SBA programs

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Introduction of SBA programs

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  • SBA programs

    1. 1. SBA Programs Presented by: Michael Elkin Assistant District Director Entrepreneurial Development U.S. Small Business Administration San Francisco District Office 455 Market Street, 6th Floor San Francisco, CA 94105 (415)744-6820
    2. 2. Bank Financing with SBA’s Guarantee <ul><li>SBA is not a direct lender </li></ul><ul><li>SBA partners with banks and lenders </li></ul><ul><li>SBA guarantees bank loans (50%-85%) </li></ul><ul><li>Bank’s risk is offset by the SBA guaranty </li></ul><ul><li>Applicants apply directly to the bank/lender </li></ul><ul><li>Bank decides when to use the SBA </li></ul><ul><li>Bank gets paid if business fails </li></ul><ul><li>Business remains liable for the debt </li></ul>
    3. 3. Regular 7(a) Guaranty Loan Terms <ul><li>SBA does not set actual terms, but does set parameters – </li></ul><ul><ul><li>Terms are negotiated between bank & borrower </li></ul></ul><ul><li>Maximum Loan Amount: $2,000,000 </li></ul><ul><li>Maximum SBA Guaranty </li></ul><ul><ul><li>75% to 85% of the loan, up to $1.5 million maximum </li></ul></ul><ul><li>Term (maturity) based on use of proceeds </li></ul><ul><ul><li>Generally 7-10 years for non-real estate </li></ul></ul>
    4. 4. Regular 7(a) Guaranty Loan Terms (continued) <ul><li>SBA Guaranty fee: </li></ul><ul><ul><li>2% to 3½% of SBA-Guaranteed amount </li></ul></ul><ul><ul><li>For $100,000 loan, fee = $1,700 </li></ul></ul><ul><ul><li>For $500,000 loan, fee = $11,250 </li></ul></ul><ul><ul><li>Guaranty fee may be financed as part of loan </li></ul></ul><ul><li>Interest Rate </li></ul><ul><ul><li>Usually variable rate loan </li></ul></ul><ul><ul><li>Generally Prime plus up to 2.75% </li></ul></ul><ul><ul><ul><li>Rate can be higher for loans under $50k or for </li></ul></ul></ul><ul><ul><ul><li>SBA Express Loans </li></ul></ul></ul>
    5. 5. SBA Guaranty Loan Eligible Use of Proceeds <ul><li>All Legitimate Business Purposes </li></ul><ul><ul><li>Inventory </li></ul></ul><ul><ul><li>Machinery & Equipment </li></ul></ul><ul><ul><li>Working Capital </li></ul></ul><ul><ul><li>Real Estate (owner-occupied only) </li></ul></ul><ul><ul><li>Debt repayment (business debts only) </li></ul></ul><ul><ul><li>Business Acquisitions </li></ul></ul><ul><ul><li>Franchises (must be an eligible franchisor) </li></ul></ul>
    6. 6. SBA Loan – Eligibility Issues <ul><li>Must be a for-profit business </li></ul><ul><li>Must qualify as a small business concern </li></ul><ul><li>Must be an eligible type of business </li></ul><ul><li>Must meet personal financial resources test </li></ul><ul><li>Must be at least 51% owned by U.S. Citizens or Legal Permanent Residents </li></ul><ul><li>Cannot be on probation or parole </li></ul>
    7. 7. Benefits of the SBA Loan <ul><li>Reduces lender’s risk , making it more likely to approve a small business loan application </li></ul><ul><li>Provides a longer loan term , or maturity </li></ul><ul><li>All SBA loans are fully amortizing, i.e., </li></ul><ul><li>no balloon payment </li></ul>
    8. 8. What Do I Need to Qualify? <ul><li>Five C’s of Credit </li></ul><ul><ul><li>C apacity to Repay </li></ul></ul><ul><ul><li>C apital </li></ul></ul><ul><ul><li>C apable Management </li></ul></ul><ul><ul><li>C haracter & Credit </li></ul></ul><ul><ul><li>C ollateral </li></ul></ul>
    9. 9. How to Apply for an SBA Loan, continued <ul><li>Gather your business & personal financial information </li></ul><ul><ul><li>Personal financial statement </li></ul></ul><ul><ul><li>Personal income tax returns for the last 3 years </li></ul></ul><ul><ul><li>Business financial statements & tax returns for 3 years if already in business </li></ul></ul><ul><li>Decide on a Lender – factors to consider: </li></ul><ul><ul><li>Your experience with the lender </li></ul></ul><ul><ul><li>Type of lender – National, regional, community bank </li></ul></ul>
    10. 10. SBA Guaranty Loan Process SBA 1. 2. 4. $$ Business Owner Lender/Banker <ul><li>Business Owner applies to Lender </li></ul><ul><li>Lender contacts SBA if lender requests SBA guaranty </li></ul><ul><li>If approved, SBA guarantees lender’s loan </li></ul><ul><li>Lender then can disburse loan to Business Owner </li></ul>3.
    11. 11. SBA Express Loan <ul><li>Loan amounts up to $350,000 </li></ul><ul><li>Offered by participating SBA Express lenders </li></ul><ul><li>Variable interest rate – Up to 6.5% over prime for loans of $50,000 or less; up to 4.5% over prime for loans over $50,000 </li></ul><ul><li>Loan term of 7 to 10 years </li></ul><ul><li>May be used as a line of credit with a term up to 7 years </li></ul><ul><li>No collateral required for loans up to $25,000 </li></ul>
    12. 12. SBA Patriot Express Loan <ul><ul><li>For Veterans & spouses and military community </li></ul></ul><ul><ul><li>Fast turnaround for approvals </li></ul></ul><ul><ul><li>Lowest interest rates, 2.25% - 4.75% over prime </li></ul></ul><ul><ul><li>Maximum loan amount - $500,000 </li></ul></ul><ul><ul><li>Use of Proceeds same as for 7(a) </li></ul></ul><ul><ul><li>Apply through specially approved lenders </li></ul></ul>
    13. 13. Other SBA Loan Programs <ul><li>SBA 504 Loan </li></ul><ul><ul><li>Only for Purchase/Improvement of long-term fixed assets such as real estate </li></ul></ul><ul><ul><li>Apply through a lender, or an SBA-approved Certified Development Company (CDC) </li></ul></ul>
    14. 14. SBA Microloan Program <ul><li>Loans up to $35,000 (average $10,500) </li></ul><ul><li>Made by “Microloan Intermediaries” funded by SBA </li></ul><ul><li>Fixed interest rate – ranges from 8 to 11% </li></ul><ul><li>Maximum loan term is 6 years, fully amortized </li></ul><ul><li>Training and technical assistance is provided to the borrower </li></ul><ul><li>Apply to the SBA Microloan Intermediary that serves your county </li></ul>
    15. 15. SBA Microloan Intermediaries <ul><li>OBDC Small Business Finance www.obdc.com , 510-763-4297 </li></ul><ul><li>Alameda, Contra Costa, Solano counties </li></ul><ul><li>Southeast Asian Community Center </li></ul><ul><li>415-885-2743 </li></ul><ul><ul><li>Alameda, Contra Costa, Marin, Merced, Sacramento, San Francisco, San Joaquin, San Mateo, Santa Clara & Stanislaus counties </li></ul></ul>
    16. 16. SBA RESOURCES <ul><li>Service Corp of Retired Executives </li></ul><ul><li>Small Business Development Centers </li></ul>
    17. 17. SBA RESOURCES <ul><li>Women Business Centers </li></ul><ul><ul><li>AnewAmerica Community Corp. </li></ul></ul><ul><ul><li>Bayview Business Resource Center </li></ul></ul><ul><ul><li>Renaissance Entrepreneurship Center </li></ul></ul><ul><ul><li>Women’s Initiative for Self Employment </li></ul></ul><ul><ul><li>C.E.O. Women </li></ul></ul>
    18. 18. SBA Websites <ul><li>SBA Home Page: www.sba.gov </li></ul><ul><li>SBA Loan Programs: www.sba.gov/financing </li></ul><ul><li>SBA San Francisco District Office: www.sba.gov/ca/sf </li></ul>

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