Trihve Finance

For business owners, choosing between an SBA 7(a) loan and an SBA 504 loan depends on the specific needs and circumstances of your business. Both loan programs are offered by the Small Business Administration (SBA) to help small businesses grow, but they serve different purposes and have distinct terms and conditions. Understanding the key differences between the two can help you decide which is more suitable for your business. SBA 7(a) Loan Program Purpose: The SBA 7(a) loan program is more versatile than the 504 program. It can be used for a wide range of business purposes, including working capital, refinancing existing debt, purchasing equipment, real estate, and starting or acquiring a new business. Loan Amount: Up to $5 million. Terms: Up to 7 to 10 years for working capital, equipment, acquisitions and up to 25 years for real estate. Interest Rates: Interest rates can be either fixed or variable, typically tied to the prime rate, plus a markup. Collateral: Required for loans over $25,000, depending on the lender's requirements. Personal Guarantee: Required from owners with a stake of 20% or more in the business. SBA 504 Loan Program Purpose: The SBA 504 loan is specifically designed for purchasing major fixed assets that promote business growth and job creation, such as real estate and large equipment. Loan Amount: Up to $5 million for most businesses, and higher amounts for certain projects. Terms: 10, 20, or 25 years, depending on the loan type. Interest Rates: Below-market, fixed interest rates for the term of the loan. Collateral: Typically, the assets being financed are used as collateral. Personal Guarantee: Also required from owners with a significant stake. Which One to Pick? Consider the SBA 7(a) loan if you: Need flexibility in how you can use the funds. Require working capital or wish to refinance existing debt. Are starting or acquiring a business. Consider the SBA 504 loan if you: Are looking to invest in long-term fixed assets. Want to benefit from lower interest rates and a longer repayment term. Aim to promote job creation through your investment in real estate or major equipment. Additional Considerations Down Payment: SBA 7a and 504 loans typically require a low down payment (around 10%) for most projects, which can be beneficial for businesses looking to preserve cash. Project Size: If your project is large, the SBA 504 loan's ability to offer a higher loan amount for certain projects might be more appealing. Ultimately, the decision should be based on your business's specific financial needs, future growth plans, and the purpose of the loan. Consulting with an SBA-approved lender or a referral partner like us (Trihve Finance) can provide personalized advice and help you navigate the application process for the loan that best suits your business's objectives.

For business owners considering funding, choosing between equity financing and debt financing is a crucial decision, as each option has its own set of advantages and disadvantages. The choice largely depends on the specific needs, circumstances, and goals of the business. Here's an overview of both options to help guide the decision: Equity Financing Advantages: o  No Repayment Obligation: Unlike debt, equity financing does not require repayment, which can ease financial pressure on the business, especially in its early stages or during tough times. o  Access to Additional Resources: Investors often bring valuable resources, such as expertise, industry contacts, and additional funds for future growth. o  Risk Sharing: Since investors share in the business's success and failure, there's a shared risk, which can be less daunting than the obligation to repay debt. Disadvantages: o  Dilution of Ownership: Raising funds through equity results in sharing ownership of the business, which can lead to a loss of control over business decisions. o  Dividend Payments: While not obligatory, some businesses may choose to pay dividends to shareholders, which can become a financial burden. o  Potential for Conflict: Differing visions between the business owner and investors can lead to conflicts. Debt Financing Advantages: o  Ownership Retention: Debt financing allows the business owner to retain full ownership and control over the business, without having to share decision-making power. o  Tax Benefits: Interest payments on debt can be deducted from the business's taxable income, providing a tax benefit. o  Fixed Repayment Schedule: Debt financing provides a clear timeline for repayment, which can help in financial planning and budgeting. Disadvantages: o  Repayment Obligation: Regardless of the business's financial situation, debt must be repaid, which can strain the business's cash flow, especially during slow periods. o  Interest Costs: Debt financing involves interest payments, which can be costly, especially if the interest rates are high or the business's income is low. o  Risk of Overleveraging: Taking on too much debt can jeopardize the business's financial stability and its ability to secure additional financing in the future. Ultimately, many businesses use a combination of both equity and debt financing to balance the advantages and disadvantages of each. It's also essential to consider the current market conditions, the cost of capital, and future financial projections when making this decision. 

Wishing everyone a joyful and prosperous New Year! May your profit margins and income surpass your goals and projections for 2024! 🎆

Great news for business owners and borrowers with existing loans (especially those with floating interest rates) or anyone planning to secure funds in 2024! The Federal Reserve has maintained the current interest rate in December and anticipates multiple interest rate reductions in 2024. This foresight points towards potential reductions in monthly payments on loans/lines of credit (LOC), contributing to enhanced cash flow. https://lnkd.in/d6BRaz84

For business owners contemplating securing funds, an important metric to prioritize is the Debt Service Coverage Ratio (DSCR). This metric, employed by most lenders to assess risk, holds significant importance in the decision-making process. It’s a ratio that compares the cash available for servicing debt to the actual debt obligations. In essence, DSCR helps you understand if your business generates enough income to comfortably meet its loan repayment requirements. DSCR = Net Operating Income/Total Debt Service DSCR values above 1 indicate that your business generates more income than required to cover its debt payments. A DSCR of 1 means your business is just meeting its debt obligations, while a ratio below 1 signals potential financial stress.

If a business owner is burdened by expensive cash advance debt that requires daily or weekly payments, Debt Restructuring offers a solution to improve cash flow. If you or someone you know has answered yes to a few of the following questions, feel free to direct message me to check if you/they qualify for reducing payments by 50% or more. - Are you experiencing cash flow constraints due to the daily or weekly payments associated with your current debt? - Have you resorted to taking out new advances to cover the costs of previous ones? - Are you currently falling behind on your payments? - Are you seeking better payment arrangements for your existing business debt? - Are your personal expenses accumulating because you are unable to draw a salary? #DebtRetstructuring #Cashflow 

Great article on managing startup finances - creating/maintaining a business plan with cash flow projections, allocating cash for unexpected/worst case scenarios and timing the fund raising activity are very important for startup businesses. #financing #planning #startupbusiness https://lnkd.in/gmGcAyvx

Inflation is slowing down at a time when consumer spending is advancing which may imply a soft landing for the economy. https://lnkd.in/gFKcQaFT

The Federal Reserve has indicated its intention to raise interest rates again this year in order to control inflation. This could lead to higher borrowing costs and interest payments for businesses. As a result, it's advisable for business owners to review their current debt structure and consider refinancing any loans with variable interest rates, or plan for increased interest payments. Building cash reserves is also important to help businesses handle potential financial challenges that may arise when interest rates go up.#businessowners #funding #payments #interestrates #loans https://lnkd.in/gfeBaE4n

Term Loan Vs Line of Credit - which option should a business owner pick? https://lnkd.in/gcnu4bs9