Alan Bussey
Member
Many car wash investors use the SBA program to build, buy, or refinance. The most popular type of SBA-guaranteed loan is the 7a. The SBA guarantee induces the bank to make you the loan, where they otherwise might not. Another advantage of a SBA-guaranteed loan is that the down payment is commonly only 20%, compared to 30% or more for a conventional bank loan. Other advantages are a 20-year or longer term with no early maturity (balloon) and no "payable upon demand" clause. These last two are very important features.
On February 17th the American Recovery and Reinvestment Act (ARRA), also known as the ?Economic Stimulus Package?, went into effect. Part of this plan temporarily eliminates the 7a Guarantee Fee paid by the applicant to SBA. A typical down payment to build or buy a car wash with a 7a loan is 20%. The maximum loan under the 7a program is $2 million.
Assume that you plan to buy a wash where the loan needs to be $750,000. Prior to February 17th, the SBA Guaranty Fee for a $750,000 loan would be $19,688, or 2.63% of the loan amount. ARRA temporarily eliminates that fee.
Until the end of October, when funding for this part of ARRA is projected to run out, the Guarantee Fee for SBA-guaranteed loans is ZERO. On top of no Guarantee Fee, with a 7a loan the banks are not allowed to charge an origination fee. For a $750,000 loan, the savings is the entire $19,688. Most of the Guarantee Fee is financed into the loan. So, with a $750,000 loan the fee waiver lowers your loan by $15,750. Assuming a 20% down payment, a 20-year term, and a 6% rate, elimination of the Guarantee Fee would save you $113 per month.
If you plan to take advantage of the SBA Guarantee Fee waiver, you need to have your application submitted to the bank by about the end of this month (Sept 2009). The key to getting the zero Guarantee Fee is submission of the application to SBA. Submission to SBA happens after the bank has approved your loan.
Alan Bussey
On February 17th the American Recovery and Reinvestment Act (ARRA), also known as the ?Economic Stimulus Package?, went into effect. Part of this plan temporarily eliminates the 7a Guarantee Fee paid by the applicant to SBA. A typical down payment to build or buy a car wash with a 7a loan is 20%. The maximum loan under the 7a program is $2 million.
Assume that you plan to buy a wash where the loan needs to be $750,000. Prior to February 17th, the SBA Guaranty Fee for a $750,000 loan would be $19,688, or 2.63% of the loan amount. ARRA temporarily eliminates that fee.
Until the end of October, when funding for this part of ARRA is projected to run out, the Guarantee Fee for SBA-guaranteed loans is ZERO. On top of no Guarantee Fee, with a 7a loan the banks are not allowed to charge an origination fee. For a $750,000 loan, the savings is the entire $19,688. Most of the Guarantee Fee is financed into the loan. So, with a $750,000 loan the fee waiver lowers your loan by $15,750. Assuming a 20% down payment, a 20-year term, and a 6% rate, elimination of the Guarantee Fee would save you $113 per month.
If you plan to take advantage of the SBA Guarantee Fee waiver, you need to have your application submitted to the bank by about the end of this month (Sept 2009). The key to getting the zero Guarantee Fee is submission of the application to SBA. Submission to SBA happens after the bank has approved your loan.
Alan Bussey
