Episode 28: Using SBA 7(a) Loans to Grow Your Business

We get a lot of questions from our listeners on topics that we aren’t necessarily experts in, so we go out and get the experts to help give you the information you need to succeed. One of our most requested topics is financing for the trades, so we grabbed Brandon Bolen, Vice President of Service Contractors at Live Oak Bank. Brandon only serves companies in the HVAC/plumbing space, and offers a wealth of information on how to use an SBA 7(a) loan to grow your business.

A Banker for the Trades

Hailing from North Carolina and graduate of UNC Wilmington, Brandon has spent his entire career serving contractors in the finance space. When Live Oak was founded about a decade ago, they were known as the “doggy bank” because they only served veterinarians. The thing that makes Live Oak unique is they have always focused on small businesses in specific industries. They conduct heavy research so that they truly understand the industry their clients work in. When a client walks in the door at Live Oak, they don’t need to explain what they do and what is important to them.

As Live Oak grew, Brandon recognized that the trades industry was filled with great people, but was extremely underserved by the financial industry. Thus, the Service Contractors division of Live Oak was created. Brandon spends all day helping clients in the HVAC/plumbing spaces find financial success all over the country. It’s a true partnership between the trades and a banker who knows and serves the industry.

What is a SBA 7(a) Loan?

Until recently, SBA loans weren’t that well-known in the trades. PPP loans dominated the headlines, and understandably so. However, Brandon specializes in SBA 7(a) loans because of their unique advantages to HVAC companies. A typical loan, especially for something like an acquisition, would mean the bank asking you what collateral you had to put up for the loan. As we all know, this isn’t where the value of our businesses comes from.

SBA 7(a) loans are a guaranteed government loan based on the cash flow of a business instead of collateral. As much of the value from an HVAC company is in the goodwill, the brand, and the profits of the business, the SBA 7(a) allows for businesses to use this value in applying for an advantageous loan to grow the company. With an SBA 7(a) loan, acquiring another business and expanding your reach doesn’t have to mean destroying your budget and placing a huge down payment for your investment. If your existing company is a borrower or co-borrower on the loan, you can get 100& financing to acquire another business. As long as you run that company well, it will pay for itself with you ever having to make a down payment.

What Do I Need to be Approved?

When applying for an SBA 7(a) loan, there are a few things to keep in mind. The biggest factor is going to be your cash flow. You’ll need to show that your company can repay any existing debt, the proposed debt, and your salary so that you can meet your own obligations and live your life. Brandon works with owners to ensure the structure of the loan isn’t going to mean a step backwards for the business. Another aspect to consider is your personal credit. Even though a business loan won’t show up on your credit, personal credit is still reviewed as part of the application process. The last thing you’ll want to have is a good resume in the industry, which most of our listeners already have at the ready. For more details on what you’ll need, take a look at the loan application checklist for an SBA 7(a).

What Can I Use it For?

The SBA 7(a) isn’t just a great tool for acquisitions. It’s the most favorable loan in the home services space if you’re an existing contractor, and with longer terms, monthly costs are much lower than non-SBA 7(a) loans. SBA 7(a) loans could be used for succession planning, marketing budgets, and a wide variety of options to put a business in a better position to succeed.

Set Yourself Up for Success

If you’re a newer contractor or existing contractor looking to grow your business and work with Brandon, he’s here to help. Even if you aren’t interested in a loan today, Brandon offers invaluable guidance and the bank’s perspective on your financials so that down the line, you’ll be ready to make a move.

To get in touch with Brandon, you can email him directly. Feel free to check out his blog on SBA loan myths to learn even more about what SBA 7(a) loans could mean for your business.