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SBA Lending – FAQ

SBA Lending - Frequently Asked Questions

Frequently Asked Questions

What is an equity injection?

The amount of your own cash or assets you contribute towards the overall project (similar to a down payment on a house) is often referred to as your “equity injection.” The term can be misleading because the equity is not being injected into the acquired business but is going directly to the seller.

How much is of an equity injection or down payment is required?

There is no simple answer to this question – talk through it with someone from our lending team. This amount depends on your business type and use of funds. Central Bank & Trust can guide you after we learn a bit more about you and your business.


What documents will I need to give you?

Whether you’re looking to buy, build or expand, you can expedite the financing process by taking these simple steps now.

  • Know your credit history. Your personal credit is more than just a score, so be ready to answer questions about any items that appear on your credit report.
  • Have your business and personal tax returns in PDF format. Once you’re ready to move forward, having digital copies readily accessible will help reduce the time it takes to complete a loan application.
  • Understand your financial standing. Most banks will ask for information regarding your personal financial resources, assets and obligations when you’re applying for a loan.
  • Be prepared to articulate your business plan. Banks are looking to lend money to people who believe in their project and have completed thorough due diligence.
  • Balance Sheets, Profit & Loss Statements, and Business Debt Schedule


What does a loan structure look like?

There is no “one size fits all” way to structure a loan. We account for a variety of factors when helping you structure the deal. What we can say is that the lending team at CB&T prides itself on getting creative and we’re skilled at building a unique loan package. We’ll tailor your loan to the needs of your business, whether that includes an SBA loan, a traditional bank loan or a combination of the two.


How much debt can I afford?

When trying to determine how much debt you can take on, we look at a number of different characteristics of your business. One of our priorities is ensuring that you take on an appropriate loan amount so that your cash flow can support the monthly payments and pay yourself a reasonable amount from the business. We look at your credit score, collateral and your debt service coverage ratio (DSCR). While your DSCR can be calculated several ways, we often use this formula:

  • Net Operating Income / Current Year’s Debt Obligations =Debt Service Coverage Ratio

For further clarification on what you can afford, talk to a member of our lending team at CB&T.

What assets can I pledge as collateral?

We are cash flow lenders and view collateral as a last resort means of repaying a loan. So, we first look at cash flow to confirm it is sufficient to repay the proposed debt, and we are looking at collateral second. That being said, there are certain collateral requirements that need to be met depending on the loan product, size of the loan and the use of proceeds. Some common examples of collateral that might be required are: home equity, retirement accounts, commercial real estate, equipment and automobiles. Be sure to speak with your lender about potential collateral requirements.


What types of financing are available?

We can help you navigate the many financing options and make sure it’s a good match for you. One of the resources that we often utilize is the Small Business Administration, which is a government agency. A portion of an SBA loan is guaranteed by the government and as mentioned above, the most common SBA loan programs include 7(a) and 504 loans. We can also combine those SBA loans with conventional loans, lines of credit and more. Let’s talk through your goals and we’ll craft a personalized loan package, together.


What are the main differences between SBA and traditional financing?

There are pros and cons to both SBA and traditional financing products and your CB&T lender can confidently walk you through which option is the best fit for you. However, SBA loans have some unique benefits. Compared to conventional loans, they generally have longer repayment terms, lower down payments and do not have financial covenants or balloon payments.


What does Central Bank & Trust’s Preferred Lender Status mean?

When considering an SBA loan, it is helpful to seek out a lender who is part of the SBA’s Preferred Lender Program (PLP). A PLP lender will know how to determine eligibility, can properly structure the loan and collect appropriate documents to keep things moving smoothly. PLP status allows the bank to approve the loan without waiting for the SBA’s approval; the bank acts on behalf of the SBA.