Borrow Like an Owner

On my most recent SBA loan, rates had come down since we closed. So I called the loan officer who'd helped me get it started and asked whether we could revisit my rate.

She routed me to a loan servicing manager, who got on a call with me and ran through three modification scenarios, simply because I asked.

It was the second time I'd done this.

I've taken three SBA loans over my career. One was for a commercial real estate investment. The other two funded business acquisitions. The first, $640K in 2008, went toward buying a business that sold 12 years later for over 20X purchase price, and 5 years after that for over 100X multiplier. The second, $422K in 2023, went into a business that's grown over 60% in the span of three years since.

Both business loans were fixed-rate. Both were underwritten when rates were higher than they'd be two or three years later. Both were originated and serviced by a large national bank. And both times, I asked for a modification, and the bank came back with options.

That's not the reputation SBA loans carry. They're known for paperwork, slow approvals, inflexible service protocols, and the dreaded personal guarantee. Some of those are accurate. But that reputation stops at closing, and after closing is where these loans earned my respect.

The guarantee

On my first loan, there were at least two occasions where I almost pulled the plug. Both times, it came down to the same thing: the SBA was forcing me to intertwine my personal financial infrastructure with the business's. The personal guarantee, the lien on my home. Everything I'd been conditioned to do, in the way college indoctrinated me into the world of business, in my corporate career, and probably from my upbringing, said to keep those two things separate.

The SBA doesn't let you. But if the personal guarantee is going to scare you off, that's probably a reflection of your own belief and commitment to your idea. It says more about your confidence in your business than about the loan.

The process

The hardest part of every one of these loans was getting it. Several iterations on the business plan and the financial projections. A five-year plan, which inherently comes with some pie-in-the-sky forecasting. But even with the pie in the sky, you still have to justify how you got there. You have to think through pricing, customer acquisition, and churn.

It was slow and involved. In hindsight, I'm grateful for it. It's the kind of exercise that forces you to understand your financials at a very low level of detail, before you've spent a dollar.

If anything, I wish the banks had been tougher. The process made me justify my numbers, but no lender ever pushed back hard on the operating plan behind them. Nobody pressed me on the business model, financial governance, how I'd market, or how the sales process would actually work. Those are the questions that decide whether the numbers ever come true.

After closing

This is where the loans surprised me.

None of them carried a prepayment penalty. The 10-year terms let me pay down aggressively. I paid off the first loan in year six, when I lined up a second, much larger round of funding for the business. The 2023 loan is in year three, and we actually look forward to the monthly statements, because they show how fast the principal balance is coming down.

But the biggest advantage was the ability to modify terms midstream.

On that most recent call, the servicing manager laid out three options built on two levers: the rate and the remaining term. Two of the three options reset the loan back to a full 10-year term. Those two offered a significant reduction in the monthly payment. They also meant the liability would stay on our balance sheet for another decade.

I took the third option: a straight rate reduction, keeping the remaining term.

Here's how I think about it. Any term debt on your books reduces your optionality. It shapes what you can do when an opportunity shows up, or when something goes wrong. A lower payment feels good every month. A shorter runway to zero debt gives you choices. In most cases, I'll take the choices.

The call nobody makes

Asking for a modification isn't something that occurs to most people. Most of us believe that once the loan closes, we're locked into its terms. That's absolutely not the case.

Both times I asked, I didn't do anything special. I called the loan officer who'd started the process with me. That person knew me and routed me to the right people. That's the practical lesson: stay connected to your SBA contacts for the life of the loan. The relationship doesn't end at closing, and if you treat it like it does, you'll never know what's available.

I can't promise your lender will offer what mine did. But you won't know unless you ask.

Where I'd push further

The common belief is that SBA loans are built for buying an established, profitable business. They are. I think they're also a strong fit for launching a new one, at minimum for working capital.

The program allows for it. The SBA applies the same 10% equity injection requirement to a startup as it does to someone buying an existing business. For smaller needs, the SBA Microloan program lends up to $50,000 for working capital and equipment, and many of those lenders pair the loan with mentoring at no extra cost.

It's harder to qualify as a startup than as a buyer of a business with a track record, and the personal guarantee applies either way: anyone who owns 20% or more of the business signs one.

The underwriting process matters even more for a new business. A buyer inherits a set of numbers. A founder has to build them. The discipline that frustrated me is exactly what a new business needs, and the lender makes you do it before anything is at stake.

Borrow like an owner

Every part of this that made me uncomfortable turned out to be the part that served me.

The personal guarantee forced me to answer whether I actually believed in what I was building. The underwriting forced me to understand the business at a level of detail I'd never have reached on my own. And the move that paid off most, asking for better terms, was the one nothing in my background prepared me to make.

That last one matters most for anyone coming out of corporate. For years, the terms were set for you. Your salary band, your benefits, your budget, your review cycle. You could push at the edges, but the structure came from above, and you got good at operating inside it.

Ownership doesn't work that way. The terms you sign on day one are where the relationship starts. What you do with them over the next ten years is up to you.

So if you're in the window before you leave: sign the guarantee only if you believe in the business. Push yourself harder than the bank will. Treat closing as the start of the relationship, not the end of the negotiation. And pay the debt down fast. A lower payment feels good every month. Choices are worth more.

That's what it means to borrow like an owner.

Until next time,

George