Indiana District Office Business Loan Seminar

Indiana District SBA SBA’s Role in Business Financing SBA does NOT make grants to businesses No Direct Loans from SBA (except for disasters) Obtain loan from Financial Institution

Financial Assistance Programs 504 Certified Development Company (CDC) Loan Program 7(a) Loan Guaranty Program Indiana District SBA

504 CDC Loan Program Eligible Business: Operated for profit Size standards Tangible net worth up to $15 million Preceding 2 year average net income after taxes up to $5.0 million No speculation or investment in rental real estate Indiana District SBA

Proceeds may be used for: Purchasing land Construction of new facilities Improvements to existing facilities Improvements to real estate Purchase major machinery and equipment Project cost financing Bank finances 50% CDC/SBA finances 30 – 40% Customer finances 10 – 20% Indiana District SBA 504 CDC Loan Program

Loan Maximums: $5.0 million – general $5.5 million – manufacturers Maximum Loan Terms: Buildings – 20 years Equipment – 10 years Job Creation or Retention: 1 job for every $65,000 of debenture Indiana District SBA 504 CDC Loan Program

Advantages of a SBA 504 loan Low down payment Low fixed rate Low monthly payments Indiana District SBA 504 CDC Loan Program

Indiana Certified Development Companies Indiana District SBA Business Development Corporation South Bend, IN Community Development Corporation of Northeast Indiana Fort Wayne, IN Indiana Statewide Certified Development Company Indianapolis, IN Premier Capital Corporation Indianapolis, IN Regional Development Company Valparaiso, IN

7(a) Loan Guaranty Program Indiana District SBA Financial Assistance Programs

7(a) Loan Guaranty Program Eligibility requirements Must qualify as “small” according to the North American Industry Classification System (NAICS) For Profit Open to general public U.S. citizen or permanent residence status Reasonable investment, usually 10 – 20% Good character Indiana District SBA

What is a small business? “one that is independently owned and operated and which not dominant in its field of operation.” This definition will vary from industry to industry. The business sizes listed below indicates the maximum size a business can be based on major industry type and still be considered a Small Business. Indiana District SBA 7(a) Loan Guaranty Program Manufacturing500 – 1,500 employees Wholesaling100 employees for financial assistance programs (500 for contracting programs) Services$6 million to $29 million in annual receipts OR 1,500 employees Retailing$6 million to $24.5 million in annual receipts General and Heavy construction$17 million to $28.5 million in annual receipts Special trade construction$12 million in annual receipts Agriculture$750,000 to $6 million in annual receipts

The 7(a) program also has alternative size standards available. They are: 1.Tangible net worth is $15,000,000 or less AND 2. Average income after taxes is $5,000,00 or less for the past 2 years Indiana District SBA 7(a) Loan Guaranty Program

Purpose of the 7(a) Loan Working capital Purchase equipment/ furniture/ fixtures Acquire land/buildings Construct new facilities Debt refinancing Purchase an existing business Indiana District SBA 7(a) Loan Guaranty Program

Ineligible uses of a 7(a) Loan Purchase partial ownership of a business Repay owners for their investment in the business Pay for delinquent taxes Refinance of delinquent loans Speculative, lending or investing purposes Real estate held for investment, sale or rent Illegal or gambling activities nor for sexually oriented businesses Business pyramids Political, lobbying or religious activities Indiana District SBA 7(a) Loan Guaranty Program

Borrower benefits Funding for start-ups Longer amortizations No balloon payments No prepayment penalties (loans under 15 year maturity) Reduced owner investment & collateral requirements The SBA guaranty encourages lenders to loan money Indiana District SBA 7(a) Loan Guaranty Program

Maximum Loan Amount $5,000,000 Guaranty fees 2 – 3.75% Guaranty percentages 75 – 85% Indiana District SBA 7(a) Loan Guaranty Program

Loan Maturities Working capital 1 to 10 years depending on cash flow needs Equipment up to the expected useful life Building/land up to 25 years Indiana District SBA 7(a) Loan Guaranty Program

Interest rates Negotiated between the borrower and lender Subject to SBA maximums May be fixed or variable Indiana District SBA 7(a) Loan Guaranty Program

Maximum Interest Rates Indiana District SBA 7(a) Loan Guaranty Program Loan amountunder 7 years7 years or more up to $25,000Base rate %Base rate % $25,001 - $50,000Base rate %Base rate % $50,001 or moreBase rate %Base rate %

Base Rate Options: Variable Rate Options: Wall Street Prime 1 Month LIBOR + 3% SBA Peg Rate Fixed Rate Option: LIBOR SWAP (1 month LIBOR + 3% + Ave of 5 and 10 year LIBOR) Indiana District SBA 7(a) Loan Guaranty Program

January 2016 Interest Rate Maximums (Loans $50,000 and greater; over 7 years) Wall Street Prime = = 6.25% 1 month LIBOR = = 6.17% SBA Peg Rate = = 5.13% Fixed Rate = = 8.11% Indiana District SBA 7(a) Loan Guaranty Program

What a Lender looks for in an SBA Loan Management ability A feasible business plan Repayment out of business proceeds Capital injection by owners Collateral Personal guarantees Credit scores Indiana District SBA 7(a) Loan Guaranty Program

Business Plan ABC Company Business Plan Section One: Executive Summary Section Two: The Business Description of business Product/service Marketing information Location Competition Management Personnel Application and expected life of loan Section Three: Financial Data Section Four: Supporting Documents Indiana District SBA 7(a) Loan Guaranty Program

Financial Information Required New businesses Detailed estimate of needed capital Projections of revenues, expenses and profits - 12 month minimum Cash flow projection - 12 month minimum Narrative of major assumptions List of collateral Indiana District SBA 7(a) Loan Guaranty Program

Financial Information Required Established businesses Current balance sheet and 3 full years income (profit/loss statements) Projections of revenues, expenses and profits - 12 month minimum Cash flow projection – 12 month minimum Narrative of major assumptions Current personal financial statement for each owner, partner or stockholder List of collateral Statement of the loan amount and intended uses Indiana District SBA 7(a) Loan Guaranty Program

SBAExpress $350,000 maximum 50% guaranty Faster processing Indiana District SBA Additional 7(a) Sub Programs

International Trade Loans United States Export Assistance Center John O’Gara 211 West Fort Street, Suite 2200 Detroit, MI Phone: Indiana District SBA Other SBA Finance Programs

Entrepreneurial Development Assistance SCORE – Counselors to America’s Small Business 11 Chapters in Indiana Small Business Development Centers 10 center in the state Central Indiana Women’s Business Center Indianapolis – Women’s Economic Opportunity Center for Indiana Fort Wayne – Additional information can be found on the Indiana SBA website Indiana District SBA 7(a) Loan Guaranty Program

First steps for government contracting : DUNNS number System for Award Management Contracting opportunities Contact Marty Anderson or Vernice Mathis Indiana District SBA Contracting and Certification Programs

Lender is not SBA Prepare a written business plan Know and understand what the plan says Talk with SBA Resource Partners and other stakeholders before visiting lender What happens if the lender says “No” to your loan request? Indiana District SBA Things to Remember

Luann Lieurance Lender Relations Specialist Indiana SBA District Office 8500 Keystone Crossing, Suite 400 Indianapolis, IN x 114 Indiana District SBA