Daniel asks…

Can an SBA loan be used to purchase real estate?

I’d like to manage some real estate in town, and I’ve found an 18 unit residential property for sale (asking price approx $625,000). Can an SBA loan be used to finance this?

If not, are there better options out there?

admin answers:

When buying real property with a SBA loan the property must be used as the location of that business. Other words, the location where the business owner conducts his business, like a store front, office, plant, etc. If it is a multi-use building like an office building complex the SBA borrower must use at least 51% of the building for his own personal business use and would be permitted to rent out the remaining 49% of the premises.

Residential properties do not qualify for a SBA loan.

There are lenders and mortgage brokers that specialize in apartment building financing. These types of loans generally require at least 25%-40% down payment.

The major advantage of a SBA loan is that down payments can be as little as 10%. SBA loans are made only to established businesses that has a history of earnings and a positive cash flow that covers the new debt load. Also, excellent credit is required. A new buyer of an established business is permitted, but the new buyer must show that he has the training and the experience of managing a business.

Robert asks…

can someone tell me why universal healthcare would be an issue that SBA supports?

recently i have read that the SBA is pushing for universla healthcare, they want cost to be absorbed by employer, employee and govt. why? what are their motives?

admin answers:

No idea. It makes no sense.

It is always easier to get votes when you tell people that their problems are not their fault. You get even more votes by telling people that you will make sure they do not have to take responsibility for themselves and their own well being.

Healthcare is one such issue. It takes personal discipline and responsibility to eat right, exercise, stop unhealthy habits like smoking, and get regular check ups. Only the last one really costs you anything at all and even then the cost is minimal. Yet these are the most important things you can do to secure a healthy life. No amount of government control, short of mustering every citizen outside for morning exercises on penalty of law, will make this happen. You have to take responsibility for you.

There is nothing wrong with healthcare in the US per se. In fact, we have some of the best healthcare in the world here. You can walk into any emergency room in the country and get treated. And if you cannot pay for it, the hospital still cannot refuse you care and they eat the expense. That is why so many hospitals, especially here in Southern California, are going bankrupt. Open a phone book and you can find page after page of doctors offering every conceivable specialty, make an appointment, and be seen promptly. The problem is the cost of delivering this care. There are several factors that drive this and frankly, I do not see how nationalizing healthcare will have a serious impact on it.

Nationalizing healthcare would dramatically increase government costs. Not just in the actual cost of service, but also in the national bureaucracy needed to maintain the federal program. You are talking about hundreds of billions of additional spending. Free healthcare is, as you would expect, not really “free”. Also, since it would be so widely available, it would be used so much that the system, without the financial limitation on personal behavior, would be quickly overwhelmed. This is what causes rationing of services and delays. There are only so many hours in a day and so many doctors to see patients. One of the major complaints in countries that have a nationalized healthcare system is rationing; having to wait months for knee replacements or over a year for a new heart valve, and that sort of thing.

There are things that can be done to reduce cost, and thus make healthcare more available to the public without the burden of a government bureaucracy. For example, limiting malpractice lawsuits to actual damages is one way. Punishments for gross malpractice should not go to making plaintiffs, and moreso the plaintiffs attorney, independently wealthy. This drives up the cost of insurance to the point that many doctors are simply closing their practices. By limiting lawsuits, you limit the cost of the service, which in turn allows the service to be provided as a lower cost to the consumer.

Another option, reduce drug costs by changing patient laws. Currently, a drug company will spend billions of dollars developing a drug. But the process of testing, documenting, and licensing drugs is so long they have only about 7 years to recoup that cost before the drug loses its protection and generic makers, who do not have a high research cost to recoup, can make it at a fraction of the cost of the name brand. But, if we were to expand the patient protection, require a small royalty for the researching company, or a combination of the two, the financial pressure is eased. With more time to recoup costs, drug companies do not have to charge as high a price for their products.

A third option that can be done is to focus on the excessive costs of training and equipping a medical professional. Currently, a doctor takes out a gargantuan amount of debt in order to go through medical school. They have to pay this debt back and it takes years, even at their pay rates. Same thing with nurses and many technicians. And the costs of some of the equipment, ultrasounds, MRIs, etc, is astronomical. But, if we make changes in how we train and equip medical professionals, we can lower this burden. I do not have any particular proposals that really get my heart racing, but a creative approach like apprenticeships, programs to start students at lower level technician jobs and working up to a medical doctor, a federal teaching school modeled after Bethesda Naval Hospital or Walter Reed Army Hospital but for civilians, business tax credits for the manufacture or purchase of diagnostic equipment, or even direct government support for medical research tied to providing care to the public are all places to start. There is a lot that can be done that does not require the government taking over an industry.

In short, I think the benefits of a nationalized healthcare system, with its accompanying government bureaucracy, are more than outweighed by the negative impacts to patient care and cost. I think that there are plenty of other things that can and should be done to lower costs and improve service that can and should be done. These proposals, like the three I laid out above, I think can reduce costs to consumers, thus making it more available, while at the same time insuring reasonable economic success for medical practitioners, drug manufacturers, and equipment makers. There is a win-win scenario out there, if we are willing to make patient, thoughtful steps and focus on the problem (high cost of service) as opposed to symptoms (people not seeking the medical care they need).

Ruth asks…

How Long do I need to be open for an SBA Loan?

How long until My business can get an sba loan or a basic business line of credit based on its own financials and credit?

admin answers:

It really depends on your financial situation. What you can do is speak with a loan officer at a bank. Banks process SBA loans, so they can look at your financials and tell you exactly where you need to be to get one…

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