Are you planning to start a small business? Or do you want to keep your business up and running?
Prosperity Bancshares offers small business loans that can help your business in many ways. You can use it to expand your workforce, cover payroll, or invest in new equipment.
These loans will help your business grow and thrive among the competition. There are various types of small business loans that can support different needs. For instance, certain loans can help you start a franchise, while others can get you cash when you have unpaid invoices.
This article will explore and compare options for small business financing. It includes everything you need to know, from how you can find the best loan to start your business to expand and maintain your trade.
An Overview of Prosperity Bancshares’ Loans
Prosperity Bancshares is a bank holding company with its headquarters in Houston, Texas. The company has over 285 branch operations across Texas and central Oklahoma. It employs about 4000 people across its branches.
This company claims to have helped SMEs by approving more than 10,000 of their SBA Payroll Protection Program loans adding up to over one billion dollars. They operate loan products through the 504 Loan Programs and the Small Business Act 7(a).
They offer loans to any small business as long as they follow a certain set of criteria. Some of these criteria include having reasonable equity to invest in and utilize available businesses. You can check out their loans as long as they are within the SBA standards.
Types of Loans Offered by Prosperity Bancshares
It is vital to pick the correct type of loan to ensure your business receives the best possible financial support. If you are worried about choosing the right small business loan, you do not have to be since the bank will advise you by laying out your options.
Prosperity Bancshares offers two loan programs: SBA 7(a) Guarantee Loan Program and SBA 504 Loan Program.
1. SBA 7(a) Guarantee Loan Program
Prosperity Bancshares provides loans for small businesses through the SBA’s primary 7(a) program. It offers financial assistance under terms and conditions like the guarantee percentage and loan amount.
The maximum loan amount under this scheme limits to 5 million dollars. The government also regulates the maximum SBA guarantee rate. It is at 85% for loans up to 150,000 dollars and 75% for loans greater than 150,000 dollars.
The borrower and the bank can negotiate the interest rate. However, it may not exceed the SBA maximum. Further, many subtypes of loans come under the 7(a) loans, such as the 7(a) small loan, SBA express, and others.
This SBA loan will enable your business improvement in many ways. Some of them include:
- Invest in new machinery or updating existing equipment
- Acquire capital assets such as engineering, installation, and impact fees
- Refinance outstanding debt
- Invest in inventory or modernize the current facility
- Start a new business or expand existing enterprises
- Acquire an existing business
2. SBA 504 Loan Program
SBA 504 loan program or the CDC (Certified Development Companies) program provides businesses with fixed-rate financing of up to 5 million dollars for significant fixed assets. This loan helps in the long term, promotes business development and job creation.
It includes the same eligibility criteria such as falling within the SBA guidelines, feasible business plan, and the ability to repay the loan. Further, it offers loans for modernizing existing facilities, new construction, or investing in machinery.
This loan includes three parts:
- Loan obtained with a senior lien from the lending bank that covers about 50% of the project’s cost
- Loan obtained with a junior lien from the CDC that covers about 40% of the cost
- A minimum of 10% equity from the business
What Lending Criteria Does the Bank Have?
Knowing the lending criteria will help you narrow the options you have at hand. If your business meets the following eligibility requirements, you can consider the two different types of programs this bank offers.
So, below are some pointers that can help you understand if you are eligible for loans at Prosperity Bancshares.
- Size standards fall under the SBA
- The business operates within the USA or its possessions
- Operates for profit
- Has equity to invest and has used available business and personal resources
Your organization will not be eligible for the loan if it is any of the following:
- Academic school
- Pyramid sales plans
- Non-profit organizations such as charitable trusts, religious organizations, or others
- Real estate investment such as rental properties
- Lending activities
- Gambling activities such as race tracks or casinos
Prosperity Bancshares’s Interest Rates, Fees, and Loan Options
SBA sets guidelines for banks in terms of interest and fees in a way that helps business owners. Hence, as a borrower, it can bring down your interest rates when compared to other loans.
Interest Rates for Different Loan Options
You can negotiate with the bank about the interest rate, as mentioned earlier. However, it is better to know what to expect before you start with the negotiation.
The maximum SBA loan rates for the 7(a) plan depend on the loan size and term. Here is a breakdown of SBA business loans’ interest and fees.
7(a) loans repaid in less than seven years
- Loan size of 25,000 dollars or less - *Prime + 4.25%
- Between 25,001 and 50,000 dollars - *Prime + 3.25%
- More than 50,000 dollars - *Prime + 2.25%
7(a) loans repaid in more than seven years
- Loan size of 25,000 dollars or less - *Prime + 4.75%
- Between 25,001 and 50,000 dollars - *Prime + 3.75%
- More than 50,000 dollars - *Prime + 2.75%
SBA Express Loans
SBA Express Loan is also a part of the 7(a) program with a higher interest rate. The rate changes depending on the amount borrowed. On average, it ranges between prime plus 4.5% to prime plus 6.5%.
7(a) fees are based on the maturity date and the loan amount, among other factors. Sometimes lenders pay the guarantee fee, while some other times, you should pay the expense. Nonetheless, the SBA has a cap on the maximum amount of guarantee fees.
Charging fees based on a three-tier system:
- For loan amount between 150,000 and 700,000 dollars - 3%
- Between 701,000 and 1 million dollars - 3.5%
- For more than a million dollars - 3.75%
On the other hand, there is no guarantee fee if the loan amount is less than 150,000 dollars. If it is above 150,000 dollars, you will see a 0.25% guarantee fee, and it will mature in less than one year.
Fee for SBA 504 Loan Program
SBA 504 loan terms primarily contain the following:
- The minimum loan amount is 50,000 dollars, and the maximum amount is 5.5 million
- Available in 10- or 20-year terms
- The fee percentage is fixed, but they reset every five years (usually, it resets to a lower payment for the business)
When applying for a CDC, you will receive a quote of the effective interest rate. It is the sum of three different fees. They are the guarantee fee to the SBA, servicing fee to the CDC, and the costs for the central servicing agent.
Prosperity Bancshares’s Application
The application process for an SBA loan program at Prosperity Bancshares is quite complicated. However, if you collect the required documents for the application, you can complete the process easily.
Here is a list of things the bank will request to complete your application. Once the bank completes it, they will submit it to the SBA.
Start with filling the SBA loan application form. Fill in the personal background and financial statement. You need to provide Business Financial Statements to support your application as it will help demonstrate your ability to repay the loan.
- P&L (Profit and Loss) Statement within the 180 days of the application and one year projected financial statement
- Ownership and affiliations
- Business license or certificate
- Loan application history that includes records of any loans that you applied for in the past
- Income tax returns of your business’s principals for the past three years
- A brief history of your business and its challenges
- A copy of your business lease, or note from the landlord, explaining the proposed lease terms
If you are purchasing an existing business, you will have to provide some additional information. They are listed below:
- Asking price of the business, including inventory, furniture, and machinery
- Federal income tax returns of business from the past two years
- P&L statement and the current balance sheet
- Proposed Bill of Sale with Terms of Sale
Summary of Prosperity Bancshares’s Loan Options
If you are looking for a long-term solution and an affordable way to ramp up your business, securing SBA loans can be an excellent choice.
SBA loans provide business people the best possible interest in the market. However, the application process can be laborious and time-consuming.
You can choose any of the two types of loans Prosperity Bancshares offers, depending on your requirements. Contact your local branch for more information on the loans they can provide for your particular business.
Alternatively, you can choose to borrow money from other online lenders if you urgently need money. These loans are easy to secure, and the company will process them very quickly.