1. Business Funding In Today’s Environment
Larry L Jones
Vice President
Commercial Loan /Special Assets Department
(630)

3. Understand the bank’s Approach
Three components of a credit decision
Coverage
Will the business be able to Service the debt?
Credit
Does the borrowers/operators have a history of paying ?
3. Collateral
Will the pledged assets pay off the loan?

4. Coverage Formulas Debt Service Coverage Ratio (DSCR)
Funds available for debt coverage
Net Income $75,000
Interest $37,500
Depreciation $12,500
Total available for debt coverage $125,000
Debt Service Coverage Ratio (DSCR)
Available for debt coverage / debt payment=DSCR
Example:
Total required debt service $100,000
Total DSCR 1.25/1

5. Credit Sources bank’s use as references Credit reports
Current and past creditors
Previous employers
Suppliers
Customers
Other bank’s experience

6. Collateral Security Maximum Advance Real Estate Equipment
Commercial
Residential
Equipment
Rolling stock
Accounts Receivable
Contracts
Goodwill
75% of appraised value
80% of appraised value
70% of depreciated value
70% up to 59 days
50% days
Over 90 days no value
No value

7. Funding Structures (typical terms for types of loans)
Funding structure consists of multiple credits
Security Paymt Term Rate Time to Closing
Comml R E P&I 25 yrs 5-6% 8 weeks
Process: borrowers’ information gathering and analysis, appraisal,
title commitment. ALWAYS close with title company.
Equipment P&I 5 yrs 7-9% 4 weeks
Process: borrowers’ information gathering and analysis, appraisal,
UCC search, security verification
Accounts Receivable (line of credit)
Int only 12 mos 7-12% 2 weeks
Process: borrowers’ information gathering and analysis, aging review,
UCC search, verification from customer
Construction Int only 6-9 mos 7-9% 8-10 weeks
Process: same as R E plus plans approval

8. Over $17 billion in small business loans in 2012
SBA 504
The SBA 504 loan program is designed to assist small business in the acquisition of commercial real estate and heavy machine/equipment.
It is truly one of the best financing options for small business owners today.
SBA Year Fixed Interest Rate for May 2014: 4.82%
Difference in interest charge between 6.00% and 4.82%
On $500,000 at 10 years: $35,000
Over $17 billion in small business loans in 2012

9. SBA 504 Eligible Projects Financing Structure
Owner-Occupied Real Estate (20-Year Term/Fixed Rate)
Machinery & Equipment (10-Year Term/Fixed Rate)
Soft Costs may be included
Financing Structure
10% equity down, up to 90% financing
For real estate, equipment, renovation
Long term (10 or 20 year notes)
all-in on purchases

10. Larry L Jones Questions? Commercial Lender ljones@firststatebank.biz
620 E Main St
St Charles, IL 60555
Office: (630)
Cell: (630)