SBA 7(A) loans are an attractive option for small businesses in need of capital. CPAs can speed up the process

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The value of working with an accountant to your business goes far beyond filing annual returns by April 15. An important skill an accountant brings is the ability to legitimately reduce a company’s tax liability. Equally important, however, is helping a business owner forecast cash flow, look for ways to find cost savings, and ultimately reduce costs. Furthermore, accountants can play an important role in projecting expenses, helping clients maximize profits and successfully growing a business.

More and more entrepreneurs are working with their accounts to secure financing. During the Paycheck Protection Program (PPP), they played an important role in helping small business owners submit their applications. Later, they helped their clients with loan forgiveness.

In 2021, CPA.com was launched CPA Business Finance Portala cloud-based platform powered by Biz2Credit’s Biz2X technology, which streamlined the application process during PPP. The use of the cloud-based platform was later expanded to allow accounting firms to help clients secure other financing options, including working capital, term loans, Employee Retention Credit (ERTC) and, most recently, SBA 7(a) loans.

Constantly rising interest rates and tightening credit at major banks, as well as small and medium-sized banks, have combined to create a credit crunch for small business owners in need of capital. SBA 7(a) loans, offered by SBA-approved lenders and backed by government guarantees, are an important source of capital for small businesses in these challenging times. The CPA Business Funding Portal supports the accountant’s role as an advisor in the lending process and offers a 100% online funding application process for the benefit of their clients. Meanwhile, the platform provides CPA firms with a client management dashboard, as well as time-saving integrations with clients’ payroll and bank accounts, and features for viewing and modifying applications.

“In an increasingly complex economic environment, small and medium-sized businesses need a trusted advisor to help deal with complexity and manage cash flow,” said Erik Asgeirsson, President and CEO of CPA. com. “Financing advisory is a growing area within client advisory services (CAS), and the addition of the SBA loan option to the CPA Business Funding Portal better enables companies to provide more holistic financing guidance and secure the capital their SME clients need to their businesses and invest in future growth.”

The SBA 7(a) loan option is ideal for smaller businesses due to its lower down payments, competitive interest rates and longer term financing. These loans provide opportunities for small business owners who may not qualify for other loan options to secure financing.

SBA 7(a) loans are available in amounts up to $5 million and can be used for short- and long-term working capital, refinancing current business debt, purchase and installation of machinery and equipment, and the purchase of furniture, fixtures and supplies.

SBA lenders are incentivized to give fund applicants they wouldn’t normally fund because the government guarantees most of the loan. For example, the SBA guarantees 85% on standard 7(a) loans up to $150,000 and 75% on loans over $150,000. In the event that a borrower defaults, the lender — often a small to medium-sized bank — can still get most of their money back. While interest rates vary by lender, the SBA does set limits on what lenders can charge.

The current SBA 7(a) loan rate is Prime + 2.75% for loans of $50,000+, Prime + 3.75% for loans from $25,001 to $50,000, and Prime + 4.75% for loans of $25,000 or less. With the Prime Rate at 8.25% as of May 2023, business owners can expect to now pay between 11% and 13% interest on SBA loans. While rates are much higher than in the pre-pandemic days, SBA loans are available at a time when banks are not seeking term loans to small businesses. Further, these rates are lower than the cost of capital of alternative lenders, which can charge 30% or more for their financial products.