SBA Loans 2009

Gateway Business Bank Gateway Business Bank PresentsPresents

SBA LoansSBA Loans““Nuts & Bolts of the SBA Nuts & Bolts of the SBA

Process”Process”

SBA Loan Program-SBA Loan Program-OverviewOverview

Created by Congress in the Small Created by Congress in the Small Business Act of 1953.Business Act of 1953.

Nearly 20 million small businesses Nearly 20 million small businesses have received funding since 1953have received funding since 1953

Current loan portfolio has roughly Current loan portfolio has roughly 219,000 loans worth more than $45 219,000 loans worth more than $45 billionbillion


SBA is not a direct lender. The banks are SBA is not a direct lender. The banks are the direct lendersthe direct lenders

SBA is the guarantor of the loans that are SBA is the guarantor of the loans that are funded by participating lenders.funded by participating lenders.

Typical SBA guarantee is 75% of the loan.Typical SBA guarantee is 75% of the loan. Borrowers have no direct contact with Borrowers have no direct contact with

SBA. SBA. All loan servicing, billing, etc. are handled All loan servicing, billing, etc. are handled

by the originating lenderby the originating lender


SBA has specialized outreach SBA has specialized outreach programs for women, minorities and programs for women, minorities and armed forces veteransarmed forces veterans

Also provide loans to victims of Also provide loans to victims of natural disastersnatural disasters

Specialized advice and assistance in Specialized advice and assistance in International TradeInternational Trade

Loan ProgramsLoan Programs

7a Loan Program (Start-ups, 7a Loan Program (Start-ups, franchises, expansions, etc.)franchises, expansions, etc.)

SBA ExpressSBA Express Patriot ExpressPatriot Express CDC/504 Loan ProgramCDC/504 Loan Program International TradeInternational Trade Disaster AssistanceDisaster Assistance

Eligibility-Size StandardsEligibility-Size Standards

Majority of business are considered Majority of business are considered small by SBAsmall by SBA

Industry SpecificIndustry Specific

Is based off of Annual Sales or # of Is based off of Annual Sales or # of EmployeesEmployees

Eligibility-Credit FactorsEligibility-Credit Factors

FICO ScoreFICO Score What is your payment historyWhat is your payment history Are there foreclosures, bankruptcies, etc.Are there foreclosures, bankruptcies, etc. Equity Investment-How much is there?Equity Investment-How much is there? Earnings Requirements-Cash flow services Earnings Requirements-Cash flow services

debtdebt Working Capital = Current Assets-Current Working Capital = Current Assets-Current

LiabilitiesLiabilities CollateralCollateral Resource ManagementResource Management

Eligibility-Basic Eligibility-Basic RequirementsRequirements

Business PlanBusiness Plan Loan RequestLoan Request CollateralCollateral Business Financial StatementsBusiness Financial Statements Personal Financial StatementPersonal Financial Statement Business Tax ReturnsBusiness Tax Returns Personal Tax ReturnsPersonal Tax Returns

Budget/Start-Up Budget/Start-Up ExpensesExpenses

Prepare a budgetPrepare a budget Construction of leasehold improvementConstruction of leasehold improvement Equipment (buy vs. lease)Equipment (buy vs. lease) VehiclesVehicles Furniture & FixturesFurniture & Fixtures InventoryInventory Accounts ReceivableAccounts Receivable Working CapitalWorking Capital

7a Loan Program7a Loan Program

SBA’s Primary Loan ProgramSBA’s Primary Loan Program Flexible ProgramFlexible Program

Start-Ups: Franchises and Non-Start-Ups: Franchises and Non-FranchiseFranchise

Working CapitalWorking Capital Leasehold ImprovementsLeasehold Improvements Furniture & FixturesFurniture & Fixtures InventoryInventory Land and Real EstateLand and Real Estate


Loan Maturity is 7-10 years for non-Loan Maturity is 7-10 years for non-real estate & 25 years for fixed real estate & 25 years for fixed assets/real estateassets/real estate

Maximum Loan amount is $2,000,000Maximum Loan amount is $2,000,000 Interest RatesInterest Rates

Negotiated between borrower and lender. Negotiated between borrower and lender. Is pegged to the Prime Rate (3.25% as of Is pegged to the Prime Rate (3.25% as of 12/01/09). Subject to SBA maximums.12/01/09). Subject to SBA maximums.

Can be fixed or variableCan be fixed or variable


Interest Rates cont.Interest Rates cont. Loans of $50,000 or more must not Loans of $50,000 or more must not

exceed Prime + 2.25% if maturity is exceed Prime + 2.25% if maturity is less than 7 yearsless than 7 years

If maturity is 7 years or longer the rate If maturity is 7 years or longer the rate cannot exceed Prime + 2.75%cannot exceed Prime + 2.75%


Prepayment Penalty: If loan Prepayment Penalty: If loan proceeds are used for Real Estate proceeds are used for Real Estate there is a prepayment penalty for 3 there is a prepayment penalty for 3 years.years.

Non-Real Estate uses will not have a Non-Real Estate uses will not have a prepayment penaltyprepayment penalty


Fees: Both the lender and the Fees: Both the lender and the borrower share the responsibility of borrower share the responsibility of paying the fees to the SBApaying the fees to the SBA

Primary fee will be the Guarantee Primary fee will be the Guarantee Fee. It is based off of the guaranteed Fee. It is based off of the guaranteed portion of the loan amountportion of the loan amount

For 2010 the Guarantee Fee is For 2010 the Guarantee Fee is waived.waived.


Guarantee Fee Schedule:Guarantee Fee Schedule: $150,000 or less = 2%$150,000 or less = 2% $150,001 - $700,000 = 3%$150,001 - $700,000 = 3% $700,001 – Up = 3.5%$700,001 – Up = 3.5% $1,000,000 – Up = 3.75%$1,000,000 – Up = 3.75%

CDC/504 ProgramCDC/504 Program

Provides long-term, fixed rate financing Provides long-term, fixed rate financing for major fixed assets, such as land and for major fixed assets, such as land and buildingsbuildings

CDC (Certified Development Company) CDC (Certified Development Company) is a non-profit corporation set up to is a non-profit corporation set up to contribute to the economic development contribute to the economic development of it’s communityof it’s community

They work with the SBA and private They work with the SBA and private sector lenders to assist small businessessector lenders to assist small businesses



Requires 3 approvals: Bank, CDC & Requires 3 approvals: Bank, CDC & SBASBA

Maximum Debenture is $2,000,000 Maximum Debenture is $2,000,000 when meeting the job creation criteria when meeting the job creation criteria or public policy goal.or public policy goal.

Manufacturer’s have a maximum Manufacturer’s have a maximum debenture of $4,000,000debenture of $4,000,000

Funds cannot be used for working Funds cannot be used for working capital, inventory or refinancing debtcapital, inventory or refinancing debt

CDC/504 ProgramCDC/504 Program Rates: Private lender determines the Rates: Private lender determines the

index for their portion. The CDC/SBA index for their portion. The CDC/SBA portion will be pegged to the 5 or 10 portion will be pegged to the 5 or 10 year Treasury bondyear Treasury bond

Maturities: Private lenders portion will Maturities: Private lenders portion will typically be for 25 years. The CDC/SBA typically be for 25 years. The CDC/SBA portion will be for 20 years.portion will be for 20 years.

Collateral: The project assets being Collateral: The project assets being financed are used as collateral. Personal financed are used as collateral. Personal guaranties of principals are required. guaranties of principals are required.

ConclusionConclusion

SBA loans are a viable option to finance SBA loans are a viable option to finance your business opportunity.your business opportunity.

Turn around time and processing will be Turn around time and processing will be a function of the lender that you choosea function of the lender that you choose

Be prepared to do some workBe prepared to do some work Try to maintain a positive attitude and Try to maintain a positive attitude and

be patientbe patient Do not give up if turned down by the Do not give up if turned down by the

bankbank

SBA Loans 2009

Documents

loan program loan maturity

sba loan programoverview

loan program fees

loan program startups

loan programs

loan proceeds

loan servicing

sba process