By Craig Pratt

Small businesses, such as many local Chicago area real estate brokerages, play a vital role in our economy and in our community as both employers and service providers.  While the economic environment continues to be challenging for businesses, we do see some signs of improvement and opportunity, including those opportunities presented by the recently passed Small Business Jobs and Credit Act.

The Small Business Jobs and Credit Act, among other things, extend some Small Business Administration (SBA) loan benefits, making it an opportune time for real estate brokerages and other businesses to consider reinvesting in their company.

The SBA is an independent agency of the federal government and assists small businesses in many ways, including setting guidelines for SBA loans and backing them with a guaranty.  Recent changes expand the number of businesses eligible for SBA loans, increase loan limits, including the permanent increase of 7(a) and 504 loan limits from $2 million to $5 million, waive borrower fees, and guarantees up to 90% of loan amounts.  The fee waiver and guaranty are currently set to expire at the end of this year.

In addition to these changes, advantages of an SBA loan compared to a conventional loan can include lower down payments, longer terms and amortization periods, as well as the fact that in many cases closing costs can be financed through the loan.  SBA loans can be used for a wide variety of business purposes and can benefit companies at any stage in their life cycle.

The application process for an SBA loan follows the same credit process as conventional business loans.  Businesses would apply for a commercial loan through a bank or lender structured according to SBA requirements.  While SBA transactions are generally more paper-intensive, an experienced SBA lender is uniquely positioned to help guide businesses through the process, and help them leverage the changes to the SBA program.

Regardless of whether you’re seeking an SBA loan or a conventional loan, it’s a good idea for businesses to approach their bank or other lender prepared with a number of items including:

• a business plan,
• legal paperwork,
• a financial profile including financial statements and tax returns, and
• a full business description with bios of key principles involved.

In addition, you should be able to clearly articulate what you want to use the funds for, and prepare a repayment plan according to your desired loan terms and time frame.

Generally, the best place to start would be your existing bank – whether the relationship is with the business itself or with the business owner as an individual.  The bank may be in a better position to understand the business owner’s circumstances based on their history and existing relationship, which may result in a smoother application and transaction process.

Craig Pratt is the head of business banking for Fifth Third Bank Chicago. He can be reached at craig.Pratt@53.com.