U.S. Small Business Administration SBA Resources and Financing In Connecticut Helping you start, grow and succeed.

U.S. Small Business Administration

SBA Resources and Financing

In Connecticut

Helping you start, grow and succeed.

The SBA Mission

Economic Development-

Maintenance of a Strong Small Business Foundation for our

Nation’s Economy

SBA History• 1932 - Reconstruction

Finance Corporation created to stimulate the economy by loaning money to businesses.

• 1953 - U. S. Small Business Administration created to provide financial, technical, and management assistance to small businesses. *

What do all of these Businesses Have in Common?

SBA Services

• Access to Capital

• Government Contracting

• Education and Training

• Disaster Recovery

SCORE: Counselors to America

• Experienced Volunteers Offering:– Expert business advice– Marketing advice– Business plan preparation– Loan application assistance*

SBDC’S – Small Business Development Centers

• Paid Professional Business Advisors:– Over 900 locations across the country– Professional management and technical

assistance – Business plan assistance– Loan application assistance *

– Executive Office –Uconn Storrs– Uconn campus locations– DECD – Call (860) 486.47920 – http://ctsbdc.com

Women’s Business Centers

• Full Business Training Curriculum

• Individual Counseling• Entrepreneurial Center –

U. of Hartford www.hartford.edu/ec

• Women’s Business Center – Stamford

• Women’s Business Center –Waterbury www.ctwbdc.org

Online Access

www.sba.gov/ct –

online training library of industry specific articles e-classes

www.score.org –

email access to volunteers throughout the nation with

over 600 skill sets

SBA Business Loan Programs

• 7(a) Loan Program

• SBAExpress Loan Program

• Patriot Express Loan Program

• Micro-Loan Program

• Child Care Facilities Micro-Loan Program

7(A) LOAN PROGRAM

• SBA’s primary business loan program.

• Broad eligibility requirements and credit criteria

• Loans are funded through a bank

• SBA guaranty reduced lender’s risk of borrower’s non-payment.

7(A) CONT.

• To qualify, business must meet lender’s criteria and 7(a) requirements.

• Lender must certify it would not make this loan under proposed terms and conditions unless it can obtain an SBA guaranty.

Percentages and Guaranties

• Loans $150,000 and less, guaranty as much as 85%

• Loans over $150,000, guaranty as much as 75%

Interest Rates

• Negotiated between applicant and lender

• Subject to SBA’s maximums

• Both fixed and variable rate structures

• Maximum rate is comprised of two parts: base rate and allowable spread.

Interest Rates Cont.

• Three acceptable rates: Wall Street Journal Prime

• London Interbank one month prime plus 3%

• SBA Peg Rate

• Lenders allowed to add additional to base rate to arrive at final rate.

7(a) Loan Maturities

• Generally intended to encourage longer term small business financing

• Loan maturities are based on ability to repay, purpose of loan proceeds and useful life of assets financed

25 years for real estate

10 years for equipment

7 years for working capital

Short term revolving lines of credit are also available

Structure

• Monthly payments of principal and interest

• Fixed and variable rates

• Applicant can request lender establish the loan interest-only payments during start-up and expansion phases (when eligible)

Structure Cont.

• Balloon payments or call payments are not allowed

• Lender may not charge a prepayment penalty if the loan is paid off before maturity

• SBA will charge borrower a prepayment penalty fee if loan has a maturity of 15 years or more and is pre-paid during first three years

• Maximum Loan amount is $5,000,000

– Loans can be used to: • Finance working capital

• Purchase inventory

• Support receivables

• Buy machinery and equipment

• Expand or renovate facilities

• Purchase business real estate *

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7 (a) Guaranty Loans

SBAExpress Loan

• Maximum Loan Amount $350,000• 50% Guaranty• Use of proceeds same as basic 7(a)

loan• Maturities are 5-7 for working

capital and 25 for real estate• Revolving Lines of Credit allowed

for maximum of 7 years.

Patriot Express Loan

• Patriot Xpress Loan Program - $500,000:– Veterans, Service-disabled veterans,

active-duty service members, reservists and national guard, current spouses of any of the above, widowed spouse of service member or veteran who died during service or of service-connected disability.

Patriot Express Cont.

• Can be used for most business purposes, including start-ups, expansion, equipment purchases, working capital, inventory.

• SBA’s lowest interest rate for business loans. – Generally 2.25 % to 4.75 % over

prime depending size and maturity.

Program Eligibility

The SBA provides loans to businesses – not individuals. Eligibility requirements are based on aspects of the business, not the owners.

SBA generally does not specify what businesses are eligible. Rather, the agency outlines what businesses are not elibible.

Eligibility Cont.

• To be eligible for assistance:– Operate for profit– Be small as defined by SBA– Be engaged in, or propose to do business in

the US or its possessions– Have reasonable invested equity– Use alternative financial resources, including

personal assets, before seeking financial assistance

– Use funds for a sound business purpose– Not be delinquent on any existing debt

obligations to the U.S. Government

Ineligible Businesses

• Financial businesses primarily engaged in the business of lending, such as banks, finance companies, some leasing companies and factors (pawn shops, although engaged in lending, may qualify in some circumstances)

• Businesses owned by developers and landlords that do actively use or occupy the assets acquired or improved with the loan proceeds

• Life Insurance Companies• Businesses located in a foreign country

(businesses in U.S. owned by aliens may qualify)• Businesses engaged in pyramid sale distribution

plans, where a participant’s primary incentive is based on the sales made by an ever-increasing number of participants.

Ineligible Businesses Cont.

• Businesses engaged in illegal activity• Private clubs and businesses that limit the number

of memberships for reasons other than capacity.• Government owned entities• Businesses principally engaged in teaching,

instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting

• Consumer and marketing cooperatives • Loan packagers earning more than one third of

their gross annual revenue from packaging SBA loans

• Businesses in which the lender or CDC, or any of its associates owns an equity interest

Ineligible Businesses Cont.

• Businesses that present live performances of an indecent sexual nature or derive directly or indirectly more than 2.5 percent of gross revenue through the sale of products or services, or the presentation of any depictions or displays, of an indecent sexual nature.

• Businesses primarily engaged in political or lobbying activities

• Speculative businesses (such as oil exploration)

Special Considerations

• Franchises are eligible except when a franchisor retains power to control operations to such an extent as the equate to an employment contract. Franchisee mush have the right to profit from efforts commensurate with ownership

• Recreational facilities and clubs are eligible if the facilities are open to the general public or in membership-only situations, membership is not selectively denied or restricted to any particular group

• Farms and agriculture businesses are eligible, but these applicants should first explore Farm Service Agency programs

Special Considerations Cont.

• Fishing vessels are eligible, but those seeking funds for the construction or reconditioning of vessels with a cargo capacity of five tons or more must first request financing from the National Marine Fisheries Service

• Privately owned medical facilities including hospitals, clinics, emergency outpatient facilities and medical and dental laboratories are eligible; recovery and nursing homes are also eligible provided they are licensed by the appropriate government agency and they provide more than room and board.

• Legal aliens are eligible, however, consideration is given to status (resident lawful temporary resident) in determining the business’s degree of risk

Micro-Loan Program

• Provides small loans ranging from $500 to $50,000.

• SBA makes funds available to nonprofit intermediaries that, in turn, make the loan(s).

• Proceeds can be used for working capital, furniture/fixtures, machinery, equipment, supplies, inventory.

• May not be used to purchase real estate.• Interest rates negotiated between

borrower and intermediary.

CT Micro-Lenders

Connecticut Investment Corporation

2315 Whitney Avenue, Suite 2B

Hamden, CT 06518

203.776.6172

www.ctcic.org

Community Economic Development Fund

965 East Main Street

Meriden, CT 06450

203.235.2333

www.cedf.com

HEDCO Inc.

15 Lewis Street, Suite 204

Hartford, CT 06103

860.527.1301

www.hedco-ct.com

Child Care Facilities Micro-Loan Program

• Part of State of CT’s School of Readiness and Child Day Care Initiative Program

• Under supervision of and financially supported by the Department of Social Services and Education (DSS)

• DSS selected the Connecticut Health & Educational Facilities Authority (CHEFA) to manage the program

• CHEFA contracted with CT Community Investment Corporation to be the lender

Child Care Facilities Micro-Loan cont.

• Designed to assist small business owners with start-ups and expansion of childcare facilities and provides in CT

• Loan maximum is $25,000• Proceeds may be used to purchase

equipment, furniture, fixtures and improvements, insurance premiums, legal, design and planning fees, licensing and required approval costs

• Interest rate is fixed for term of the loan• No application or origination fees

Surety Bond Program

• Public-private partnership between the federal government and surety companies.

• Provides small businesses with the bonding assistance necessary for them to compete for public and private contracting and subcontracting opportunities

• Guaranty provides incentive for sureties to bond small businesses that would otherwise be unable to obtain bonding.

Surety Bond Cont.

• SBA guarantees bid, payment, performance and ancillary bonds issued by surety companies for individual contracts up $2,000,000.

• SBA reimburses sureties between 70 and 90 percent of loses sustained if contractor defaults on the contract.

What a Lender Looks for When Reviewing a Loan Request

• Good Character – borrower’s background, credit history,

references• Management Expertise and Commitment

– borrower’s experience and desire to succeed• Reasonable Personal Contribution

– borrower’s stake in the business • Feasible Business Plan

– does it make sense and is it sufficiently thorough

• Collateral – does it provide sufficient protection to the lender

• Repayment – Will the loan repay from earnings of the

business *

Typical Loan Terms With SBA Guarantee

• Flexible repayment:• 7 to 10 years for working capital• 10 to 15 years for equipment • 25 years for real estate

•Interest rates:• Negotiated between borrower and lender

• Typically cannot exceed prime rate plus 2.75%

• Points and certain fees not permitted by SBA

Collateral - What is it - What is Required?

• Anything of value that you can pledge

– Liens on personal assets usually required

– Liens on business assets always required

– Personal guaranties always required

– Life insurance on borrowers sometimes required

• Purpose of loan (must be used for business)

• Business plan (or business history)• 3 years of financial statements (actual or

projected)– Balance Sheet– Profit and Loss Statement– Cash flow statement (at least one year)

• Business and personal tax returns• Schedule of current debts (if any) • Owner equity in the business (if any)• Signed personal financial statements• Personal résumé of each principal

• Everything else Lender asks for *

Loan Application Documentation Includes:

Inside Banking

* Banks want to make you a loan* Banks only make money by making loans

* Banks must make money to survive

* Risk, collateral, and credit

* Banks only want two things from you * repayment of the loan as agreed

* your deposits and your future business

* Why it’s critical that you are prepared

* Banks make loans to people, not businesses

* The bank as your business partner *

Things You Need to Know -

Reasons for Loan Declines

• Applicant is not properly prepared– No business plan, – no current financials, etc.

• Poor credit - no credit– History of late payments / charge-offs /

collection accounts / tax liens / low credit scores

• Lack of experience in the business, no partners, no experienced employees under contract

• Little personal investment into the business• Under capitalization / negative net worth• No earnings history / questionable loan

repayment• Lack of commitment on part of borrower *

How to Reach Us -• Phone: 1 800 U ASK SBA• Fax: 202-205-7064 • E-mail: [email protected]• TDD: 704-344-6640

• Local Telephone Directory under U.S. Government

• Lisa Powell [email protected]• 860.240.4892• Connecticut Office• 330 Main Street, Hartford• SBA OnLine: • www.sba.gov/ct

The end

Questions From the Floor?

Thank you for your Time

Department of Economic and Community Development (DECD)

• Small Business Express Program • The Small Business Express Program

(EXP) provides loans and grants to Connecticut’s small business to spur job creation and growth. 

• Assistance focuses on:

• Access to capital – EXP Revolving Loan Fund

• Incentive loan and grant funds to create jobs

– EXP Job Creation Incentive Loan

– EXP Matching Grant  

• Small businesses with operations in Connecticut, registered to conduct business for not less than twelve months, in good standing with all state agencies and with the payment of all state taxes, and employing not more than 100 employees, are eligible to apply.  Priority for available funding will be given to those eligible applicants who (1) are creating new jobs and (2) are within Connecticut’s economic base industries, as defined in Connecticut General Statutes 32-222, including but not limited to: precision manufacturing, business services, green and sustainable technology, bioscience, and information technology sectors.  

Applying for Assistance

• The EXP Procedures and Guidelines will assist you in the application process and

will answer many of your questions.  • To apply to the EXP program, each

applicant must complete and submit:– a Small Business Express

Program application form,  – a Financing Plan and Budget form, and – all the other required information as

listed and highlighted on the application form.

• Each application package may be transmitted either by• completing the EXP application online and

then transmitting the required supporting documents transmitted separately via email, U.S. mail, courier or hand delivery to the DECD, or 

• completing and including the one-page EXP application with the required supporting documents and transmitting via email, U.S. mail, courier or hand delivery to the DECD.

• All documents and information related to each application should be sent to the attention of:

 Michelle Peters (formerly Lugo)DECD505 Hudson Street Hartford, CT  [email protected]