American Business Lending is a Preferred SBA non-bank lender offering SBA small business loans. SBA Loans are guaranteed by the Small Business Administration. Since the government may guarantee up to 85% of this small business loan, the lender is able to qualify business owners with more lenient standards and offer a lower interest rate than traditional loans.
You can borrow $300,000 to $5,000,000 for commercial financing. This loan can be used for expansion, refinancing, business acquisitions, start-ups, franchises, furniture, fixtures, equipment, inventory and working capital.
Loan interest on the American Business Lending SBA Loan is the prime rate + up to 2.75%. The Wall Street Journal prime rate at the time of publication is 3.50, so you can expect an interest cap of 6.25%. However, interest on this loan is floating, which is another way of saying variable. Interest rates will adjust quarterly based on the prime rate.
The loan term is 7 to 25 years. Collateral may be required. There’s a minimum 10% down payment. You may be able to avoid a down payment if you’re getting a loan for a refinance.
The American Business Lending Loan Process
There are four steps to the loan process. First, you’ll get assigned a loan officer. They’ll help you choose which loan product is the best for you and then you put in an application. During the application process you’ll turn in a few documents to qualify you for the loan including:
- Financial statements
- Federal tax returns for your business from the last 3 years
- A business plan or projections for the next two years if your business is a start-up
- A purchase agreement if you’re buying real estate or business assets
- The franchise agreement if you run a franchise business
- A copy of the note being refinanced if you’re refinancing a loan
From there, your application goes into underwriting where your loan request will be reviewed. An underwriter will possibly follow up with questions to qualify you. You get a credit decision within 72 hours of turning in your complete loan application.
Once approved, you’re given a commitment letter, which includes: your interest rate, loan amount, collateral required and other loan terms. You’ll have to pay a good faith deposit, which will later be used to cover the closing costs, credit reports and other fees associated with taking out a loan. After signing the commitment letter and turning in your good faith deposit, you can expect your loan to close within 30 to 45 days.
Since we just mentioned closing fees, now’s a good time to go into how much this is going to cost you.
Fees and Gotchas
American Business Lending charges a $1,500 fee for packaging the loan on top of the SBA guarantee fee charged by the Small Business Administration and other closing costs.
The Small Business Administration fee is charged to the lender and the lender can choose to eat the cost or charge it back to you. In this case, American Business Lending will charge you. The SBA guarantee fee for this loan will range from 3% to 3.75% of the guaranteed portion depending on how much you borrow.
Aside from packaging and the guarantee fee, there’s a prepayment penalty to consider. If you take out a loan that has a term less than 15 years, there’s no penalty for paying early.
If you have a loan term of 15 years or more you can prepay up to 25% of the principal during the first 3 years without penalty. Payments you make above 25% will cost you 5% of the principal the first year, 3% the second year and 1% the third year.
Pros and Cons
We’ve gone over the basics. Let’s head into the pros and cons of this loan:
Pro: Competitive interest. Loans guaranteed by the Small Business Administration have an interest cap. The prime rate has been at a low, so even though interest is variable it’s still a good deal for now.
Con: Fees. This lender is transparent with most fees there’s just many fees to consider. Particularly the closing costs and early prepayment fee. American Business Lending doesn’t say how much closing costs are exactly but you will be charged to cover appraisals and environmental reports, loan closing attorney’s fees, credit reports and lien searches. You may also get penalized if you’re able to repay this loan early.
Pro: Loan size. American Business Lending gives you the flexibility to take out a large loan amount and you can borrow for a longer time span than you can for other non-SBA business loans. We’ll cover a non-SBA business loan below so you can see the difference in loan amounts and terms.
Con: Loan size. The loan size is a plus for business owners who want to borrow over $300,000, but a negative if you’re looking for a smaller loan amount. Other SBA Loan products like the SBA Express Loan allow you to borrow $50,000 through an expedited process. American Business Lending doesn’t appear to have this option.
Pro: Experience with SBA loans. One of the downsides of SBA Loans is the application process. You have to qualify with the lender and also have your paperwork approved by the Small Business Association. According to the American Business Lending site, it’s a preferred SBA lender and the loan officers are experienced in processing these loans. Ideally, this experience will make the process less burdensome.
Con: Long wait time for funds. Applying and closing this loan will take awhile. Getting a credit approval will take 3 days. Then closing will take up to 45 days after you sign off on the contract. If anything should hold up the process like an appraisal you could be waiting for a few months until you get your hands on the loan.
Alternatives to American Business Lending
In our comparison section, we’re going to put the American Business Lending SBA Loan against two competitors including one that also offers the SBA Loan and another lender that doesn’t offer SBA Loans.
SmartBiz has an SBA Loan process that’s handled completely online. You can borrow $30,000 to $350,000 for 10 years. Interest ranges from variable 6.25% to 7.25%. Interest is higher at SmartBiz because the Small Business Administration sets a higher interest cap for smaller loans that have shorter loan terms.
You can pre-qualify for a SmartBiz loan within 5 minutes and get funding within 7 days of completing your application. SmartBiz doesn’t have a prepayment fee. The packaging fee is 4% in addition to closing costs. For loans above $150,000, there’s a 2.25% SBA guarantee fee.
Funding Circle can get you funds quickly and with a competitive interest rate, if you have a good to excellent credit score. You can borrow $25,000 to $500,000. This is comparable to the amount you can borrow from American Business Lending. However, the loan terms are shorter.
You have between 1 and 5 years to repay your loan. If you’re taking out a six-figure loan a short repayment window could be a challenge. Interest is from 5.49% to 21.29% APR. There’s an origination fee of 1.49% to 4.99%.
Who Will Benefit the Most From an American Business Lending Loan?
SBA Loans open the door to financing for small business owners who can’t qualify for traditional financing. So, an American Business Lending SBA Loan could be a good choice if you need to borrow a large sum with a low-rate.
Instead of a percentage package fee like SmartBiz, American Business Lending has a flat $1,500 fee, which can save you money and gives it an edge. One the other hand, SmartBiz has a quick and streamlined application process that is more convenient for smaller loans.
One question you should ask a loan officer at American Business Lending and SmartBiz before borrowing is how much the closing costs will be beyond the packaging and guarantee fees for the loan you choose.