA loans: the deal doesn’t necessarily have to be closed; we just have to have an SBA loan number assigned to the deal, and that doesn’t happen until all the information required by the SBA is sent by the lender and it is complete.
Then a number is assigned.
Once that happens, even if rates rise, the loan doesn’t have to be re-underwritten.
What is required is a lot, especially if there are investors, but we can do it.
However, that is not the purpose of this episode, to talk about SBA loan details.
Given the race I find myself in, I have paid particular attention to two key reports in the last week and then how the bond market reacted.
As part of our jobs as business owners, I feel we need to be looking into the future so we can react today to what we see on the horizon.
The particular horizon I have keenly been watching recently is where interest rates may go for the balance of this year.
Let’s look at two reports that have come out in the last week or so.
Source: What the Jobs Report, CPI, and Bond Market May Be Telling Us About Interest Rates
