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Primed for Growth: How SBA Loans Can Aid in Business Expansion

July 22, 2019
Businesspeople discussing how SBA loans can help them with business expansion
SBA loans are federally guaranteed term loans that businesses can use for working capital, equipment purchases, real estate acquisitions and other purposes. (Photo credit): Images

When this Houston sign company outgrew its space, an SBA loan gave it the means to expand.

Azmir Islam had reached a tipping point in 2016. His then-six-year-old business, New Modern Sign, had long outgrown its current location in a Houston shopping center, and he was picking up new clients all the time. Of course, running a company that’s actually growing is a good problem to have when you’re an entrepreneur—Islam just didn’t have the physical space to meet the demand.

“My neighbors would complain as I was getting the trucks to perform my work. It was congested. Our ceiling wasn’t high, so if we were to build a sign that was tall, even if we could build it inside we couldn’t take it back outside,” he explained of his arrangement in the strip mall. “So, I would set up little tables outside the shop to build some of the (larger) signs, and my landlord would come and say, ‘What, do you think this is like a flea market?’”

Lack of space wasn’t the only issue, though. Being in a shopping plaza meant the rent was high, so it was far from ideal, he adds, noting that sign businesses are typically run out of warehouses. But, he says, “It was the only thing we’d known, so we just made do.”

At this juncture of the business, buying a property seemed like the logical next step. Islam just wasn’t sure if he could afford it. That’s where applying for a small business loan really helped.

New Modern Sign’s old storefront in the shopping plaza
New Modern Sign’s old storefront in the shopping plaza

Financing your expansion

It was clear that New Modern Sign was ready to expand, according to Paul Cheong, a first vice president and senior relationship manager at East West Bank. “When I visited (the shop) I could see his signs laying out in the middle of the parking lot. And he said, ‘Well, you see it—I have all this demand, but sometimes my space is not big enough,’” recalls Cheong.

After running the numbers, Cheong found Islam’s company to be a textbook 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, which amounted to a total of $25.37 billion.

Around the time Islam learned he qualified for the SBA loan, he also found the perfect property. “It’s like the guy knew I would come and one day take his business,” he says. “It was already partitioned for me, it had the perfect parking space, the ability to expand.”

The timing was impeccable, remarks Cheong. “In my 24 years of SBA lending, I felt that this was truly the right timing for this loan for this company, let’s put it that way. The opportunity really just matched up.” Plus, the SBA often allows a lower down payment for borrowers than a conventional business loan—10-15 percent versus 30-35 percent, Cheong adds.

It wasn’t too long before Islam won the bid for the property and was approved for a $540,000 loan. He moved into the new space in December 2016 and hit the ground running again soon after. Since then, taking on more projects—and bigger ones—hasn’t been an issue at all. Just last year, the business made $1.4 million in revenue.

“People feel more confident in the things we can do once they visit the facility,” says Islam, whose local clients range from SignatureCare Emergency Center and Metro PCS, to Taco Bell and KFC. “They don't doubt that we have the capacity or the capability of doing it.”

[Also read: SBA Loans 101: Frequently Asked Questions]

From psych to signs

A career in signs wasn’t always part of Islam’s grand plan. At his parents’ behest, he’d been working towards a psychology degree, with a minor in biology, when someone came to him with an opportunity to get into the sign business. And because he was eager for an excuse not to major in psychology, he took it. The problem? He didn’t have any experience making signs back then, so he took it upon himself to learn everything from scratch. In the beginning, he admits, he hated it.

New Modern Sign’s warehouse
New Modern Sign’s warehouse

“The sign business had to do with everything that I fear: I didn’t like taking measurements. I didn’t like heights. I didn’t like having to talk to people. I didn’t like having to convince someone they needed something,” he reveals. “And I didn't know anything, and there was no one to teach me. But I stayed persistent, and I worked for free for a lot of people to pick up knowledge. Slowly, I expanded my skills, and I learned through my mistakes, by trial and error. Learning that way really ingrained it in me.”

Today, Islam says he’s grown to truly love and enjoy his work. Running a successful business and having the proper space to continue to grow doesn’t hurt either. And if he’s learned anything from his experience over the years, it’s that “there’s no such thing as failure—only feedback,” he says.

The other piece of advice he has for other business owners is to make sure to 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 get 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