Lending the SBA Way Robert Chavarria U.S. Small Business Administration Jacksonville North Florida District

Business Plan The business plan is perhaps one of the most important documents you can have for your small business; it is a roadmap for your business venture; one which can assist you greatly. If you don’t know where you are going, and you don’t have a road map, any road will get you there...

Eligible Uses of Loan Proceeds  Working Capital  Inventory  Equipment  Real Estate  Debt Refinancing  Existing Business

Ineligible Uses of Loan Proceeds Floorplan Speculation Partial Change of Ownership Payment to Principals Delinquent Payroll/Sales Taxes SBA Loan

The 6 C’s of Credit  Character  Capacity  Capital  Cash Flow  Credit  Collateral

Ineligible Businesses Gambling Real Estate Investment Speculation Lending Activities & life insurance companies Businesses selling through a pyramid plan Illegal Businesses Non-Profit Organizations Businesses providing prurient sexual material Businesses which restrict patronage Businesses owned by individual(s) on probation, parole and with pending criminal charges

Sales in Millions Retail$5.0 to $21.0 Service$2.5 to $21.5 Construction$7.0 to $17.0 Agriculture$.5 to $ 9.0 Number of Employees Wholesale< 100 Manufacturing500 to 1500 Note: Size Standard is SIC/NAICS Code specific. A size standard other than above may be available for certain SIC/NAICS codes Website: Size Standards

Benefits of 7(a) Loans REDUCES LENDER’S RISK of LOSS Broadens Bank’s Lending Activities: Start-Ups High Risk Businesses Longer Terms Collateral Shortfalls Allows banks to increase its lending limits to borrowers. Community Reinvestment Act (CRA) Increased Profitability to Banks Selling loans on the Secondary Market.

SBA Loan Programs 7(a) Programs - Regular and Special –Microloans –LowDoc –Express –Pre-Qualification –CAPLines (Lines of Credit) –Export Working Capital –International Trade Certified Development Company - 504

Maximum Guarantee Percentage by Program Std 7(a) Loan - over $150,00075% Std 7(a) Loan - $150,000 or less85% LowDoc85% SBA Express50% Export Working Capital90%

Maximum Loan Amounts Standard 7(a) Loan $ 2,000,000 LowDoc$ 150,000 SBA Express$ 250,000 Community Express$ 250,000 Pre-Qualification $ 250,000 Microloan$ 35,000 EWCP$ 1,000,000 International Trade$ 1,250, $ 1,000,000 to 1,300,000

SBA Fee Policy For loans of $150,000 or less: Fee is 2% of SBA guaranteed portion For loans between $150m and $700M: Fee is 3% of SBA guaranteed portion For loans over $700M: Fee is 3.5% of SBA guaranteed portion Fee is due within 90 days of loan approval and may not be extended. Fee may be charged to borrower only after first disbursement.

Maximum Maturities Shortest appropriate term - Must match ability to repay AND - Remaining Useful life of asset Ten years maximum except for M&E with long useful life & real estate financing Twenty Five years maximum on real estate and 15 years for machinery & equipment

Maximum Interest Rates Less than 7 yearsPrime % 7 years or morePrime % $25,001 - $50,000Plus 1% $25,000 or lessPlus 2% RATES may be FIXED or VARIABLE

What SBA Looks For Good Character Management Expertise and Commitment Feasible Business Plan Adequate Equity or Investment (25% to 30% injection for new business) Sufficient Collateral Ability to Repay the Loan from Earnings

Collateral Sufficient assets must be pledged to adequately secure the loan to the extent available. Personal guarantees of all 20% or more owners of the business Liens on personal assets are considered if under-collateralized by business assets Lack of collateral, in and of itself, is not a reason for decline.

Microloan Program Maximum microloan amount is $35,000 Must be processed by SBA approved microlender Can be leveraged up to two times by other sources of financing ($70,000) up to total combined project of $105,000 Microlender may take subordinate position to bank or other financing

SBA Express Loans Loans up to $250,000 50% guarantee Lender has delegated authority to approve loan requests without submitting to SBA. Lender not required to use SBA forms May be Revolving Lender liquidates

LOWDOC LOANS L oans up to $150,000 O ne Page Application for Applicant W ith Quick Turnaround from SBA D ocumentation to SBA is Simplified for faster, quicker service! O ne Page Application for Lender C haracter, Credit & Experience

Pre-Qualification Loan Program Maximum Loan Amount $250,000 Guaranty percentages Loan up to $150,000 85% Loans more than $150,000 75% Business must be at least 51% owned by a woman, veteran or minority Loans to exporters are eligible (used to significantly increase or create new export markets) Loans in approved rural markets may be eligible

Pre-Qualification Loan Program Intermediaries assist prospective borrowers in developing viable application packages Intermediary submits application to SBA for consideration of a loan up to $250,000 If application is approved SBA issues a pre-qualification letter to applicant, which they can present to a bank.

504 Loan Program Benefits to the Borrower –Low down payment % –Fixed interest rate on SBA portion –Long term financing 20 years on real estate 10 years on equipment –Rate on private sector loan should be lower –Access to larger amount of financing than on regular 7(a) loans

504 Funding Structures

For More Information... For SBA’s programs and services, visit our web site at North Florida District Office at (904) Robert Chavarria (407)