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North Carolina small businesses may find SBA financing easier

| Feb 3, 2016 | Business Formation & Planning |

Success in business often depends on smooth cash flow, and preferably the flow is more inward than outward. But operators of North Carolina businesses of all sizes know that having a reliable source for financing business expansion plans is important, too.

Many small businesses turn to the federal Small Business Administration for those funds, but last year it proved to be a little less reliable than many had hoped. This year, though, SBA officials tell Congress things are going to be a lot better, so much so that a record number of loans are expected to be approved.

Specifically, here is what agency officials told members of the House Small Business Committee at a hearing last month.

  • No SBA loan shutdown. Last year, the most common source for financing, the 7(a) Loan Program, had to shut down for a while when it hit its authorization level earlier than expected. Officials say that won’t happen this year and that new, higher limits should be sufficient for 2016.
  • Mortgage refinancing with 504 loans will be possible by June. If the SBA has its way, the program will be online even sooner than that. These loans are primarily for commercial real estate transactions. When used to refinance, they can reduce loan costs and free up capital for hiring and growth.
  • Small loans won’t get short shrift. Noting research that shows that nearly 90 percent of loans sought are for amounts of $150,000 or less, the agency says it hopes to increase the number of loans made of that size by 22 percent. Lenders are being encouraged to be more open to such loans by eliminating fees. Business owners with criminal records should find it easier to obtain microloans, too.

The SBA told lawmakers they also plan to streamline procedures for lenders to make them more user friendly. The objective is to raise the number of banks making SBA-backed loans. Right now nearly two-thirds of banks don’t offer them.

Financing is only one element of running a successful business. There are others and each has legal hurdles. By working with an attorney skilled in business law, you can be more confident of clearing the hurdles with room to spare.

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