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SBA Loan Programs for Financing Small Business

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Project financing vehicle for long-term, fixed-rate financing for purchasing or ... The Office of Women Business Ownership provides oversight of the WBC program. ... – PowerPoint PPT presentation

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Title: SBA Loan Programs for Financing Small Business


1
SBA Loan Programs for Financing Small Business
  • American Institute of Certified Public
    Accountants (AICPA)

2
CAPITAL ACCESS
  • COMMITTED TO SUSTAINING CONTINUOUS SOURCES OF
    CAPITAL FOR SMALL BUSINESS
  • OPERATES AS A GUARANTOR OF SMALL BUSINESS LOANS
    MADE BY LENDER PARTICIPANTS

3
CREDIT POLICY
  • PROMOTE SMALL BUSINESS FINANCING WHEN IT IS NOT
    OTHERWISE AVAILABLE ON REASONABLE TERMS
  • PRIMACY OF CASH FLOW LENDING
  • LOANS NOT DENIED STRICTLY FOR LACK OF COLLATERAL

4
IMPACT FOR SMALL BUSINESS
  • Loans not meeting lenders conventional credit
    policies may be SBA eligible.
  • Term to maturity
  • Start-up business
  • Outside lenders credit box
  • 63 Billion outstanding

5
PORTFOLIO ATTRIBUTES
  • HIGH CONCENTRATION OF START-UP SMALL CONCERNS
  • MOST LOANS ISSUED TO UNDERSERVED BORROWERS
    INCLUDING WOMEN, MINORITIES, VETERANS AND RURAL
    CONCERNS
  • TYPICALLY RISKY INDUSTRIES
  • REASONABLY WELL-COLLATERIZED
  • LOANS RANGE IN SIZE FROM 5,000 TO 3.5 MILLION.

6
7(A) LOAN PROGRAM
  • GOVERNED BY
  • SMALL BUSINESS ACT
  • TITLE 13 CODE OF FEDERAL REGULATIONS (13 CFR)
  • STANDARD OPERATING PROCEDURES (SOP)
  • ALL PARTICIPANTS EXECUTE MASTER FORM OF GUARANTY
    AGREEMENT

7
LOAN TERMS
  • GUARANTY PERCENTAGE 50, 75- 80
  • GUARANTY AMOUNT - MAX. 1.5 million to one
    borrower (including affiliates)
  • GUARANTY FEE - 2 TO 3.75
  • LOAN AMOUNT - 2 million
  • MATURITY - UP TO 25 YEARS
  • INTEREST - UP TO PRIME 2 3/4
  • (higher rates for SBAExpress and Community
    Express)

8
ELIGIBILITY
  • BASIC PURPOSE / USE OF PROCEEDS
  • Working Capital, Machinery Equipment, Real
    Estate, Inventory, and Furniture Fixtures
  • SIZE
  • Employees or Receipts
  • TYPE OF BUSINESS
  • For Profit, For General Public (Not
    Discriminating), etc.

9
PROCESS FOR APPROVAL
  • BUSINESS PLAN, MARKET ANALYSIS STRATEGY
  • CASH FLOW FORECASTS - MONTHLY
  • BANK APPLICATION
  • SBA GUARANTY REQUEST

10
SBA DELIVERY PROGRAMS
  • REGULAR 7(a) - 1958
  • CERTIFIED LENDERS PROGRAM (CLP) - 1979
  • PREFERRED LENDERS PROGRAM (PLP) - 1981
  • SBAEXPRESS - 1995

11
REGULAR 7(a)
  • BASIC LOAN DELIVERY
  • APPLICATION WITH SUPPORTING DOCUMENTS SENT TO
    CENTRAL PROCESSING UNIT
  • SBA REVIEWS CREDIT ANALYSIS
  • THIS DELIVERY FORM CAN BE USED FOR ALL ELIGIBLE
    7(a) LOANS

12
PREFERRED LENDERS PROGRAM (PLP)
  • LENDER DEMONSTRATES COMMITMENT TO EXCELLENCE IN
  • PROCESSING
  • SERVICING
  • LIQUIDATION OF SBA LOANS
  • RESULTS IN QUICKER PROCESSING OF LOAN APPROVAL
  • SBA DOES NOT REVIEW CREDIT
  • PROCESSING CENTER IN SACRAMENTO

13
SBAEXPRESS
  • BANK HAS CREDIT AUTHORITY
  • BANK GENERALLY USES ITS OWN FORMS
  • CENTER DETERMINES ELIGIBILITY
  • 24 HOUR RESPONSE TIME AT PROCESSING CENTER
  • LOANS PROVIDED WITH 50 GUARANTEE

14
CERTIFIED DEVELOPMENT COMPANY
504 Loan Program
  • Project financing vehicle for long-term,
    fixed-rate financing for purchasing or
    constructing facilities or for purchasing
    machinery equipment
  • Maximize public/private sector financing
  • Fulfill community/public policy goals
  • Source of job creation

15
Typical 504 Project
  • Use of proceeds to purchase land and building for
    expanding business
  • Borrower provides at least 10 percent equity
  • First mortgage lender provides 50 percent of
    financing (no SBA guaranty)
  • SBA provides balance of financing secured by
    second mortgage

16
MECHANICS OF PROJECT FINANCING
  • Borrower obtains first mortgage loan from 3rd
    party lender.
  • Borrower is approved for subordinate note from
    CDC.
  • CDC sells subordinate note to public debenture
    vehicle and issues proceeds to borrower.
  • Debenture is sold to investors with full faith
    and credit provision.
  • Borrower has two separate fixed-rate note
    payments.

17
Certified Development Companies (CDCs)
  • CDCs are nonprofit organizations established to
    promote economic development
  • SBA certifies and regulates CDCs
  • There are approximately 270 CDCs nationwide

18
Debentures
  • Maturities of 504 loans are for 10 or 20 years
  • Funds to the small businesses come from investors
    who buy shares in the pooled debentures for that
    month
  • The loan rate is established at the time the
    debenture is sold and is fixed for the term
  • There is a declining prepayment penalty extending
    for 1/2 the maturity of the debenture

19
Maximum Debenture Size
  • Public Policy Goal Loans - 4.0 million for
    manufacturers. Otherwise, 2.0 million
  • Other Goals - 1.5 million
  • 20 billion outstanding

20
Office of Entrepreneurial Development
  • AICPA Web Forum
  • May 13, 2008

21
Office of Entrepreneurial Development
  • The OED oversees a network of programs and
    services that support the training and counseling
    needs of small businesses. It is SBAs technical
    assistance arm with resource partners located
    throughout the country.
  • Provide services to 1.4 million business clients
    annually and information and training to an
    additional million through SBAs website.

Anoop PrakashAssociate AdministratorOffice of
Entrepreneurial Development
22
Small Business Development Centers (SBDCs)
  • The U.S Small Business Administration (SBA)
    administers the Small Business Development Center
    Program to provide management assistance to
    current and prospective small business owners.
    SBDCs offer one-stop assistance to individuals
    and small businesses by providing a wide variety
    of information and guidance in 63 networks with
    over 950 locations.
  • The program is a cooperative effort of the
    private sector, the educational community and
    federal, state and local governments. It
    enhances economic development by providing small
    businesses with management and technical
    assistance through counseling and training.
  • Emphasis on long-term counseling.
  • http//www.sba.gov/aboutsba/sbaprograms/sbdc/index
    .html

23
Womens Business Centers
  • The Office of Women Business Ownership provides
    oversight of the WBC program. OWBO promotes the
    growth of women-owned businesses through programs
    that address business training and technical
    assistance, and provide access to credit and
    capital, federal contracts, and international
    trade opportunities.
  • There are 113 WBCs across the country in 44
    states and 2 US territories providing
    community-based services tailored to local needs.
  • Special target socially and economically
    disadvantaged women.
  • Provide counseling and training in finance,
    management, marketing, procurement, and the
    Internet.
  • www.sba.gov/women

24
SCORE
  • Representing Counselors to Americas Small
    Business, SCORE is a nonprofit association
    dedicated to providing entrepreneurs with free,
    confidential face-to-face and email business
    counseling from its 10,500 volunteers.
  • The national SCORE program provides workshops and
    free business counseling through 389 chapters at
    over 800 service delivery locations across the
    country.
  • Provides 24/7 online counseling.
  • Emphasis on core coaching for nascent and
    start-up businesses.
  • www.score.org

25
ED Initiatives
  • Emerging 200
  • E200 has also been launched in eleven
    participating cities Boston, Philadelphia,
    Baltimore, Atlanta, Memphis, Chicago, New
    Orleans, Albuquerque, Des Moines, Milwaukee, and
    Oakland. E200 is a training initiative targeted
    to inner city companies showing promise for
    growth. The companies that will most benefit
    from the training are those that have been in
    business for at least three years and have
    revenues of at least 400,000
  • ED Annual Report
  • OED will be issuing a first-ever annual
    report by June 1, 2008. This report gives
    transparency to the process and lays out new
    effectiveness metrics used to evaluate the
    performance of our resource partners provide
    independent customer service validation, and set
    forth strategic issues for the future
  • ED Impact Study
  • The ED Impact Study was designed to target OED
    programs over a period of years measuring all
    appropriated partner resources in a consistent
    and simultaneous manner. The study examines three
    key indicators
  • Client Value-Added Measures measuring the
    clients perception of service provide.
  • Managerial, Marketing Operations, Implementation
    measuring the extent the client implemented
    changes to their managerial and marketing
    operations.
  • Economic Impact measuring the change in the
    clients business revenue, employment based on
    the face to face counseling received and new
    business starts.  
  • Results of the survey show that OED resources
    served a broad spectrum of clients and that
    those clients reported, albeit a small sample,
    positive economic impacts.
  • International Visitors
  • International Visitors Service provides
    general briefings on the American free-enterprise
    system and SBAs unique role in entrepreneurship.
    In 2007 ---134 countries 1106 visitors.
  • Co sponsorships
  • Junior Achievement co sponsorship for
    young entrepreneurs online at www.mindyourownbiz.o
    rg.
  • Online library http//www.sba.gov/tools/resource
    library/publications/index.html

26
Small Business Training Network
  • This online training network is a virtual campus
    providing quality and targeted online training to
    meet the information needs of prospective and
    existing small business owners.
  • It is an E-Government initiative, powering a
    comprehensive menu of business courses, designed
    to serve more customers, more efficiently. The
    Training Network operates like an electronic
    umbrella under which many SBA and agency resource
    training programs are captured, aggregated,
    sorted by content and made available in multiple
    formats.
  • Over 1000 persons a day are taking courses.
  • http//www.sba.gov/services/training/index.html

27
Helping Your Clients Succeed in the Federal
Procurement Market
  • Tony Robinson
  • Office of Government Contracting
  • U.S. Small Business Administration

28
Government Prime Contracting Market
  • 340 Billion in Fiscal Year 2006
  • 77 Billion Awarded to Small Businesses

29
Government Prime Contracting Goals
  • 23 Prime Contracts
  • 5 Small Disadvantaged
  • 3 percent Hubzones
  • 5 Women-Owned Small Businesses
  • 3 Service Disabled Veteran Owned Small Busineses

30
Government Subcontracting Contracting Goals
  • 40 of all Subcontract Dollars (est.)
  • 5 Small Disadvantaged
  • 3 percent Hubzones
  • 5 Women-Owned Small Businesses
  • 3 Service Disabled Veteran Owned Small Businesses

31
SBA Tools and Resources
  • Contract Set Asides
  • Procurement Center Representatives (PCRs)

32
New Trends
  • Best Value
  • greatest overall benefit means greater
    contracting officer discretion Lowest price is
    not necessarily determinative
  • Past Performance is key
  • To be successful small businesses need to perform
    according to contract specifications.
  • Customer Satisfaction is essential for success.

33
Small firms face new challenges in the
acquisition arena
  • Acquisition Reform
  • Fewer acquisition personnel
  • New Acquisition Vehicles
  • New paradigms
  • Internet
  • E-commerce

34
New Opportunities
  • Hubzones
  • Service Disabled Veteran Owned Small Businesses
  • Teaming Arrangements
  • SBIR
  • http/www.sba.gov/gc

35
Best Practices
  • Get Tech
  • Web page, credit card, e-mail (mandatory)
  • Get Registered
  • http//www.ccr.gov/
  • https//www.fbo.gov/
  • Get Scheduled
  • GSA schedules are large growing very rapidly
  • http//wwwGSA.gov

36
Best Practices
  • Get Real
  • federal market may not be right, try local first
  • Get Personal
  • Know your buyer, personal relationships count
  • Get Commercial
  • Recognize the new commercial emphasis
  • Get Specific
  • Target your market

37
8(a) Business Development
  • promote the business development of small
    business concerns owned and controlled by
    socially and economically disadvantaged
    individuals
  • promote the competitive viability of such
    concerns
  • clarify and expand the program for procurement
    by the United States

38
8(a) Business Development
  • Initial Eligibility Determination
  • Annual Program Review
  • Management Technical assistance
  • Mentor Protégé
  • Joint Venture
  • Surplus Property
  • Contract Assistance
  • Sole Source (5.5 million for manufacturing and
    3.5 million for all other contracts)
  • Limited Competition

39
8(a) Business Development
  • During FY 2006
  • 9,000 firms
  • More then 1,600 training sessions
  • 12.4 billion in contracts
  • Since 8(a) Inception
  • More Than 120 billion in contract support

40
8(a) Contracting
  • FY 1999 - 6.3 B (3.39)
  • FY 2000 - 5.7 B (2.88)
  • FY 2001 - 6.3 B (2.86)
  • FY 2002 - 5.7 B (2.39)
  • FY 2003 - 10.1 B (3.64)
  • FY 2004 - 8.4 B (2.81)
  • FY 2005 - 11.7 B (3.68)
  • FY 2006 - 12.4 B (3.67)

41
Small Disadvantaged Business Certification
  • Initial Eligibility Determination
  • Re-certification Determination

42
SDB Contracting
  • FY 1999 Goal - 5 Actual - 6.2 B (3.31)
  • FY 2000 Goal 5 Actual - 7.2 B (3.61)
  • FY 2001 Goal 5 Actual - 15.6 B (7.12)
  • FY 2002 Goal 5 Actual - 15.9 B (6.75)
  • FY 2003 Goal 5 Actual - 19.5 B (7.01)
  • FY 2004 Goal 5 Actual - 18.5 B (6.18)
  • FY 2005 Goal 5 Actual - 20.9 B (6.55)
  • FY 2006 Goal 5 Actual - 22.9 B (6.76)

43
U. S. Small Business Administration
DISASTER ASSISTANCE Federal Disaster Loans
for Homeowners, Renters and Businesses of All
Sizes
44
U. S. S m a l l B u s i
n e s s A d m i n i s t
r a t i o n
  • SBAs role in disaster recovery
  • After hurricanes, floods, earthquakes, wildfires
    and other disasters, SBA disaster loans are the
    primary form of Federal disaster assistance for
    the owners of private property.

45
U. S. S m a l l B u s i
n e s s A d m i n i s t
r a t i o n
  • SBAs role in disaster recovery

Not Just for Small Businesses
  • SBA disaster loans for property damages are
    available to homeowners, renters, businesses of
    all sizes, and private, non-profit organizations.

46
U. S. S m a l l B u s i
n e s s A d m i n i s t
r a t i o n
  • SBAs role in disaster recovery

Disaster Loans Help Recovery
  • Disaster losses are unexpected and create
    financial hardships for most disaster victims.
  • SBA disaster loans with low interest rates and
    long terms make recovery affordable.

47
U. S. S m a l l B u s i
n e s s A d m i n i s t
r a t i o n
  • SBAs role in disaster recovery
  • SBAs disaster loans are a critical source of
    economic stimulation in disaster-ravaged
    communities.
  • They help spur employment and stabilize tax
    bases by protecting jobs.

48
U. S. S m a l l B u s i
n e s s A d m i n i s t
r a t i o n
  • SBAs role in disaster recovery

Making Recovery Affordable
  • The law gives SBA several powerful tools to
    make disaster loans affordable
  • low interest rates (about 3-4)
  • long terms (up to 30 years)
  • refinancing of prior debts (in some cases)

49
U. S. S m a l l B u s i
n e s s A d m i n i s t
r a t i o n
  • SBAs role in disaster recovery

Types of Disaster Declarations
  • When the President declares a Major Disaster
    Declaration for Individual Assistance, SBAs
    disaster loan program is automatically activated.

President George W. Bush
50
  • SBAs role in disaster recovery

Types of Disaster Declarations
  • For smaller disasters, SBAs Administrator may
    issue an SBA-only declaration (called an Agency
    or Administrative declaration).

SBA Administrator Steve Preston
51
Loan Limits
Home Repair/Replace Real Estate 200,000 Per
sonal Property 40,000 Refinancing (in some
cases) 200,000 Mitigation (up to 20)
48,000
52
Loan Limits
Business Repair/Replace Real
Estate/Machinery/Equip./ Furniture and
Fixtures 1.5 Mil Economic Injury
(EIDL) 1.5 Mil (Combined loan limit
is 1.5 Mil)
53
Loan Limits
  • The 1.5 million statutory limit applies to the
    total of all loans to a single borrower and its
    affiliates.
  • If a business is a Major Source of Employment,
    SBA may waive the statutory limit.

54
  • Current Interest rates

Home Business Non-Profit EIDL No Credit
Avail. 2.687 4.00 4.000 4.000 Credit Avail.
5.375 8.00 5.250 N/A Credit available
elsewhere means that the disaster victim can
provide for their own recovery through
private sector borrowing on reasonable rates
and terms without causing financial
hardship. SBA makes the majority of disaster
loans at the lower interest rates
55
  • Loan Terms
  • SBA determines the loan term in accordance with
    each borrowers ability to repay.
  • The maximum term is 30 years.

56
Credit Requirements
  • Credit History
  • Applicants must have a credit history acceptable
    to SBA.
  • Repayment
  • Applicants must show the ability to repay all
    loans.

57
Refinancing
  • In cases with substantial damage (generally 40)
    SBA may refinance recorded liens on real estate
    or machinery and equipment.
  • Liens eligible for refinancing
  • Home loans - real estate liens only
  • Business loans - real estate and chattel (UCC
    filings) liens

Note Existing Federal loans are not eligible for
refinancing.
58
Collateral Requirements
  • Physical loans over 10,000 require collateral.
  • EIDLs over 5,000 require collateral.
  • SBA takes real estate as collateral when it is
    available.
  • SBA will not decline a loan for lack of
    collateral, but requires you to pledge what is
  • available.

59
Loan Eligibility Restrictions
  • Only disaster losses not fully compensated by
    insurance or other recoveries are eligible.
  • Applicants who have not complied with terms of
    previous SBA loan agreements (e.g. failure to
    maintain required insurance) are not eligible.
  • Hobby businesses are not eligible.

60
Loan Eligibility Restrictions
The types of businesses ineligible for EIDLs
include
  • Speculative businesses
  • Nonprofit organizations
  • Multi-level sales organizations (pyramids)

61
Relocation
Relocation occurs any time the victim either
elects to move, or is required to move, from the
damaged property to any other location.
62
Relocation
  • Applicants are required to provide details
    regarding their relocation plans, if known. SBA
    must approve the plan.
  • - Address
  • - Cost breakdown of property to be
    acquired or leased

63
Insurance Requirements
  • SBA requires borrowers to obtain
    and maintain appropriate insurance as a
    condition of most loans.

Hazard insurance - Required on all secured loans.
Flood insurance - Required for property located
in a Special Flood Hazard Area (SFHA) flood
disasters.
64
Application/Appeal Process
  • Original request
  • Reconsideration - 6 months deadline to seek
    reconsideration
  • Appeal - 30 days to request a final appeal

65
Filing Deadlines
Physical 60-days from date of declaration EIDL
9-months from date of declaration For
Presidential declarations FEMA may extend the
filing deadline for all Federal programs,
including SBA.
66
FOR MORE INFORMATION
  • U. S. Small Business Administration
  • Disaster Assistance Customer Service Center
  • (800) 659-2955
  • TTY (800) 877-8339
  • or
  • Visit our website at www.sba.gov/services/disaster
    assistance

Federal Regulations 13 CFR 123
U. S. Small Business Administration
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