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Join us for an informative conversation with one of Cogent Bank’s SBA Lenders, Tom Koether. Tom brings 32 years of experience to his role as an SVP Business Development Officer. He specializes in offering government-guaranteed lending solutions to small business customers through three different lending arrangements: SBA 7(a) and SBA 504 through the U.S. Small Business Administration (SBA) and USDA Business & Industry Loans through the U.S. Department of Agriculture.
Tom lives in Lafayette, Georgia, on a 48-acre farm with his wife of nearly 35 years, Cheri. Their daughter, Catie, is a graduate of the University of Georgia (Go Dawgs!). In his free time, Tom enjoys riding his Harley Davidson Road Glide Special, boating on local lakes, and playing golf.
I’ve been in banking since 1986, when I worked as a bank teller while going to college. After graduation, I went into a management training program and managed retail branches for 5-7 years. After that, I moved into business and corporate banking. In 2012, I went into SBA lending full-time after dabbling in it for 25 years.
For small business owners, access to capital in a traditional setting is more restrictive. The SBA loan program is more flexible and forgiving, allowing these entrepreneurs to reach their dreams. Whether it’s helping borrowers start, expand, or buy a business, it’s very satisfying to be part of this process and the resulting success stories.
I’ve worked for both larger regional and community banks. In my experience, large banks don’t do very well with complicated transactions. They don’t spend enough time with small business customers to get to the point where they can offer financial assistance in the form of a loan. When large banks do SBA loans, it’s typically a small amount in large batches and based solely on credit score.
In contrast, community banks are personal—we get to know our borrowers’ backgrounds, education, work history, and unique stories. We also help them develop a business plan to support their success.
Access to capital is the most common reason. It’s always challenging for entrepreneurs to get conventional financing to encompass all they need for their small business.
The SBA offers financing for multiple loan purposes such as the purchase of real estate, buying a business, or equipment, inventory, working capital, goodwill, and debt refinance. Required equity depends upon the particular project in some cases 100% financing may be available.
Some people assume that SBA lending is only for start-ups or borrowers who find it challenging to get conventional financing. However, we’ve seen a lot businesses who may have obtained conventional financing in the past come to us for SBA loans due to the tightening of conventional financing and their desire for more flexible lending terms.
The biggest difference is that 7(a) loans provide financing for for many loan purposes. Whereas, 504 loans only provide financing for commercial real estate purchases or refinance of owner-occupied properties (as long as 51% is occupied by the business owner, the rest of the space can be leased).
Another big difference is with interest rates. 504 loans come with a long-term fixed rate with a 20 or 25 year loan term on the second mortgage with SBA. The Bank’s first mortgage on SBA may be fixed or variable. 7(a) loans have a variable rate that adjusts quarterly based on the WSJ prime rate.
The SBA’s Standard Operating Procedures book is updated periodically. When you choose an experienced SBA lender like Cogent Bank, we can help you determine your eligibility upfront, so you don’t waste your time only to end up with a denial.
Determining your eligibility starts with identifying the purpose of the loan. For example, buying a franchise, building a gas station, buying an existing medical business, etc.
Compared with conventional financing, the down payment required for an SBA loan is little to none. For 504 loans, half is a conventional mortgage from the bank, 30-40% is backed by the SBA, and the borrower puts 10-20% down.
As part of the application process for all SBA loans, borrowers must prepare projections for at least two years. Start-ups should create a business plan. Sensitivity analysis is part of the underwriting process to determine post-closing liquidity.
As a Preferred Lender for the SBA, we have the ability to work through a loan quickly. On average, SBA loans take 45-75 days from start to finish. Real estate acquisitions can close within 30 days—it just requires active involvement from the buyer and seller.
The three phases of the SBA application process are:
When necessary, Cogent Bank can close loans rapidly for borrowers with short closing requirements.
Although we’re based in Florida, Cogent Bank is a national SBA lender. We’re open to all kinds of deals, such as convenience stores, hotels, acquisitions, medical/dental, childcare, assisted living, and more. Our team of business development officers is very experienced with SBA lending–each of us has, on average, 25-30 years of experience, including direct experience working for the agency.
Cogent is an approved lender for the SBA, which means we can approve loans internally on behalf of the agency. This makes the process faster and more efficient. We also have a streamlined approval process with as a few layers as possible to deliver a quick and easy experience for our clients.
We understand that the current economic environment is challenging, as small business owners deal with inflation, rising rates, and the possibility of recession. However, Cogent Bank is well capitalized and looking to expand on SBA loans. We will help you navigate the application process and required paperwork to make it as easy as possible for you. To learn more or apply for a small business loan, contact Tom today!