2010 american hotel & lodging association 031710 (1)

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  • Mention 3 yr average
  • 2010 american hotel & lodging association 031710 (1)

    1. 1. 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
    2. 2. BUSINESS LOANS & THE SBA <ul><li>Guaranty Loans: </li></ul><ul><li>7(a) </li></ul><ul><li>SBA Express </li></ul><ul><li>Special Loan Programs </li></ul><ul><li>504 Loan Program </li></ul>
    3. 3. WHO CAN GET AN SBA LOAN? <ul><li>ELIGIBILITY </li></ul><ul><li>Size </li></ul><ul><li>Type </li></ul><ul><li>Ownership </li></ul>
    4. 4. ELIGIBILITY – NAICS SIZE STANDARDS <ul><li>Manufacturer - 500 employees </li></ul><ul><li>Wholesalers - 100 employees </li></ul><ul><li>Retail - $6.5 - $26.5 Million </li></ul><ul><li>Service - $6.5 - $23.5 Million </li></ul><ul><li>Contractors - $6.5 - $31.0 Million </li></ul><ul><li>Note: Size standards includes affiliates </li></ul><ul><li>www.sba.gov/size </li></ul>
    5. 5. ELIGIBLE LOAN PURPOSES <ul><li>Business start-ups </li></ul><ul><li>Improve site </li></ul><ul><li>Purchase building </li></ul><ul><li>Acquire/install fixed assets </li></ul><ul><li>Purchase inventory, supplies, raw materials </li></ul>
    6. 6. ELIGIBLE LOAN PURPOSES <ul><li>Renovate building </li></ul><ul><li>Construct building </li></ul><ul><li>Working capital </li></ul><ul><li>Refinancing - subject to restrictions </li></ul><ul><li>Business acquisitions </li></ul><ul><li>Acquire land (purchase or lease) </li></ul>
    7. 7. GUARANTY PERCENTAGES <ul><li>Loans up to $ 150,000 - 85% </li></ul><ul><li>Loans over $ 150,000 - 75% </li></ul><ul><li>SBAExpress – 50% </li></ul>
    8. 8. TERMS <ul><li>Real Estate - up to 25 years </li></ul><ul><li>M & E - up to 10 years </li></ul><ul><li>Working Capital - up to 7 years </li></ul>
    9. 9. LOAN LIMITS <ul><li>No lower limit </li></ul><ul><li>Maximum Gross Amount - $2,000,000 </li></ul><ul><li>Maximum Guaranty Amount - $1,500,000 </li></ul>
    10. 10. INTEREST RATES <ul><li>Term less than 7 years </li></ul><ul><ul><li>NY prime + 2 1/4 % </li></ul></ul><ul><li>Term 7 years and longer </li></ul><ul><ul><li>NY prime + 2 3/4% </li></ul></ul><ul><li>Higher rates on small loans </li></ul><ul><li>Rate may be fixed or variable </li></ul><ul><li>Periodic adjustment allowable on variable rate </li></ul>
    11. 11. 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)
    12. 12. <ul><li>Existing debt is not on reasonable terms & refinancing provides substantial benefit </li></ul><ul><li>Loan current for last 36 months for debt with same lender </li></ul><ul><li>Requires 10% cash flow improvement * *SOP 50 10 B 5 Effective 10/01/09 </li></ul>DEBT REFINANCING
    13. 13. INELIGIBLE - LOAN PROCEEDS <ul><li>Payoff unsecured creditors </li></ul><ul><li>Repay debt to a director of the lender </li></ul><ul><li>Provide funds to an owner </li></ul><ul><li>Replenish working capital which has been used for any of the above </li></ul><ul><li>Alien, certain status </li></ul><ul><li>Anyone owing money to the government which is not current; IRS, Student Loans </li></ul>
    14. 14. GUARANTY FEES <ul><li>Term of 12 months or less - 1/4 of 1% </li></ul><ul><li>Term over 12 months: </li></ul><ul><ul><li>Loans up to $150,000 </li></ul></ul><ul><ul><ul><li>2% of guaranteed amount </li></ul></ul></ul><ul><ul><ul><li>(Lender may retain 25% of this amount) </li></ul></ul></ul><ul><ul><ul><li>Loans over $150,000 to $700,000 </li></ul></ul></ul><ul><ul><ul><li>3% of guaranteed amount </li></ul></ul></ul><ul><ul><ul><li>Loans over $700,000 </li></ul></ul></ul><ul><ul><ul><li>3.5% of guaranteed amount </li></ul></ul></ul><ul><li>Additional Fee of .25% on guaranteed amount in excess of $1 million </li></ul>
    15. 15. 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
    16. 16. CREDIT REQUIREMENTS <ul><li>Good character </li></ul><ul><li>Ability to manage the business </li></ul><ul><li>Sufficient equity </li></ul><ul><li>Adequate repayment ability </li></ul><ul><li>Collateral: SBA will not decline a loan only on the basis of inadequate collateral </li></ul>
    17. 17. <ul><li>Answer eligibility questions </li></ul><ul><li>Determine prospect for approval </li></ul><ul><li>Provide borrower with application </li></ul><ul><li>Lender reviews application </li></ul><ul><li>Perform loan analysis </li></ul><ul><li>Submit package to SBA for approval </li></ul>THE PROCESS
    18. 18. SBA REVIEW <ul><li>SBA concurs in approval or denies and </li></ul><ul><li>notifies lender </li></ul><ul><li>Lender closes loan </li></ul>
    19. 19. 504 LOANS <ul><li>Long Term </li></ul><ul><li>Fixed Asset Financing </li></ul>
    20. 20. ADVANTAGES of 504 LOANS <ul><li>Expand services to customer base </li></ul><ul><li>Provide longer terms </li></ul><ul><li>Exposure only 50% </li></ul><ul><li>First mortgage position / Secondary Mkt . </li></ul><ul><li>No restrictions on bank loan </li></ul><ul><li>Manufacturing projects up to $10 million </li></ul>
    21. 21. 504 LOANS ELIGIBILITY <ul><li>SBA size standards </li></ul><ul><li>Firm’s net worth may not exceed $7 million </li></ul><ul><li>Net profits after Federal income taxes may not exceed $2.5 million during the preceding two fiscal years </li></ul><ul><li>Job creation / retention </li></ul><ul><ul><li>project must create or retain 1 job for each $65,000 of SBA assistance or must be considered a “community project” </li></ul></ul><ul><ul><li>for manufacturers, 1 job per $100,000 </li></ul></ul>
    22. 22. 504 LOANS USE of PROCEEDS <ul><li>Land and improvement at cost </li></ul><ul><ul><li>Construction of building </li></ul></ul><ul><ul><ul><li>60% occupancy of space and demonstrate a need for future expansion </li></ul></ul></ul><ul><ul><li>Purchase/remodel existing building </li></ul></ul><ul><ul><ul><li>must occupy at least 51% and funds can be used to remodel only portion to be used by business </li></ul></ul></ul><ul><li>Machinery & equipment - 10 year life </li></ul><ul><li>Construction contingency fund up to 10% of construction amount </li></ul><ul><li>Soft costs </li></ul>
    23. 23. 504 LOANS - INELIGIBLE USE OF PROCEEDS <ul><li>Working capital </li></ul><ul><li>Management fees </li></ul><ul><li>Consulting fees </li></ul><ul><li>Franchise fees </li></ul><ul><li>Fees connected with permanent financing </li></ul><ul><li>Airplanes or automotive equipment </li></ul><ul><li>Debt refinancing (other than interim) </li></ul>
    24. 24. 504 LOANS - LOAN LIMITS <ul><ul><li>$1,500,000 - Maximum amount of guarantee - SBA/CDC share </li></ul></ul><ul><ul><li>Exceptions to $2 million maximum when national objective/ public policy goals involved </li></ul></ul><ul><ul><li>Up to $4 million for manufacturing </li></ul></ul>
    25. 25. TYPICAL 504 LOAN STRUCTURE <ul><li>Local lender 50% </li></ul><ul><li>SBA/CDC 40% </li></ul><ul><li>Small Business 10% </li></ul>
    26. 26. 504 LOANS INTEREST RATES <ul><ul><li>Lender portion - no restrictions </li></ul></ul><ul><ul><li>SBA/CDC - market rate at time of sale of debenture - fixed rate </li></ul></ul>
    27. 27. 504 LOANS TERMS <ul><ul><li>Lender portion - minimum of 10 years or 7 years on a 10 year debenture </li></ul></ul><ul><ul><li>SBA/CDC portion - maximum of 20 years </li></ul></ul><ul><ul><li>Prepayment penalty </li></ul></ul>
    28. 28. 504 LOANS CREDIT REQUIREMENTS <ul><li>Same basic credit criteria as </li></ul><ul><li>guaranteed loans </li></ul><ul><li>Good character </li></ul><ul><li>Ability to manage the business </li></ul><ul><li>Sufficient equity invested </li></ul><ul><li>Adequate repayment ability </li></ul><ul><li>Collateral </li></ul>
    29. 29. 504 LOANS PROCESS <ul><li>CDC is responsible for </li></ul><ul><ul><li>developing and submitting application </li></ul></ul><ul><ul><li>closing SBA/CDC loan </li></ul></ul><ul><li>Funds from debenture sale wired directly to the bank </li></ul>
    30. 30. A Typical 504 Project <ul><li>For-profit enterprise </li></ul><ul><li>Acquiring or expanding a facility </li></ul><ul><li>Construction period with interim financing </li></ul><ul><li>by bank </li></ul><ul><li>Jobs created </li></ul>
    31. 31. CERTIFIED DEVELOPMENT COMPANIES <ul><li>Capital Partners Cert Dev Company Atlanta (404) 475-6002 </li></ul><ul><li>Coastal Area District Dev Authority Brunswick (912) 261-2500 </li></ul><ul><li>CSRA Business Lending Augusta (706) 210-2010 </li></ul><ul><li>Economic Dev Corp Fulton County College Park (404) 836-7731 </li></ul><ul><li>Georgia Certified Dev Corporation Atlanta (404) 442-2480 </li></ul><ul><li>Small Business Access Partners, Inc Gainesville (770) 536-7839 </li></ul><ul><li>Georgia Resource Capital Marietta (678) 560-2656 </li></ul><ul><li>Georgia Small Business Capital Decatur (404) 373-8601 </li></ul><ul><li>George Small Business Lender, Inc Macon (478) 751-6160 </li></ul><ul><li>North Georgia Certified Dev Corp Dalton (706) 272-2300 </li></ul><ul><li>Small Business Assistance Corp Savannah (912) 232-4700 </li></ul><ul><li>South Georgia Area Dev Corp Valdosta (229) 333-5281 </li></ul>
    32. 32. INTERNET ACCESS <ul><li>SBA home page - all programs </li></ul><ul><ul><li>www.sba.gov </li></ul></ul><ul><li>GA home page </li></ul><ul><ul><li>www.sba.gov/ga </li></ul></ul>
    33. 33. Thank you! <ul><li>Presented by: </li></ul><ul><li>Vianna Harrison </li></ul><ul><li>Lender Relations Specialist </li></ul><ul><li>Georgia District Office </li></ul><ul><li>(404) 331-0100, x607 </li></ul><ul><li>[email_address] </li></ul>

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