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2010 american hotel & lodging association 031710 (1)
 

2010 american hotel & lodging association 031710 (1)

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2010 american hotel & lodging association 031710 (1) 2010 american hotel & lodging association 031710 (1) Presentation Transcript

  • 7(a) & 504 Loan Seminar U.S. Small Business Administration 233 Peachtree Street, NE, Suite 1900 Atlanta, GA 30303 404-331-0100 www.sba.gov
  • BUSINESS LOANS & THE SBA
    • Guaranty Loans:
    • 7(a)
    • SBA Express
    • Special Loan Programs
    • 504 Loan Program
  • WHO CAN GET AN SBA LOAN?
    • ELIGIBILITY
    • Size
    • Type
    • Ownership
  • ELIGIBILITY – NAICS SIZE STANDARDS
    • Manufacturer - 500 employees
    • Wholesalers - 100 employees
    • Retail - $6.5 - $26.5 Million
    • Service - $6.5 - $23.5 Million
    • Contractors - $6.5 - $31.0 Million
    • Note: Size standards includes affiliates
    • www.sba.gov/size
  • ELIGIBLE LOAN PURPOSES
    • Business start-ups
    • Improve site
    • Purchase building
    • Acquire/install fixed assets
    • Purchase inventory, supplies, raw materials
  • ELIGIBLE LOAN PURPOSES
    • Renovate building
    • Construct building
    • Working capital
    • Refinancing - subject to restrictions
    • Business acquisitions
    • Acquire land (purchase or lease)
  • GUARANTY PERCENTAGES
    • Loans up to $ 150,000 - 85%
    • Loans over $ 150,000 - 75%
    • SBAExpress – 50%
  • TERMS
    • Real Estate - up to 25 years
    • M & E - up to 10 years
    • Working Capital - up to 7 years
  • LOAN LIMITS
    • No lower limit
    • Maximum Gross Amount - $2,000,000
    • Maximum Guaranty Amount - $1,500,000
  • INTEREST RATES
    • Term less than 7 years
      • NY prime + 2 1/4 %
    • Term 7 years and longer
      • NY prime + 2 3/4%
    • Higher rates on small loans
    • Rate may be fixed or variable
    • Periodic adjustment allowable on variable rate
  • MAXIMUM INTEREST RATES Loan Amount Term is < 7 yrs Term is > 7 yrs Up to $25,000 Prime + 4.25% Prime + 4.75% $25,001 – $50,000 Prime + 3.25% Prime + 3.75% $50,001 & above Prime + 2.25% Prime + 2.75% (Excluding Express Loans)
    • Existing debt is not on reasonable terms & refinancing provides substantial benefit
    • Loan current for last 36 months for debt with same lender
    • Requires 10% cash flow improvement * *SOP 50 10 B 5 Effective 10/01/09
    DEBT REFINANCING
  • INELIGIBLE - LOAN PROCEEDS
    • Payoff unsecured creditors
    • Repay debt to a director of the lender
    • Provide funds to an owner
    • Replenish working capital which has been used for any of the above
    • Alien, certain status
    • Anyone owing money to the government which is not current; IRS, Student Loans
  • GUARANTY FEES
    • Term of 12 months or less - 1/4 of 1%
    • Term over 12 months:
      • Loans up to $150,000
        • 2% of guaranteed amount
        • (Lender may retain 25% of this amount)
        • Loans over $150,000 to $700,000
        • 3% of guaranteed amount
        • Loans over $700,000
        • 3.5% of guaranteed amount
    • Additional Fee of .25% on guaranteed amount in excess of $1 million
  • GUARANTY FEES Loan Amount Guaranty % Guaranty Fee % Guaranty Amount $150,000 $600,000 85% 2.0% $2,550 75% 3.0% $13,500 $800,000 75% 3.5% $21,000
  • CREDIT REQUIREMENTS
    • Good character
    • Ability to manage the business
    • Sufficient equity
    • Adequate repayment ability
    • Collateral: SBA will not decline a loan only on the basis of inadequate collateral
    • Answer eligibility questions
    • Determine prospect for approval
    • Provide borrower with application
    • Lender reviews application
    • Perform loan analysis
    • Submit package to SBA for approval
    THE PROCESS
  • SBA REVIEW
    • SBA concurs in approval or denies and
    • notifies lender
    • Lender closes loan
  • 504 LOANS
    • Long Term
    • Fixed Asset Financing
  • ADVANTAGES of 504 LOANS
    • Expand services to customer base
    • Provide longer terms
    • Exposure only 50%
    • First mortgage position / Secondary Mkt .
    • No restrictions on bank loan
    • Manufacturing projects up to $10 million
  • 504 LOANS ELIGIBILITY
    • SBA size standards
    • Firm’s net worth may not exceed $7 million
    • Net profits after Federal income taxes may not exceed $2.5 million during the preceding two fiscal years
    • Job creation / retention
      • project must create or retain 1 job for each $65,000 of SBA assistance or must be considered a “community project”
      • for manufacturers, 1 job per $100,000
  • 504 LOANS USE of PROCEEDS
    • Land and improvement at cost
      • Construction of building
        • 60% occupancy of space and demonstrate a need for future expansion
      • Purchase/remodel existing building
        • must occupy at least 51% and funds can be used to remodel only portion to be used by business
    • Machinery & equipment - 10 year life
    • Construction contingency fund up to 10% of construction amount
    • Soft costs
  • 504 LOANS - INELIGIBLE USE OF PROCEEDS
    • Working capital
    • Management fees
    • Consulting fees
    • Franchise fees
    • Fees connected with permanent financing
    • Airplanes or automotive equipment
    • Debt refinancing (other than interim)
  • 504 LOANS - LOAN LIMITS
      • $1,500,000 - Maximum amount of guarantee - SBA/CDC share
      • Exceptions to $2 million maximum when national objective/ public policy goals involved
      • Up to $4 million for manufacturing
  • TYPICAL 504 LOAN STRUCTURE
    • Local lender 50%
    • SBA/CDC 40%
    • Small Business 10%
  • 504 LOANS INTEREST RATES
      • Lender portion - no restrictions
      • SBA/CDC - market rate at time of sale of debenture - fixed rate
  • 504 LOANS TERMS
      • Lender portion - minimum of 10 years or 7 years on a 10 year debenture
      • SBA/CDC portion - maximum of 20 years
      • Prepayment penalty
  • 504 LOANS CREDIT REQUIREMENTS
    • Same basic credit criteria as
    • guaranteed loans
    • Good character
    • Ability to manage the business
    • Sufficient equity invested
    • Adequate repayment ability
    • Collateral
  • 504 LOANS PROCESS
    • CDC is responsible for
      • developing and submitting application
      • closing SBA/CDC loan
    • Funds from debenture sale wired directly to the bank
  • A Typical 504 Project
    • For-profit enterprise
    • Acquiring or expanding a facility
    • Construction period with interim financing
    • by bank
    • Jobs created
  • CERTIFIED DEVELOPMENT COMPANIES
    • Capital Partners Cert Dev Company Atlanta (404) 475-6002
    • Coastal Area District Dev Authority Brunswick (912) 261-2500
    • CSRA Business Lending Augusta (706) 210-2010
    • Economic Dev Corp Fulton County College Park (404) 836-7731
    • Georgia Certified Dev Corporation Atlanta (404) 442-2480
    • Small Business Access Partners, Inc Gainesville (770) 536-7839
    • Georgia Resource Capital Marietta (678) 560-2656
    • Georgia Small Business Capital Decatur (404) 373-8601
    • George Small Business Lender, Inc Macon (478) 751-6160
    • North Georgia Certified Dev Corp Dalton (706) 272-2300
    • Small Business Assistance Corp Savannah (912) 232-4700
    • South Georgia Area Dev Corp Valdosta (229) 333-5281
  • INTERNET ACCESS
    • SBA home page - all programs
      • www.sba.gov
    • GA home page
      • www.sba.gov/ga
  • Thank you!
    • Presented by:
    • Vianna Harrison
    • Lender Relations Specialist
    • Georgia District Office
    • (404) 331-0100, x607
    • [email_address]