We look towards the profitability of the operation, the projections to make sure that they’re able to pay back. It’s not a grant. These are loans. They’re extended loans unlike banks that might have three and five year maximum loans. SBA loans could go seven and 10 years up to 25 years. And so what we look at in terms of how we rate a borrower, for one, we have credit scores that are a little bit lower than traditional lenders. The lender can use the SBAs credit SCORE model or they can use their own model to determine credit worthiness. The other thing we look at is like I said, the ability to pay back the loan and collateral is what’s on the table.
If they have collateral, they don’t have collateral, we just want to make sure that if the business is, it has collateral to provide SBA, then SBA will take that collateral. If they don’t, that’s not a condition not to use SBA. It’s up to the lender. And here’s the other thing too for those businesses that only need 20 and 25,000 and there are a lot of them out there. We have a micro loan program that’s up to $50,000. This is not through the bank. These are through community organizations that have been chartered by SBA. We provide them the micro loan dollars and then they are the ones that underwrite and approve the loan to that small business. And a lot of the borrowers that use that program are home-based businesses. I want to do a taco truck. I want to leave my 20 hour restaurant business and I want to now go into having my own truck. That’s what that loan opportunity is about. And that’s called the micro loan program and it’s up to $50,000 and that’s through our community loan funds.
You could actually go on to and search for micro loans and you’ll see the state. Each state has micro lenders. Connecticut has three, other states might have more. And you call the SBA office and asking for the list of the micro lenders. And then you will reach out to the micro lenders. They will provide you with the technical assistance. They could either be your resource partner in putting through all the paperwork because most of them want you to be a viable startup business.
So you’re going to need more of an understanding of a business plan, cash flow, that kind of stuff
Jon: Awesome. And when you say those, so it’s smaller amounts, but do they also tend to be a little bit more flexible in what they determine for credit worthiness because of those amounts.
This is a community lender
Julio: Right. Because they’re not your traditional bank. They will apply whatever their rules are to make the loan viable. And most of them will take on… I look at some of them as being the lender last resort, where they actually will go beyond the beyond to make sure that that business gets that funding.
Jon: Got yah. And then I guess on the flip side of that, for profitable businesses who are looking for kind of cash flow increase, do you feel like SBA programs are right for them or is it really 24 hour payday loans Chillicothe kind of geared towards those who kind of need the hand up? So if I’m a really profitable consulting firm and I don’t have a ton of risk and I just want to grow or expand, but I’m probably not underserved, is an SBA program right for me? Or is that something where you’d encourage them more to kind of look at a traditional lender?