SMALL BUSINESS ADMINISTRATION FINANCIAL ASSISTANCE PROGRAMS Neida M. Heusinkvelt (816)

SBA FINANCIAL ASSISTANCE PROGRAMS SBA FINANCIAL ASSISTANCE PROGRAMS n 7(a) Loan Guaranty Program % Guarantees Made by private lendersMade by private lenders SBA guarantees up to 85% of the loan amountSBA guarantees up to 85% of the loan amount Maximum loan amount can be up to $2,000,000Maximum loan amount can be up to $2,000,000 n 7(a) program requirements: Good credit historyGood credit history demonstrated record for successdemonstrated record for success good charactergood character sufficient funds to operate the business at a profitsufficient funds to operate the business at a profit collateral the loan as fully as possiblecollateral the loan as fully as possible

SBA FINANCIAL ASSISTANCE PROGRAMS n Flexible Maturities: Up to 10 Years for working capitalUp to 10 Years for working capital Up to 25 years for fixed assetsUp to 25 years for fixed assets –real estate, construction, equipment n Interest Rates : Negotiated between borrower and lenderNegotiated between borrower and lender Typically cannot exceed prime rate plus 2.75% except with SBAExpress loans which can go higherTypically cannot exceed prime rate plus 2.75% except with SBAExpress loans which can go higher

SBA FINANCIAL ASSISTANCE PROGRAMS 1 Yr or less Any $$ 0.25% Over 1 yr $127,500 or less 1.0% (lender keeps 25% of fee) Over 1 yr More than $127, % 7(a) Program Guaranty Fees: Maturity SBA Portion Guaranty Fee

SBA FINANCIAL ASSISTANCE PROGRAMS n 7(a) SBAExpress - Up to $350,000 and under with 50% guaranty - this program is expandingwith 50% guaranty - this program is expanding lender uses its own documentationlender uses its own documentation can be used for a variety of purposes, including funding working capital lines of credit can be used for a variety of purposes, including funding working capital lines of credit Over 65% of SBA lending is now done thru this SBAExpress program!Over 65% of SBA lending is now done thru this SBAExpress program!

Smartway Financing Initiative n n EPA/SBA have partnered to promote to the trucking industry an Upgrade Kit. Its technology will save fuel and money, while reducing pollution. n n Kit includes: Idle-reduction technology such as auxiliary power units, generator sets, battery HVAC or direct fired heater units Low rolling resistance tires, And tractor and trailer areodynamics

Smartway Financing Initiative n n Eligibility targets small & medium sized trucking companies (>$23.5 Million) n n Not a grant program – loan must be repaid with interest to lender. n n Loan amounts range from $5,000 to $25,000. Interest rates are prime plus 4- 6%. Loan terms range 3 – 10 years. Lenders may change a processing fee.

Smartway Financing Initiative n n Can finance entire Upgrade kit or individual components only. n n Uses existing SBAExpress program with 50% guaranty to lender. n n Lender has option to not require collateral. n n Business owners must personally guaranty the loan. n n Lender will most likely use credit scoring for approval or decline decision-making.

Smartway Financing Initiative n n For more info on Smartway Financing or for a list of participating lenders to go: n n

SBA FINANCIAL ASSISTANCE PROGRAMS n n CAPLINES Loans Used to meet short- term and cyclical working capital needs Can be a one project type deal or can be on a revolving basis Three Types: Seasonal, Contract, Small Builder n n Also, Two Types of Asset Based Loans Are Available : Standard Asset Based Small Asset Based

SBA FINANCIAL ASSISTANCE PROGRAMS n n Export Working Capital Loan 90%Guaranty Pre-Export and Post-Export Transactions can be Financed Paid back from proceeds of the export sales n n International Trade Loan Used for producing goods or services within the U.S. to export elsewhere Can help firms adversely affected by import competition

SBA FINANCIAL ASSISTANCE PROGRAMS n 504 Fixed Asset Loan Long-Term financing for major fixed assets (not rolling stock). Long-Term financing for major fixed assets (not rolling stock). Up to $1.3 million in SBA-backed debentures Up to $1.3 million in SBA-backed debentures Loan must create or retain one job for every $35,000 of debenture proceeds provided by the SBA. Loan must create or retain one job for every $35,000 of debenture proceeds provided by the SBA. Available throughout Kansas and Missouri from CDCs in specific areas Available throughout Kansas and Missouri from CDCs in specific areas Typical Expansion project is 50%/40%/10% Typical Expansion project is 50%/40%/10%

SBA FINANCIAL ASSISTANCE PROGRAMS n MICROLOAN - $35,000 or less Pool of Funds available thru microloan intermediaryPool of Funds available thru microloan intermediary – RMI in out state MO n - Go Connection – KC metro Area plus the Kansas Counties of Douglas & Shawnee n Other states have microlenders available! n SURETY BOND GUARANTEES - processed in Denver CO

LOGICAL BUSINESS ADVICE n n Get an explanation on various sources of financing Traditional and non-traditional n n Get a realistic understanding of the strengths and weaknesses of the deal n n Don’t be afraid to “shop” for a lender that fits your needs n n Make credit requests both for the short-term and long-term benefit

HOW DOES AN APPLICANT APPROACH A LENDER ABOUT SBA LOANS? n Make advance appointment with commercial officer that handles business loans. n Be prepared with a written business plan that includes total cost of project with a breakout of what $$ are expected to be borrowed and what $$ are expected to be injected by business owner!

WHAT SHOULD AN APPLICANT EXPECT FROM A LENDER? n A commitment from the lender to review the business plan by a specified date or an up-front explanation of why that lender does not want to do that type of loan. n Expect the lender to ask for applicant’s SSN information so they can authorize a credit report.

NEGOTIATION ITEMS & LENDER DISCLOSURE n Interest rate n Term of loan n Who will personally guaranty loan n What fees will be charged n Time frame range in expecting an answer “YES or NO” and time frame to expect on disbursement of funds n Other services lender can provide

WHY DOES A LENDER SAY “YES”? n n Likes balance of credit factors – strengths outweigh weaknesses n n Lender’s institution has favorable experience with that industry n n Your credit risk fits in with lender’s target portfolio n n Lending officer is willing and able to be your advocate in loan committee

WHY DOES A LENDER SAY “NO”? n n Weaknesses of individual deal outweigh strengths in areas such as: Sales volume is optimistic or expenses are underestimated or industry in turmoil Management has no direct experience Lender risk too high in loan amount compared to applicant’s injection – D/E Credit or character history is marginal or poor Collateral offered doesn’t offset other risks n n Lender’s institution has unfavorable experience with that industry

TIPS FOR FINANCIAL PREPARATION n n FIRST be prepared- Asking for $$ before plan is in place is likely to create poor first impression with lender - you only get one chance to make a good first impression! n n Understand the loan process and consider how their application will be compared to their peers! n. n You need to establish time frame for decision making that is realistic and decide if lender can meet those needs.