Hey all, I have an SBA loan for a little over $500,000. My interest is 11.5% with 10 year terms. Majority of my $9,600 monthly payment is interest.
What can I do to lower my interest? I dont know how the government can possibly understand how a small business can survive with such high interests.
Does anyone know of any private lenders? Other banks that will exponentially decrease this?
I’m struggling and November was not a great month for us…
“We had to take the deal as that was our only option to secure financing at the time.”
One attribute of small business is its ability to support debt.
Banks and lenders use debt service coverage ratio (DSCR) as an indicator of a company’s ability to generate enough cash to repay its loans. DSCR compares total debt obligations to operating income.
For example, your SBA loan term sheet should have contained a financial stress test that analyzed the ability of your business to deal with economic crisis (i.e. X percent decline in sales).
The lender relies on this analysis to ensure it gets paid every month.
Since you got the loan, we have to assume you passed the stress test.
Consequently, we also have to assume the business is now falling short of its ability to support debt.
The bottom line is lenders really don’t care if you make $1.0 million profit or only $10,000. Their principal concern is getting their money back according to terms and conditions.
In final analysis, the problem isn’t the loan you agreed to it’s the lack of sales that you anticipated.
To add to this, the government understands how small business work and is purposefully try to slow them down to cool the economy off.
Nonsense
The three branches of federal government are legislative (makes laws), executive (enforces law), and judicial (interprets laws).
No branch is mutually exclusive.
For example, executive cannot arbitrarily decide to say no more SBA loans to auto mechanics unless they service EV’s.
There are laws governing SBA. Challenging them requires judicial and changing them requires legislative.
If government wants to cool down economy, it would target consumer spending (67 percent of GDP) not small business.
The Federal Reserve controls interest rates and is independent of all other branches of government on purpose. If I’m wrong please someone correct me.
You might think it’s nonsense, but that’s the way it is.
The Fed monitors risk and uses economic policy to help ensure healthy economy and stable banking system.
To temper inflation, it modulates prime interest rate.
Just several years ago, client would have loan amount $4.0 million at five or six percent. Then it became eight and then ten. Now it’s as much as 13.5 percent (prime + 5.0).
That’s a whopping 50 percent increase in monthly mortgage payment. So, mom and pop sit on sideline.
What causes inflation; deficit spending, not the Fed.
But they want mom and pop to sit on the sideline. That’s what I’m getting at.