Starting this month, the state’s small business owners have two new ways to get what promises to be hassle-free government-backed loans.
The Rhode Island office of the U.S. Small Business Administration has unveiled what District Director Joseph P. Loddo dubbed “the dynamic duo for the SBA as we move forward”: The New SBA LowDoc and the SBA Express.
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The New SBA LowDoc is exactly what it sounds like — a revved up version of the agency’s most popular loan product to date. The SBA launched the LowDoc (or low documentation) loan program in 1993. The offering was part of a nationwide pilot program aimed at simplifying the application process. Within a year, the product accounted for 40 percent of all SBA loans made, according to Patrick K. McGowan, regional administrator for the SBA. Meanwhile, the pool of lenders has grown from 17 financial institutions to about 500 preferred lenders across the country, he said.
The new version of this popular product increases the maximum loan amount from $100,000 to $150,000 and requires the SBA to respond to applications within 36 hours, as opposed to 48 hours. The 12-hour difference in turn around time will probably mean more to lenders than to borrowers, McGowan said. “Time is money and it’s a very competitive atmosphere,” he said.
The SBA guarantees the New SBA LowDoc loan up to 80 percent for amounts as high as $100,000 and up to 75 percent for amounts between $100,000 and $150,000. Potential borrowers need only complete the front of the SBA’s one-page application. The lender completes the back.
The SBA Express loan allows preferred lenders only within the SBA’s Rhode Island district to provide loans up to $150,000. The same 36-hour turn-around time applies. Those institutions currently include BankBoston, Citizens Bank, Fleet Bank, Washington Trust Company, First National Bank of New England, Enterprise Capital, Westminster Development Bank, Home Loan and Investment Bank, Bank of America, Business Lenders, Coastway Credit Union, AT&T Small Business Lending and The Money Store, according to the local SBA.
In the case of the SBA Express, lenders can use their own forms to approve loans and must provide minimal paperwork to the SBA for a 50 percent guaranty on the loan.
“With SBA Express, we’ve removed the paperwork all together,” Loddo said, adding “we’ve removed the obstacle for small businesses to make an application.”
What’s more, the product includes the option of an unsecured line of credit up to $25,000. The SBA generally requires guaranteed loans to be fully secured.
“This new tool will give SBA preferred lenders a tremendous advantage in providing value-added services to their customers,” Loddo said.
A similar product, the SBA Fastrack, was “more cumbersome and asset-based,” McGowan said. The SBA Express is “the ultimate user-friendly bank product.”
“The Rhode Island small business community will now have additional tools to assist in its continued economic development,” McGowan said. “We believe that (the programs) will provide additional capital to the small business community.”
