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Capital Access: SBA Financing Options for Your Small Business

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Capital Access: SBA Financing Options for Your Small Business Presented by U.S. Small Business Administration s Colorado District Office SBA Loan Guaranties ... – PowerPoint PPT presentation

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Title: Capital Access: SBA Financing Options for Your Small Business


1
Capital Access SBA Financing Options for Your
Small Business
  • Presented by
  • U.S. Small Business Administrations
  • Colorado District Office

2
SBA Loan Guaranties-Understanding How It Works
  • SBA does not provide
  • Grants
  • Low interest rate loans
  • Minority- or women-owned small business loans
  • 100 financing
  • Direct business loans

3
7(a) Loan Guaranty Program
  • Applicant applies for commercial loan at bank
  • If commercial loan declined, applicant may ask
    SBA participating lender to consider an SBA 7(a)
    guaranteed loan.
  • Lender submits SBA guaranty application to SBA.
  • After SBA guaranty approved, lender disburses
    funds to applicant.
  • SBA guaranties range from 50-90.

4
SBA Eligibility Requirements
Businesses must
  • Be independently owned and operated for profit
  • Not dominant in its field of operation or
    industry
  • May not exceed SBA size standards (based on
    average annual receipts for past 3 fiscal years
    or average number of employees over last 12
    months)

5
SBA Basic Requirements
  • Management related industry experience,
  • education, ownership and management experience
  • Repayment ability historical/projected cash
    flow
  • debt service coverage
  • Collateral Secondary source of repayment
  • Credit personal/historical business credit
  • experience
  • Leverage debt/tangible net worth, retained
    earnings
  • capitalization
  • Equity injection cash injection/seller
    carry-back
  • (Generally on full standby during term of SBA
    loan)

6
SBA Requirements (Cont)
  • Cash/Equity injection required generally 20-30
    in a normal economy
  • SBA considers type of business its industry
    risk
  • Availability of funds from other sources
  • Personal guaranties required of all owners of 20
    or more of business

7
SBA Requirements (Cont)
  • Businesses Ineligible for SBA Guaranty
  • Non-profits
  • Businesses engaged in lending activities
  • Speculative or investment type businesses
  • Businesses engaged in gambling
  • Illegal businesses
  • Businesses providing prurient sexual material
  • Businesses promoting religion

8
Use of Proceeds
  • Expand renovate facilities
  • Purchase machinery equipment, construct
    leasehold improvements, purchase land and
    existing building for business
  • Finance receivables augment working capital
  • Refinance existing debt (with compelling reason)
  • Finance seasonal lines of credit and/or
  • Construct commercial buildings.

9
Loan Terms
  • Flexible maturities
  • Up to 10 years for working capital
  • Up to 10 years for equipment
  • Up to 25 years for fixed assets
  • Real estate
  • Construction
  • Capital Equipment (based on economic life of
    equipment)
  • Interest rates
  • Negotiated between borrower lender
  • Under 7 year term cannot exceed base rate plus
    2.25
  • Over 7 year term cannot exceed base rate plus
    2.75
  • Base rate options NY prime, 30-day LIBOR 3
    or SBA peg rate
  • (3.375)
  • ? May be higher for SBAExpress program or smaller
    loans

10
SBA Loan Programs
  • 7(a) Loan Program
  • Expedited Programs
  • SBAExpress
  • Small Loan Advantage
  • Veterans Advantage
  • CAPLines
  • 504 fixed asset financing
  • Micro-loan program

11
7(a) Loan
  • Can be used for basically any purpose.
  • Loan up to 5M
  • SBA guaranty of 75 - 85
  • Maturity length and interest rates as discussed
    previously

12
SBAExpress
  • Lender uses its own forms
  • Loan or revolving lines of credit up to 350,000
  • Limited SBA guaranty of 50
  • Interest rates 4.5 over prime for loans over
    50,000 but 6.5 over prime for loans under
    50,000
  • 36-hour response from the SBA

13
Small Loan Advantage
  • 350,000 Max Term Loan
  • Uses expedited credit scoring method
  • Maturity Length same as standard 7(a)
  • Proceeds to be used for all of the same items as
    listed in 7(a)
  • 85 guaranty for loans 150,000 or less, 75 on
    loans greater than 150,000

14
Veterans Advantage
  • Targets veterans and service-disabled veterans,
    reservists, National Guard, their spouses or
    widowed spouses
  • Uses expedited SBA review approval process
  • Maximum loan amount of 350,000
  • 75-85 loan guaranty to bank depending upon loan
    amount
  • NO FEES!!!

15
CAPLines Working Capital Program)
  • For short-term cyclical working capital needs
  • Maximum loan of 5.0 million
  • Proceeds advanced against inventory or
    receivables
  • Types of CAPLines
  • Seasonal Line
  • Contract Line
  • Builders Line
  • Working Capital

16
504 Fixed Assets Financing
  • Long-term, fixed-rate financing (10 20 year
    terms)
  • Up to 5.0 million in SBA-backed debenture under
    job creation goal 5.5 million for manufacturers
  • Used for Property, Building, and Large Fixed
    Assets

17
A Typical 504 Project
  • A third party lender (bank/credit union) provides
    50 of project financing
  • 504 loan through a CDC provides up to 40 of
    project financing backed 100 by SBA debenture
    sold to institutional investors
  • At least 10 of project financing provided by
    applicant (additional 5 for single or limited
    use building additional 5 for startup
    business)

18
Micro-Loans
  • SBA provides direct loan through non-profit
    intermediary
  • Micro-lender loans of up to 50,000 to small
    businesses
  • Term of up to six years
  • Used for
  • Machinery, equipment fixtures
  • Leasehold improvements
  • Inventory
  • Working capital
  • Technical assistance available

19
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