Your Questions About Sba Loans

George asks…

The SBA loans awarded after Hurricane Katrina: $10,000. Can it be used for a downpayment on another home?

I was given a very inexpensive loan from SBA that has to be repaid beginning in April. Can I use this money for a different home down payment?

admin answers:

Check the stipulations of the loan you got.

If you got a Personal Property Loan from SBA, for example, it stipulates that

“This loan can provide a homeowner or renter with up to $40,000 to help repair or replace personal property, such as clothing, furniture, automobiles, etc., lost in the disaster. As a rule of thumb, personal property is anything that is not considered real estate or a part of the actual structure. This loan may not be used to replace extraordinarily expensive or irreplaceable items, such as antiques, collections, pleasure boats, recreational vehicles, fur coats, etc.”

If this is what you got, it says that you cannot use it to buy real estate. Check the penalties for not following the terms of the loan (I know with SBA that means immediate repayment of the full amount plus some interests and fines).

Steven asks…

SBA Loans- can a 401K be used as collateral?

I have been told I need $22K to be approved for a $150K SBA loan. Do they mean collateral? Can I use my 401Ks as collateral?

admin answers:

No it cannot be. In almost all cases, tax qualified retirement plans are protected from creditors. As such, they would be useless as collateral, as the lender would be barred from recovering.

You could take a loan from your 401k, depending on the plan’s loan provisions, and accomplish effectively the same thing.

Susan asks…

Real Estate Investing using VA or SBA loans?

Are there any opportunities available for veterans to take advantage of in this market? I have someone who is asking me to help them get into investing. He has about 75k to float but I told him he should want to buy and hold for at least two years. Can the government provide options for an exit strategy? Are banks out of doing business with investors?

admin answers:

I met with a representative of the SBA once and one of the things he stressed to be repeatedly is that real estate speculation is just about the only thing you can’t get an SBA loan for. That’s mainly because it’s just that… Speculation not an investment. The way things are going right now I don’t think it’s a good idea to get involved in the mess. See for info on what Suze Orman is saying on this topic. Also see for details on investing vs speculation. As for your question about an exit strategy… Don’t get involved in it and you won’t need one. We can’t expect the government to bail us out of every bad situation we get ourselves into. It’s one thing if you need a primary residence and want to fix it up and try to earn a profit, but investing in other properties all you can do is -hope- that you can sell later or -hope- you can find someone to rent/lease.

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