SBA Preferred Lender

May 31, 2023

by Dennis Welch

Business borrowers tend to think that Small Business Administration (SBA) loans are more demanding and tedious than other bank financing options. While this may be a common belief, borrowers should know that SBA loans do not require much more information than a conventional business loan, and the benefits are worth the extra effort. The key benefits of an SBA loan include a lower down payment, longer loan terms to aid cash flow, and flexible collateral requirements.

Why was the SBA established?
The Small Business Administration was created by Congress in 1956 to “aid, counsel, assist and protect the interests of small business concerns; preserve free competitive enterprise; and maintain and strengthen the overall economy of our nation." (sba.gov) The SBA’s primary goal is to protect and grow America’s small businesses.
Frandsen has been able to serve its local communities by providing small businesses the financing they need and deserve. For further perspective, Frandsen has processed SBA loans for businesses in Minnesota, Wisconsin, and North Dakota that have existed for over 100 years and with combined revenues of over $300 million.

What is considered a small business?
Depending on the industry, small businesses are identified as companies with a net worth of less than $15 million and/or profits that do not exceed $5 million for the previous two years.

Whom have we helped using the SBA?
Since Frandsen Bank & Trust established an in-house SBA department in 2016, we have earned the SBA's Preferred Lender status. What does this mean? We have designated authority from the SBA to approve and process our loans without having to send them to the SBA for their approval.  Below is a sampling of the customers we have served.
  • Acquisitions:  The General Manager of a local company wanted to purchase the business where he had worked for the past 25 years.  He didn’t have enough for a down payment to buy the company using conventional financing as the project had a significant collateral shortfall.  Frandsen Bank financed the acquisition using 10% cash equity, a 10% seller carryback note, and an SBA 7(a) loan.
  • Expansions:  A small tonic manufacturer wanted to expand their physical location and marketing/distribution.  FB&T financed this using an SBA loan with 10% owner equity and a small city revolving loan fund.
  • Working Capital:  An environmental consulting firm had been growing rapidly and needed working capital to finance its growth.  FB&T provided an SBA Express Line of Credit to help them grow their client base and meet their cash flow needs.
  • Equipment Purchases:  A local machine shop needed additional equipment to expand its production capabilities for its clients.  FB&T funded 100% of the equipment purchase, which will allow for increased sales/profits for the company. The SBA funding leveled the playing field for this business, and it was able to purchase the same equipment used by larger machine shops.
  • Debt Refinance:  A dental office had several loans with various amortizations and wanted to consolidate the loans into one payment.  They also needed additional equipment and working capital.  Frandsen Bank met these needs by providing an SBA 7(a) loan that saved them 33% on their existing debt and working capital (cash) and enabled them to stabilize cash flow while increasing their sales.
  • Building/Business Purchases:  A gun range owner wanted to sell the business and the building to their general manager.  The general manager purchased the company using an SBA 504 loan with 5% down, 5% seller carryback, and 5% economic development funding.  Additionally, we used an SBA 7(a) to finance the business purchase and provide for working capital with 5% down and a 5% seller carryback note.
  • Startups:  A customer of Frandsen approached one of our lenders with the idea of establishing a tree-trimming and removal business.  The customer provided an in-depth business plan with detailed projections. In addition, the customer had a reliable credit history and funds to invest in the project. Their dream of owning a business came true with the assistance of an SBA 7(a) loan from Frandsen Bank.
How does providing SBA loans help Frandsen Bank?
SBA loans have become an excellent tool for FB&T.  SBA loans reduce the risk to the bank, guaranteeing up to 85% of the loan amount.  SBA can also generate significant fee income for the bank as we can sell the guaranteed portion of the SBA loan to investors.  Last year these sales generated over $733,000 in fee income.
Frandsen Bank was ranked number one for SBA 504 loans and is Minnesota’s top SBA 7(a) lender by dollar volume (As of May 18th, 2023).   If you wonder whether an SBA loan is right for you, contact Dennis Welch, Liz Lambrecht, or the Frandsen Bank website to learn more. SBA Loans

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