109. Evaluating lending requests
The 5 C’s of Credit
Capacity: Is the borrower capable of paying the new
loan and current obligations?
Collateral: What will be pledged to secure financing?
Character: Measures the integrity of the borrower and
past credit repayment history
Conditions: Assesses the borrower’s industry and overall
economic conditions
Capital: Measures the relationship between debt and
equity in the business.
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110. Business Scenarios Seeking Financing
Existing Business: In business for 2 or more years with
same ownership, Income verifiable with Federal Tax returns
or Reviewed Financials.
Nominal Start-up: Purchase of existing business operating
at least 3 to 5 years and purchaser has 5 years of
professional and management experience.
True start-up: No clients, business in a new market, new
marketing and business plan.
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111. Considerations for an existing business 2+
years of operations
Historical and financial strengths of the business
Value of existing business assets
Management and professional experience
20% or > ownership interest would require
personal guarantee
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112. Considerations for purchasing an
existing business (Nominal Start-up)
Prior financial performance
Collateral review; intangible (client base) vs. tangible
assets (physical fixed assets)
Sources of secondary income
Management and professional experience of purchaser
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113. Considerations of a true start-up
(no existing patients)
Business plan with 24 months of projections with assumptions
The plan should be reviewed by a technical service provider such
as Small Business Development Center or CPA
Sources and uses of funds analysis
Equity injection typically required (20%)
• Note - 100% financing is usually not an option for
conventional financing. Some specialized lending programs
will offer 100% financing.
Collateral
Secondary sources of income
Personal FICO score
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114. Financing Options
Owner Private Financing
Traditional bank programs
SBA Guarantee
Specialty Lender
Vendor Financing
Equipment Leasing
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115. Loan Products
Term Loans
Lines of Credit
Business Home Equity
Lines of Credit (SBHELOC)
Commercial Real Estate
Mortgages (CREMs)
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116. Term Loans
PURPOSE:
Purchase non-real estate
fixed assets for either an
existing business or a new
business.
FEATURES:
Defined end-date on loan
Fixed monthly payment:
Payments based on principal
and interest installments.
Loan term should not
exceed the “useful life” of
asset
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117. Lines of Credit
Short term working capital
PRODUCT:
Line of Credit
PURPOSE:
Rectify timing issues: (funding payables while
waiting for receivables)
Purchases of inventory
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118. Lines of Credit
Short term working capital
REQUIREMENTS:
Usually paid down to zero annually
Renewable
BENEFITS:
Flexible repayment schedule: interest-only options
with flexible principal pay down
Repayment coincides with peak in cash flow
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119. Business Home Equity
Line of Credit
Similar in nature to the Short Term Working Capital with
the exception of collateral – being a primary residence.
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120. Commercial Mortgages (CREM)
PURPOSE:
To finance purchases or refinance commercial
buildings or mixed use properties.
FEATURES:
Repayment terms include principal and interest
Loan is secured by a mortgage on the real estate
Rates are generally Fixed for 5 years, with the
payment amortized over 20 years to keep the
payments low
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121. Credit Guarantees and Enhancement
S B A Enhancements – MOST FEES WAIVED (2009)
Purpose: Used to reduce the risk of the loan and provides a
reassurance to the lender by offering a guarantee
Express Guarantee – 50%
Patriot Express – 90% NEW
Import Express – 90% NEW
Community Express – 90% NEW
7(a) – 90% NEW
TD #1 7(a) SBA Lender in MA 2008
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122. Credit Guarantees and Enhancement
504 Program
Borrower puts down 10%, Bank finances
50% and SBA 40%
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123. Credit Guarantees and Enhancement
ARC Stabilization Loan Program
New loan program for SBA
Applicants can start applying for the loan program
6/15/09
Loans will be made by participating commercial
lenders
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124. Credit Guarantees and Enhancement
ARC Stabilization Loan Program – General Info
ARC loans can be made for up to $35,000
These loans can be used to pay up to six months
worth of business debt
Business debts include mortgages, non SBA
loans, lines of credit and credit cards.
These loans are interest free, no fees & have a
100% guaranty
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125. Credit Guarantees and Enhancement
ARC Stabilization Loan Program Eligibility
Designed for Viable Small Businesses – Start ups
are not eligible
The business must be in operation for at least the
previous two years
No debt can be more than 60 days past due
Must have been profitable one of the past three
years.
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126. Credit Guarantees and Enhancement
ARC Application Requirements
Must have financial statements for previous three
years
Must have projections that show profitability for
two years after disbursement of loan proceeds
Must show that your business is suffering an
immediate financial hardship
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127. Credit Guarantees and Enhancement
ARC – STAY TUNED
More ARC loan information released June 8, 2009
For the most up to date information, visit
http://www.sba.gov/recovery/arcloanprogram/inde
x.html
You can get more information at www.sba.gov
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128. Questions
Ed Nunes
Business Banker, AVP
TD Bank, NA
74 Concord Street
Framingham MA 01702
B (508) 424-7128
F (508) 620-3729
Edward.Nunes@TDBanknorth.com
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