Small businesses offer opportunities for entrepreneurs, employment for the local community, and more. They give back endurance and sustenance to the place they are rooted in. Besides, they even provide greater job satisfaction than positions in larger establishments.
Running a small business comes with a lot of challenges. One of the most pressing of these challenges is access to capital. A small business loan can help you with exactly that.
You can use it to invest in new and upgraded equipment, cover payroll, or expand your team. Apart from providing capital, these loans can help you sustain your business during difficult times.
First Midwest Bank, among many other reputed banks, offers lending expertise to small businesses. These loans include various Loan Programs supported by The U.S. Small Business Administration.
This article will help you understand the loan programs you can opt for. Plus, it will shine some light upon the eligibility criteria and application process. So, let's dive right in!
An Overview of First Midwest Bank's Loans
First Midwest is one of the largest independent banks headquartered in Chicago, Illinois. They serve many suburbs in Illinois, Indiana, Iowa, and Wisconsin. Plus, they have 21 billion dollars of total assets and 14 billion dollars of assets under management.
They lend commercial banking solutions to Business Banking, Treasury Management, Middle Market, Commercial Real Estate, Specialty Finance, Healthcare, and Equipment Leasing.
Additionally, they offer full-service wealth management, including Investment Management Services, Fiduciary, and Private Banking.
They have branches in more than 100 locations with Mortgage, eCommerce, and Small Business teams. With these teams, they will help you navigate your negotiations and loan processing.
This bank offers an easy and smooth-sailing banking process for SBA loans. They have helped small businesses in their locality by purchasing equipment and inventory, modernizing the manufacturing process, and expanding the business.
Types of Loans Offered by First Midwest Bank
The type of loan can make a lot of difference in carrying on with your business. Therefore, it is crucial to pick the right kind of loan for your necessities.
Although the bank will walk you through all your options, it is better to have an idea beforehand. So, you can take your time to plan before preparing yourself for a loan.
The First Midwest Bank offers our financing expertise to small businesses with three different loan programs. They are SBA Express, SBA 504, and SBA 7(a) Loan Programs. You can find a detailed explanation of these programs below:
The SBA Express loan with this bank is granted in two ways. The first one is for a revolving line of credit, and the second is a term loan.
With SBA Express Revolving Line of Credit and SBA Express Term Loan, you can borrow up to 350,000 dollars. You can use it for supporting your working capital needs, purchasing equipment or machinery, and more.
The SBA turnaround time for this loan is 36 hours. Also, the bank will not take any collateral for this loan up to 25,000 dollars. For the loan amount, 25,001 and more, the bank will apply their collateral policy.
A quick sum-up of the SBA Express Loan program:
- The maximum loan amount is 350,000 dollars.
- The minimum SBA guarantee is 50%.
- SBA has a limit on the maximum interest the bank can charge.
- The bank makes the eligibility decision.
- You can receive up to seven years with maturity extensions permitted in terms of revolving lines of credit.
- No collateral is needed for loans up to 25,000 dollars.
- Collateral is required for loans above 25,001 dollars.
- You will have to fill the bank form and the SBA Form 1919.
- SBA turnaround time is within 36 hours.
SBA 504 Loans
If you want to expand your business location, improve your existing building, purchase land or building, you can apply for this loan. Plus, you can use it for new construction, purchasing equipment, and investing in inventory, among others.
SBA 504 loan terms principally contain the following:
- The loan term can range anywhere between ten to 20 years
- The minimum amount of loan you can receive in this program is 50,000 dollars, and the maximum amount is 5.5 million
Here's a look at the terms for the SBA 504 Loans program at First Midwest Bank:
For investing in machinery and equipment
- Up to 10 years (Bank Loan)
For investing in Real Estate
- Up to 20 years (CDC or SBA debenture)
- Up to 25 years (Bank Loan)
Benefits of choosing this loan program include:
- 90% financing and 10% down payment
- You can receive a loan amount of up to 10 million dollars
- Longer-term loans with fixed-rate options
- You will receive longer amortizations
- Savings that can improve cash flow for your business
SBA 7(a) Loan Programs
This is the primary loan choice offered by the Small Business Administration. You can receive up to a 5 million dollars loan to expand, improve, or start a business.
The guaranteed rate for this loan program is at 85% for loans up to 150,000 dollars and 75% for loans greater than 150,000 dollars.
You can use this loan for a wide range of financing for your business. It includes the following:
- Working capital
- Upgrading machinery, equipment, and apparatus
- Acquire capital assets, including installation, impact fees, and engineering
- Refinancing existing outstanding debt
- Revolving funds
- Modernizing the current facility or invest in inventory
- Acquire existing businesses
What Lending Criteria Does the Bank Have?
It is important to know if your business is eligible for the loan. Although the lending criteria for banks are a lot simpler now than before, there are still some rules.
Below are some pointers that can help you decide if you can apply for the loans or not:
- Business size should fall under SBA guidelines
- Your business should operate within the boundaries of the USA and its possessions
- The company should operate for profit
- Have equity to invest
- Must have used up the available business and personal resources
Under the following circumstances, your organization will not be eligible for SBA loans:
- Your organization has a pyramid sales structure
- Academic schools and non-profit organizations such as religious organizations, environmental organizations, and charitable trusts
- Involved in lending activities
- Real estate investments such as renting properties
- Involved in gambling activities such as casinos and race tracks
First Midwest Bank's Interest Rates, Fees, and Loan Options
Although the bank will explain to you in detail the interest rates and other fees, it is wiser to understand them beforehand. Besides, not all banks will publish the interest rates. Hence, this section will help you with that.
SBA loans, like all types of loans, depending on the size and term. Plus, you can negotiate with the banks about the rates as well.
So, here's a look at First Midwest Bank interest rates based on the loan program:
Interest Rates for Different Loan Options
A breakdown of interest rates based on the type of loan program you choose:
SBA Express Program Interest Rates
- For loan amounts up to $350,000 - up to 7 years - *Prime rate + 4.5% – 6.5%
SBA 504 Program Interest Rates
- For loan amount up to 5.5 million dollars - 10 years period - about 2.231%
- Up to 5.5 million dollars - for 20 to 25 years plan - ranging anywhere between 2.364% to 2.399%
SBA 7(a) Loan Programs Interest Rates
The interest rates vary based on the term period. It is the same for loans below seven years and loans with a term period of more than seven years. The below pointers can help you understand better:
Interest Rates for 7(a) loans repaid in less than seven years
- Loan size of 25,000 dollars or less - *Prime + 4.25% interest
- Amount between 25,001 and 50,000 dollars - *Prime + 3.25% interest
- More than 50,000 dollars - *Prime + 2.25% interest
7(a) loans repaid in more than seven years
- Loan size of 25,000 dollars or less - *Prime + 4.75% interest
- Amount between 25,001 and 50,000 dollars - *Prime + 3.75% interest
- More than 50,000 dollars - *Prime + 2.75% interest
The interest you pay for the loan does not cover the fees you have to pay for the bank and SBA. Therefore, you will have to pay fees separately. It can vary depending on the total annual cost of the loan or the annual percentage.
Generally, banks will charge you anywhere between 2% to 5%. First Midwest Bank may also be in that range. In addition to that, you will also have to pay a guarantee fee.
The guarantee fee will depend on the loan amount, terms, and conditions. Plus, guarantee fees can usually cost more than other types of fees. In some cases, the bank might cover these fees for you.
The bank will also charge you for application fees, service, and credit check fees. The First Midwest Bank will guide you through these fee details before you commit to a loan program. You can always walk into your nearest branch for more information.
First Midwest Bank's Application
The application and the processing of loans at First Midwest Bank is a smooth process. Besides, the SBA regulates it. Hence, you can expect straightforward processing as well. Besides, the methods are similar to other banks, so you have nothing to worry about.
Before you go all in, it is important to do some preparations. So, you must start collecting all the necessary documents for the processing.
The bank will give you a list of things you ought to submit for approval. Nonetheless, it would be best if you knew these things beforehand. So, you can help yourself by going through the pointers below.
- Fill the bank application form for the chosen loan program in addition to the SBA form.
- Provide your business license, permit, or certificate.
- Provide records of your ownership or affiliation to the business.
- Make sure to provide personal and financial information that adheres to the most recent government documents.
- Provide the following:
- o P&L statement (Profit and Loss statement) that records at least 180 days before your application.
- o Income tax return (Federal and State) for the past three years in business
- o A financial statement that projects your business one year ahead
- o Lease or rental details of your business location
Apart from these important documents, you will also have to produce certain other statements. They are as follows:
- Financial statements of your business that demonstrates its ability to repay the loan
- A brief history of your business
- The challenges your enterprises face and how you can overcome it
- History of loans applied and received for your business
Purchasing an Already Existing Small Business
The documentation and the application process will vary if you want to purchase a business. In such cases, you will have to provide extra documents in addition to the ones mentioned above.
Here's a list of things to consider when you are applying for a Small Business Loan to purchase an already existing business:
- The current balance sheet of the business
- Profit and Loss statement
- The proposed bill of sale
- All documents and records of terms and conditions of sale
- Federal income tax returns record of the business (it should record at least the past two years)
- Asking price of the company (including details on equipment, machinery, lease, and inventory)
Summary of First Midwest Bank's Loan Options
SBA loans with First Midwest Banks can be a fantastic boost for your business's growth. These loans provide sustainable, long-term solutions for your financial issues. Furthermore, you can negotiate the interest price to get a fair deal.
You can choose any type of loan program the bank offers based on what your company needs. The bank will also help you connect with a Small Business Lending expert who can take you through all the essential aspects.
You can call them, send an email, or simply walk into your nearest branch. On the flip side, the processing of these loans can take a lot of time, which you may not have.