1.
SBA Loans
Oscar Novelo, Eleva Financial
Azlo Webinar - August 28, 2019

2.
Purpose
• Define “Small Business”
• Demystify “SBA Loan”
• Overview of SBA Products
• Cost of SBA Loans
• SBA Programs
• Loans vs Lines
• Underwriting
• Advice
• Resources

3.
Small Business
BUSINESS
TYPE
PHOTOGRAPHY
STUDIO
COMMERCIAL
PRINT SHOP
NAICS CODE 541921 323111
GROSS SALES $7,500,000 $10,000000
NUMBER OF
EMPLOYEES
750 500

4.
Small Business
BUSINESS
TYPE
PHOTOGRAPHY
STUDIO
COMMERCIAL
PRINT SHOP
NAICS CODE 541921 323111
GROSS SALES $7,500,000
NUMBER OF
EMPLOYEES
500

5.
The Good News
• SBA guarantees help banks say “yes” to more borrowers.
• SBA guarantees are great if your business lacks adequate
collateral, assuming you demonstrate the ability to repay.
• SBA guarantees may help you qualify for more than your
history support, assuming there are compensating factors.
• SBA guarantees may help you purchase an owner-
occupied building with 10% down.
• SBA guarantees are profitable for banks.

6.
Fake News!
• Myth: The SBA makes LOANS to small businesses.
Truth: The SBA provides banks with a PARTIAL
GUARANTEE. If a borrower defaults on a business
loan, the bank gets a percentage of the outstanding
principal (after collateral has been liquidated).
• Myth: If I default on a “SBA loan” the SBA will pay the
bank and I’ll be left alone. Truth: (a) If you default on
an SBA guaranteed loan, the bank gets a portion of
their outstanding principal, and (b) the SBA refers this
payment to the U.S. Department of the Treasury for
collection.

7.
Guarantee Fees
GROSS LOAN
SIZE
FEE
$150,000 OR
LESS
2% of the guaranteed portion
$150,001-
$700,000
3% of the guaranteed portion
$700,001-
$5,000,000
3.5% of the guaranteed portion, up to $1MM +
3.75% of the guaranteed portion over $1MM

8.
Percentage Guaranteed
GROSS LOAN
SIZE
GUARANTEED PORTION
$150,000
85%
$127,500
$700,000
75%
$525,000
$5,000,000
75%
$3,750,000

9.
Guarantee Fee
GROSS LOAN
SIZE
GUARANTEED PORTION
$150,000 $150,000 X .85 = $127,500 X .02 = $2,550
$700,000 $700,000 X .75 = $525,000 X .03 = $15,750
$5,000,000
$1,000,000 X .75 = $750,000 X .035 = $26,250
$4,000,000 X .75 = $3,000,000 X .0375 = $112,500

10.
SBA Programs & Best Uses
PROGRAMS 7(A) 504
LINE OF CREDIT
INVENTORY
EQUIPMENT
COMMERCIAL
REAL ESTATE

11.
What’s the difference between
a “Loan” and a “Line of Credit”

12.
Loan
• A lump sum of capital lent at loan closing
• Amortizing payments (capital and interest)
• Upon making all predetermined payments, the loan
balance reaches zero
• Normally, interest rate is fixed
Best Use: Finance purchase of tangible assets
(equipment, machinery, commercial real estate) with a
useful life greater than 12 months.

13.
Line of Credit
• Partial draws of capital at borrower request
• Typically, only pay interest on funds used
• As long as the approved limit isn’t surpassed, borrower
may repeatedly use the capital that has been approved
and repaid
• Typically, line is renewed every 12 or 24 months; terms
can change
• Normally, the interest rate is variable
Best Use: To cover gaps between invoicing and getting
paid, and to weather times when cash flow is low. Also
good for the purchase of inventory.

14.
What are the requirements
for an application?

15.
What are the requirements
for an application?
• Business Income Tax Returns
• Personal Income Tax Returns
• Interim Financial Statements
• A/P & A/R Aging Reports
• List of Business Debt
Hint 1: Everything must match!
Hint 2: Owner = someone that owns 20% or more.

16.
What does a lender consider
when analyzing my loan request?

17.
What does a lender consider
when analyzing my loan request?
• Is the business profitable?
• CAN the loan be repaid?
• Does the borrower WANT to repay?
• Has the owner invested in the business?
• What collateral is available?
• What does business history tell us?
• What is the loan for?

18.
When comparing loan offers,
which elements should I evaluate?

19.
When comparing loan offers,
which elements should I evaluate?
• Interest rate
• Repayment period
• Bank fees
• SBA fees
• Loan covenants
• Prepayment penalties

20.
What advice would I give a
business owner?

21.
What advice would I give a
business owner?
• Show profit on your tax returns
• Maintain good personal credit (FICO 680+)
• Maintain good accounting practices & produce financial
statements
• Obtain your number with Dun & Bradstreet
• Speak with one or more professionals focused on small
business lending
• Prepare your questions, compare your options
• Ask for help as soon as possible, before it’s too late
• Be careful with companies that promise quick solutions

22.
Best of luck!
Thank you for your time.

23.
For additional information:
• sba.gov Search for: SOP 50 10 5(K)
• sbdcnet.org
• cdfifund.gov/Pages/FAQ.aspx
• Oscar Novelo
oscar@elevafinancial.com