1. Example sba
Scenarios

2. Scenario – change of ownership
Key Details:
$1.75MM sales price for business and real estate
CRE valued at $550,000
Business Assets valued at $350,000
Goodwill of $850,000
Total equity of 10% or 175,000

3. Scenario – change of ownership
Based on standard collateral discounts collateral coverage is as follows:
Total shortfall equals $1.215MM
- SBA Guaranty of 75% reduces shortfall to $303,750

4. Scenario – working capital need for growth
Key Details:
Highly profitable river towing company with only a handful of contracts to large companies
Needing to expand labor in order to staff more vessels in order to secure greater number of contracts
Request of $500,000 Revolving LOC
Limiting Factors:
AR never goes above $250,000 and typically pays in 10 days
Concentration of customers and receivables

5. Scenario – working capital need for growth
Solution:
Leverage equity in existing vessels (2 tow boats owned free and clear) in order to provide 3 year committed CAPLine for $500,000.
Equity in vessels allowed the bank to meet SBA’s 1:1 requirement for collateral coverage for CAPLines without the need of a borrowing base.
Scenario – working capital need for growth

6. Scenario – start up and expansion
Key Details:
Successful restaurant operator with single location looking to open new location and new concept.
Leased space; build out and start-up expenses total $850m. Significant collateral shortfall.
Highly visible location in affluent area.

7. Scenario – start up and expansion
Solution:
By relying on historical performance at current location the bank was able to validate borrower prepared projections in order to provide loan to new legal entity only for project.
Landlord contributed to project by providing a note for half of the first year’s rent via a note that would be on full standby for the life of the bank loan. In doing so, the bank was able to count this as equity in the project toward the overall equity contribution figure.

8. Scenario – ineligible business?
Situation: Borrower was a publisher and distributor of Christian based books and educational materials. Problem: SBA SOP prohibits the use of proceeds to business who “engage in the promotion of religion”.

9. Scenario – ineligible business?
Solution: 13CFR more clearly states that “Businesses principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting” are considered to be ineligible businesses. Being as that the company was primarily engaged in the business of publishing and distributing books the bank was able to successful receive an opinion from SBA counsel that determined a publisher of Christian related material was not engaging in doctrinating religious beliefs but was rather providing educational source material for which retailers could offer to their consumers seeking such material.

10. 504 Loan Program Project Examples

11. Additional Economic Development Programs
Enterprise Zone
Intermediary Relending Program (IRP)
Innovate PA (SSBCI)
Anchor Building
Rural Micro Entrepreneur Assistance (RMAP)

12. Combining ED Programs with 504
Subordinated Debt as equity
Lowers out of pocket costs
Even less than 50/40/10
Use programs to “carve out” non-eligible 504 costs

13. Keep in Mind:
If equity contribution is borrowed and secured by Project Property, loan cannot be repaid faster than 504 Note
Leasing Requirements
Standby Agreements

14. KF Affiliated Services, Inc.

15. Jaggard Street Realty

16. Jaggard Street Realty

17. Laguna Splash Limited

18. Laguna Splash Limited