Financing -- Loans/Term loan under SBA
We successfully completed a $2 million plus loan under the SBA 7(a) program with a small bank eager to get this project under their belt. They have no previous SBA experience it seems, so drilling down for details/questions of the SBA calculations appears just about impossible. Our contact with the local bank is more a typical bank officer instead of the back office numbers guy who can answer questions.
Part of the agreement was an additional loan required of a shareholder to the company with a two year grace period. The SBA cover form for the note shows a principal amount and a total interest amount. For illustration, let's say $100,000- and $35,000- for a 5 year at 6% with payments of $2,000-,but not starting for two years. We were NOT provided with any kind of amortization schedule. These above numbers are just pulled out of the hat because I didn't want to use specifics in this public question.
Now, the only way I could reconcile all the numbers was to assume that the SBA calculation to amortize the total amount with those dates was to assume that the interest was compounding monthly up to the point that repayment is to begin. So my monthly accounting entry will be to expense the accumulating interest and add it to the loan liability account. So by the time the loan will start to be repaid, the balance will be $135,000- Then, amortizing payments over the subsequent 5 years will result in a schedule of principal and interest payments. If I add the first two years of compounding interest plus the interest in the 5 year amortization schedule, I reach the total interest shown on the cover form.
No online programs that I can find are set up to do what I did above, even one supposedly SBA. They are all just straight amortization schedules that don't deal with compounding interest from grace periods etc. So I guess my question is if you know of one? Obviously, deep in the bowels of the SBA there are people who do this with their formulas, but those calculations never made it out to the officers who implement the agreements to coordinate with the borrower--us.
You caught me on vacay in CA.
Am without both a computer and my financial calculator, but this company I volunteer for wants me to answer your question, today.
You can do this....
You simply want to calculate the FV (future value) of a loan at some interest rate, for some term, at some specific periodicity, say monthly compounding, with $0.00 payment amount.
Then, that FV, becomes your new PV ( present value) for a simple mortgage amortization, for which you can use any standard amort table.
Hope this helps.
If not, let me know, I can be more helpful when I return.
Let me know...