For small business owners, securing financing is often a critical step in expanding or acquiring a new venture. Many people don’t know how the Small Business Administration (SBA) lends money, especially for RV parks. These myths typically stem from misunderstandings or experiences with lenders who are not specialists in SBA loans.

Moe Kruger, Senior Loan Officer of RV Park Financing at Live Oak Bank, explains that SBA loans can be a powerful tool when structured correctly by an experienced lender. In this blog, we’ll explain how SBA loans can help RV park owners grow their businesses.

Myth 1: SBA Loan Products Are Not Borrower-Friendly

Reality: SBA Loans Offer Flexibility and Favorable Terms

A common misconception is that SBA loans are rigid and unfavorable compared to conventional loans. However, the SBA designed loans with small businesses in mind, offering much more flexibility than traditional bank loans. Here are some borrower-friendly aspects of SBA loans:

• Longer Repayment Terms: SBA loans offer repayment terms of 7 to 10 years, with up to 25 years for loans that include real estate.
• No balloon payments: Unlike conventional loans, SBA loans do not require large balloon payments, reducing financial stress on business owners.
• Favorable Interest Rates: SBA loan interest rates are often competitive with, or even more favorable than, conventional loans.

Myth 2: The SBA Lending Process is Slow and Inefficient

Reality: Preferred lenders can streamline the process.

Another common myth is that the SBA lending process is slow and bogged down by excessive documentation. While it’s true that SBA loans require documentation similar to any traditional loan, the key to efficiency lies in working with a Preferred Lender Program (PLP) partner like Live Oak Bank.

• PLP Status: Lenders with PLP status can approve loans on behalf of the SBA without waiting for the agency’s approval, speeding up the process.
• Industry-Specific Expertise: A lender experienced in SBA loans for RV parks can quickly gather the necessary documents and structure the loan properly, keeping the process moving efficiently.

As Moe Kruger explains, “Working with an SBA lender who specializes in your industry can make all the difference when it comes to getting your loan processed quickly and accurately.”

Myth 3: The SBA Lends Money Directly to Small Businesses

Reality: Banks Lend the Money, Backed by the SBA

Contrary to popular belief, the SBA does not directly lend money to small businesses. Instead, banks provide the loans, and the SBA guarantees a portion of the loan to reduce the bank’s risk. This guarantee allows banks to offer loans to businesses that may not meet the strict criteria of conventional lending.

• Higher Leverage: For example, Live Oak Bank may offer up to 85–90% leverage on SBA 7(a) loans for RV parks, whereas a conventional loan might have a lower loan-to-value (LTV) ratio.
• Credit Support: The SBA guarantee functions like insurance for the bank, enabling them to extend credit beyond conventional limits.

By partnering with Live Oak Bank, borrowers benefit from the SBA guarantee while working with a lender who understands the outdoor hospitality industry and can offer customized financial solutions.

Myth 4: SBA Loans Are Only for Underperforming Businesses

Reality: SBA Loans Are for Growing, Profitable Businesses

There is still a misconception that SBA loans are a last resort for struggling businesses or borrowers with poor credit. This could not be further from the truth. Businesses that are already established and growing, like successful RV parks, often use SBA loans to help them expand.

• Strong Underwriting: While the SBA provides a guarantee, lenders still apply rigorous underwriting standards. Factors like cash flow, market conditions, and borrower experience are all considered.
• Financing for Sophisticated Deals: SBA loans can be structured to meet complex financing needs, such as acquiring large RV parks, refinancing existing debts, or funding expansions.

As Moe Kruger highlights, “The SBA program can be used for sophisticated financing structures for expanding businesses, not just for those distressed.”

Myth 5: SBA Loans Require Extensive Collateral

Reality: Collateral Is Important, but Not Always a Deal-Breaker

Many business owners think that they can only get SBA loans if they have many assets, like real estate. While collateral is a factor, it’s not always a deal-breaker.

• Collateral Requirements: SBA loans require lenders to take available collateral, such as real estate, but they are not solely dependent on it.
• Flexible Terms: A business with strong financials but limited collateral can still qualify for an SBA loan. In such cases, lenders focus on the borrower’s cash flow and business strength rather than the value of hard assets.

For RV park owners who may not have extensive collateral, working with a lender like Live Oak Bank that understands the nuances of the outdoor hospitality industry can make a significant difference.

Myth 6: You Can Only Borrow Up to $5 Million

Reality: You Can Borrow More Through Loan Structuring

While the SBA 7(a) program has a $5 million lending cap, banks like Live Oak Bank can combine an SBA loan with other financing options to meet higher funding needs.

• Pari Passu Loan: Live Oak Bank may pair an SBA 7(a) loan of up to $5 million with a conventional loan to cover larger projects.
• Flexible Financing: If an RV park expansion or new acquisition exceeds the SBA limit, Live Oak Bank can provide a conventional loan or a line of credit to cover the additional amount.

This flexibility allows RV park owners to access the capital they require for large-scale projects without being constrained by the SBA loan cap.

Why work with Live Oak Bank?

Industry Expertise and SBA Loan Leadership

Choosing the right lender is crucial when navigating SBA lending. Live Oak Bank is the top SBA 7(a) lender in the nation by dollar amount^*, specializing in RV park financing. With over $300 million in small business financing under his belt, Moe Kruger brings a wealth of experience to RV park owners seeking financial support.

• Proven Track Record: Live Oak Bank has extensive experience in the outdoor hospitality industry, making them uniquely positioned to offer financing solutions tailored to RV park owners.
• Specialized Knowledge: Moe Kruger and his team understand the specific challenges and opportunities within the RV park and outdoor hospitality market, ensuring that your loan is structured for success.
• Preferred Lender Program Status: As a PLP lender, Live Oak Bank can expedite the loan approval process, reducing the typical delays associated with SBA loans.

Building a Long-Term Financial Partnership

To get an SBA loan, you need to work with a lender who understands your business goals and work together for a long time. With Live Oak Bank, RV park owners can get help with money and keep their business going.

Frequently Asked Questions

1. What is an SBA loan, and how does it work for RV parks?

An SBA loan is a loan provided by a bank but partially guaranteed by the Small Business Administration. It offers flexible terms and favorable rates, so its a great option for RV park owners to grow their business.

2. Do SBA loans require significant collateral?

While collateral is considered, SBA loans do not require extensive collateral for approval. Strong cash flow and financials can often compensate for limited collateral.

3. Is the SBA loan process slow?

The process can be simplified when working with a Preferred Lender Program (PLP) lender which can approve loans on behalf of the SBA without delays.

4. Can I borrow more than $5 million with an SBA loan?

While the SBA 7(a) program has a $5 million limit, Live Oak Bank can combine an SBA loan with other financing options to provide higher funding amounts.

5. Why should I choose Live Oak Bank for my SBA loan?

Live Oak Bank is the top SBA 7(a) lender in the nation by dollar amount, specializing in RV park financing. Their expertise and PLP status help expedite the loan process and ensure your financing is structured for long-term success.

For more insights on how to thrive in the campground industry, keep reading our blog.

^{*The data supplied by the SBA reflects 7(a) highest dollar volume FY 2023.}