SBA Loans 2009
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SBA Loans 2009

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An introduction to the SBA loan process.

An introduction to the SBA loan process.

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SBA Loans 2009 SBA Loans 2009 Presentation Transcript

  • Gateway Business Bank Presents SBA Loans “Nuts & Bolts of the SBA Process”
  • SBA Loan Program-Overview
    • Created by Congress in the Small Business Act of 1953.
    • Nearly 20 million small businesses have received funding since 1953
    • Current loan portfolio has roughly 219,000 loans worth more than $45 billion
  • SBA Loan Program-Overview
    • SBA is not a direct lender. The banks are the direct lenders
    • SBA is the guarantor of the loans that are funded by participating lenders.
    • Typical SBA guarantee is 75% of the loan.
    • Borrowers have no direct contact with SBA.
    • All loan servicing, billing, etc. are handled by the originating lender
  • SBA Loan Program-Overview
    • SBA has specialized outreach programs for women, minorities and armed forces veterans
    • Also provide loans to victims of natural disasters
    • Specialized advice and assistance in International Trade
  • Loan Programs
    • 7a Loan Program (Start-ups, franchises, expansions, etc.)
    • SBA Express
    • Patriot Express
    • CDC/504 Loan Program
    • International Trade
    • Disaster Assistance
  • Eligibility-Size Standards
    • Majority of business are considered small by SBA
    • Industry Specific
    • Is based off of Annual Sales or # of Employees
  • Eligibility-Credit Factors
    • FICO Score
    • What is your payment history
    • Are there foreclosures, bankruptcies, etc.
    • Equity Investment-How much is there?
    • Earnings Requirements-Cash flow services debt
    • Working Capital = Current Assets-Current Liabilities
    • Collateral
    • Resource Management
  • Eligibility-Basic Requirements
    • Business Plan
    • Loan Request
    • Collateral
    • Business Financial Statements
    • Personal Financial Statement
    • Business Tax Returns
    • Personal Tax Returns
  • Budget/Start-Up Expenses
    • Prepare a budget
      • Construction of leasehold improvement
      • Equipment (buy vs. lease)
      • Vehicles
      • Furniture & Fixtures
      • Inventory
      • Accounts Receivable
      • Working Capital
  • 7a Loan Program
    • SBA’s Primary Loan Program
    • Flexible Program
      • Start-Ups: Franchises and Non-Franchise
      • Working Capital
      • Leasehold Improvements
      • Furniture & Fixtures
      • Inventory
      • Land and Real Estate
  • 7a Loan Program
    • Loan Maturity is 7-10 years for non-real estate & 25 years for fixed assets/real estate
    • Maximum Loan amount is $2,000,000
    • Interest Rates
      • Negotiated between borrower and lender. Is pegged to the Prime Rate (3.25% as of 12/01/09). Subject to SBA maximums.
      • Can be fixed or variable
  • 7a Loan Program
    • Interest Rates cont.
      • Loans of $50,000 or more must not exceed Prime + 2.25% if maturity is less than 7 years
      • If maturity is 7 years or longer the rate cannot exceed Prime + 2.75%
  • 7a Loan Program
    • Prepayment Penalty: If loan proceeds are used for Real Estate there is a prepayment penalty for 3 years.
    • Non-Real Estate uses will not have a prepayment penalty
  • 7a Loan Program
    • Fees: Both the lender and the borrower share the responsibility of paying the fees to the SBA
    • Primary fee will be the Guarantee Fee. It is based off of the guaranteed portion of the loan amount
    • For 2010 the Guarantee Fee is waived.
  • 7a Loan Program
    • Guarantee Fee Schedule:
      • $150,000 or less = 2%
      • $150,001 - $700,000 = 3%
      • $700,001 – Up = 3.5%
      • $1,000,000 – Up = 3.75%
  • CDC/504 Program
    • Provides long-term, fixed rate financing for major fixed assets, such as land and buildings
    • CDC (Certified Development Company) is a non-profit corporation set up to contribute to the economic development of it’s community
    • They work with the SBA and private sector lenders to assist small businesses
  • CDC/504 Program
  • CDC/504 Program
    • Requires 3 approvals: Bank, CDC & SBA
    • Maximum Debenture is $2,000,000 when meeting the job creation criteria or public policy goal.
    • Manufacturer’s have a maximum debenture of $4,000,000
    • Funds cannot be used for working capital, inventory or refinancing debt
  • CDC/504 Program
    • Rates: Private lender determines the index for their portion. The CDC/SBA portion will be pegged to the 5 or 10 year Treasury bond
    • Maturities: Private lenders portion will typically be for 25 years. The CDC/SBA portion will be for 20 years.
    • Collateral: The project assets being financed are used as collateral. Personal guaranties of principals are required.
  • Conclusion
    • SBA loans are a viable option to finance your business opportunity.
    • Turn around time and processing will be a function of the lender that you choose
    • Be prepared to do some work
    • Try to maintain a positive attitude and be patient
    • Do not give up if turned down by the bank