In my Roundtable Discussion last week Mark Costello, the regional director of SBA lending, was the topic presenter. It was interesting to hear some of the inner workings and thought patterns behind SBA lending.
With loan limits of $5 million the SBA has become a real player. And frankly, the option of choice for many banks these day. It’s safe to say that many loans to small businesses and for small business acquisitions wouldn’t happen with the SBA guarantee.
Also interesting is how antiquated it appears some of the SBA rules and regulations are. If not antiquated, then conceived by people without on-the-street experience. One we discussed was that an acquisition loan has to be for a purchase of 100% of the company. So if a couple key employees own 5% each the SBA won’t allow a loan for a buyer to buy the other 90%. Yet the vast majority of buyers would look at this situation as a win-win; the key employees are tied to the company and have a vested interest in its success.
All in all though, this program appears to be working well and doing what it’s intended to do and that is provide capital to businesses and for business acquisitions.