How SBA Loans Can Help Business Expansion
By Vickie An
July 22, 2019
SBA loans are federally guaranteed term loans that businesses can use for working capital, equipment purchases, real estate acquisitions, and other purposes. (Photo credit): Gettyimages.com/Hero Images
When this Houston sign company overshot its space, an SBA loan gave it the means to grow.
Azmir Islam had reached a tipping point in 2016. His then six-year-old company New Modern Sign had long passed its current location in a Houston mall, and it was recruiting new customers all the time. Of course, running a growing business is a good problem when you’re an entrepreneur – Islam just didn’t have the physical space to meet the demand.
“My neighbors were complaining while I was asking the trucks to do my job. It was crowded. Our ceiling wasn’t high, so if we had to build a tall sign, even if we could build it inside, we couldn’t bring it back outside, ”he explained of his. arrangement in the mall. “So I was setting up little tables outside the store to build some of the (bigger) signs, and my owner would come in and say, ‘What, do you think this is like a flea market? “”
Lack of space wasn’t the only problem, however. Being in a mall meant the rent was high, so it was far from ideal, he adds, noting that sign companies are typically short of warehouses. But, he said, “It was the only thing we knew, so we just made do.”
At this point in the business, buying a property seemed like the next logical step. Islam was just not sure that it could afford it. This is where applying for a small business loan has really helped.
The old storefront of the new modern sign on the shopping square
Finance your expansion
It was clear New Modern Sign was ready to grow, according to Paul Cheong, senior vice president and senior relationship manager at East West Bank. “When I visited (the store), I could see his signs in the middle of the parking lot. And he said, ‘Well, you see, I have all this demand, but sometimes my space is not big enough,’ ”recalls Cheong.
After calculating the numbers, Cheong found that Islam’s firm was an ideal candidate for the SBA’s flagship 7 (a) loan. The program offers federally guaranteed term loans of up to $ 5 million, and the funds can be used for a variety of purposes, including working capital, equipment purchases and real estate acquisitions. Last year, the SBA approved approximately 60,353 7 (a) loans, for a total of $ 25.37 billion.
Around the time Islam found out he qualified for the SBA loan, he found the perfect property as well. “It’s like the guy knows that I will come and one day I will take over his business,” he says. “It was already compartmentalized for me, it had the perfect parking space, the ability to expand.”
The timing was impeccable, notes Cheong. “During my 24 years of SBA loan, I felt that this was a really good time for this loan for this company, let’s put it that way. The opportunity has really come to fruition. What’s more, the SBA often allows borrowers a lower down payment than a conventional business loan – 10 to 15 percent versus 30 to 35 percent, Cheong adds.
It wasn’t long before Islam won the bid for the property and was approved for a loan of $ 540,000. He moved into the new space in December 2016 and returned to the path soon after. Since then, taking on more projects – and bigger ones – has not been a problem at all. Last year, the company reported sales of $ 1.4 million.
“People feel more confident in the things we can do once they visit the facility,” says Islam, whose local customers range from SignatureCare and Metro PCS emergency centers, to Taco Bell and KFC. “They have no doubts that we have the ability or the ability to do it.”
[Also read: SBA Loans 101: Frequently Asked Questions]
From the psyche to the signs
A career in the signs has not always been part of the grand plan of Islam. At the request of his parents, he was studying for a degree in psychology, with a minor in biology, when someone came to see him with the opportunity to get into the sign business. And because he was hungry for an excuse not to specialize in psychology, he took it. The problem? He had no sign making experience at the time, so he took it upon himself to learn everything from scratch. At first, he admits, he hated it.
New Modern Sign warehouse
“The sign had to do with everything I fear: I didn’t like taking action. I didn’t like heights. I didn’t like having to talk to people. I didn’t like having to convince someone that they needed something, ”he reveals. “And I didn’t know anything, and there was no one to teach me. But I kept persevering and worked for free so that many people would gain knowledge. Slowly I broadened my skills and learned through my mistakes, by trial and error. Learning that way really put it in me.
Today Islam says he has come to really love and appreciate his work. Running a successful business and having the right space to continue to grow doesn’t hurt either. And if he has learned anything from his experience over the years, it’s that “there is no failure, there is only feedback,” he says.
The other tip he has for other business owners is to make sure you stay on top of your numbers. “At the end of the day, if you want to grow, if you want to invest, if you want to buy equipment, if you want to get property, the numbers tell the truth,” Islam says. “If you can make the numbers happen and you go for it, then amazing things can happen. ”
Learn more about how SBA loans can help your business grow.