1 ACCESS TO CAPITAL FOR SMALL BUSINESSES Annie Hudspeth Lionel Davila Lender Relations Specialists
2 Mission Established on July 30, 1953 to aid, counsel, assist and protect the interests of small business concerns; to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. SBA helps Americans start, build and grow their businesses. SBA has the 3 Cs Capital, Certification & Counseling
3 The Answers You Need Starts Here: Experience the New SBA.gov! Answers, Support and Resources for Your Small Business. Fast and Easy! Gives you information and services based on your unique business needs LINC SBA Learning Center on line training opportunities Find Exporting Opportunities SBA local Resource Partners
4 Experience the New SBA.gov! The Answers You Need Starts Here: SBA.GOV Answers, Support and Resources for Your Small Business. Fast and Easy! Gives you information and services based on your unique business needs LINC SBA Learning Center on line training opportunities Find Exporting Opportunities SBA local Resource Partners
5 Click on SBA LINC TOOL
6 Personal Savings Friend & Relatives Credit Cards Business Earnings Partners Trade Credit Investors Banks/Credit Unions SBA Factoring Companies Crowd Funding Micro Loans
7 Non-profit agencies Environment Inventions Research & Development Science & Technology
8 Financial Assistance - SBA is a government guarantee loan program offered through SBA participating lenders (banks and credit unions). SBA does not loan money directly. SBA is the largest single financial backer of the federal government for the nation s small businesses. Used when a small business (start-up or existing) cannot obtain financing on bank terms but is still viable. SBA participating Lenders play the Central Role between you and the SBA.
9 So Why Go With an SBA Guarantee??
10 Not everyone needs an SBA Guarantee SBA guaranteed loan programs provide an alternative Used when a viable business cannot obtain financing through normal lending channels on reasonable terms. If risk is too high lender comes to SBA-- guarantee reduces lender risk SBA participating lenders play a Central Role between you and the SBA.
11 Benefits for small business: Provides funding when financing is not otherwise available on reasonable terms. Longer Terms Interest Rate not-to-exceed SBA maximums & driven by prime-rate. SBA supports start-up position.
12 Start-up Business Insufficient of Collateral Lower Than Normal Down payment (Equity) Longer Term/Lower Payments to Meet Debt Coverage Riskier Industries (Entertainment, High- Tech, Service, Retail) Uneven Historical Cash Flow Tighter Debt Coverage Change of Ownership/ Management Lending Limits Reliance on Projections
13 Owned & Operated for Profit Size Standards NAICS Codes Number of employees 500 Sales averaged - $7 million Alternative Size Standard Maximum Tangible Net Worth - < $15 Million Average Net Income after Federal Income Taxes for two full fiscal years - $5 Million Type of Business Use of Proceeds
14 Purchase machinery, equipment, fixtures, buildings and land for business Purchase inventory & materials Working capital Leasehold improvements Debt-Refinancing Buy existing businesses Construct new buildings Franchise Home-Based Lines of Credit
15 General 7(a) Loan Limitations Max. Loan Amount Max. amount of SBA guaranty to any one Borrower (including all affiliates) $5 Million $3.75 Million (75%) Max. SBA guaranty percentage 85% for loans of $150,000 or less; 75% for loans greater than $150,000
16 SBA Guaranty Fees Quick Reference Chart Gross Loan Size Fees Notes Loans of $150,000 or less Currently No Fees Maturities that exceed 12 months $150,0001 to $700,000 3% of guaranteed portion $700,001 to $5,000, % of guaranteed portion up to $1,000,000 PLUS 3.75% of the guaranteed portion over $1,000,000 Short Term Loans Up to $5,000, % of the guaranteed portion Maturities of 12 months or less
17 SBA Guaranty Fees Quick Reference Chart Approved To Qualified Veteran Owned Small Businesses Gross Loan Size Fees Notes Loans of $150,000 or less Currently No Fees Maturities that exceed 12 months $150,0001 to $700,000 *for Veterans $700,001 to $5,000,000 *for Veterans 1.5% of guaranteed portion 1.75% of guaranteed portion up to $1,000,000 PLUS 1.875% of the guaranteed portion over $1,000,000 Short Term Loans Up to $5,000,000 *for Veterans 0.125% of the guaranteed portion Maturities of 12 months or less
18 Interest Rates Determined by lender (Negotiable) Maximum variable interest rate: < 7 Year Term = [Prime %] OR [(LIBOR + 3%) %] 7 Year Term = [Prime %] OR [(LIBOR + 3%) %] Loan $25,000 Additional 2% Loan $25,000 - $50,000 Additional 1% SBA Optional Peg Rate Published quarterly in the Federal Register Higher rates may apply for SBAExpress
19 Working Capital will not typically exceed 7 years. In some cases may go up to 10 years. Fixed Assets other than real estate will be limited to the economic life of those assets. Real Estate will not typically exceed 20 years. In some cases may go up to 25 years.
20 SBAExpress Loan Program $350,000 (50% guaranty) Veteran s Advantage Loan Program - $350,000 (No Fees up to $350,000) Export Express Loan Program - $500,000 (up to 90% guaranty) International Trade $5 million (up to 90% guaranty) Export Working Capital - $5 million (up to 90% guaranty) Community Advantage 7(a) Loan - $250,000 Non-7(a) Loans: CDC/504 Loan Program $5,000,000 up to $5.5 million Microloans - $50,000
21 Community Advantage - is a pilot initiative aimed at increasing the number of SBA 7(a) lenders who reach underserved communities, targeting mission-focused financial institutions which were previously not able to offer SBA loans. Maximum Loan Size: $250,000 Guaranty: 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000. Underserved Communities are small businesses in or that have more than 50 percent of their workforce residing in low-tomoderate income (LMI) communities; in Empowerment Zones and Enterprise Communities; in HUBZones; start-ups (firms in business less than 2 years); and veteran-owned businesses and those that would be eligible for Veteran Advantage.
22 504 Loan Program 504 Loan Limitations Maximum Loan Amount (generic 504) Maximum Loan Amount if a public policy goal Maximum Loan Amount if a small manufacturer Maximum Loan Amount if at least 10% reduction in borrower s energy consumption Maximum Loan Amount if project generates renewable energy or renewable fuels, such as biodiesel or ethanol production $5 Million $5 Million $5.5 Million $5.5 Million $5.5 Million
23 Typical Structure Lender 50% 504 Program 40% Owners Equity 10% Special circumstances Single purpose building +5% Owners Equity Start-up business +5% Owners Equity Interest Rates 504 portion typically close to Prime Rate 504 portion fixed interest rate Longer Repayment Term Heavy Machinery/Equipment Real Estate 10 Years 20 Years Refinance Option Eligible up to 50% of the new project costs
24 Special use or special purpose properties include: theaters, sports arenas, schools, dormitories, cold storage plants, tennis clubs, golf courses, marinas, gasoline service stations, automatic car wash properties, hospitals, medical centers, nursing homes, funeral homes, cemeteries, historic properties, sanitary landfills, museums, clubhouses, and some recreational properties. Generally, SBA considers hotels or motels to be included as a special-use or special-purpose property.
25 Maximum loan amount Up to $50,000 Eligibility Same as 7(a) Criteria Maturity Short-term, Not to Exceed 6 Years Fixed Interest Rates Negotiable
26 Loans for Federal Declared Disaster Zones Business Homeowners Renters *Not for secondary homes or vacation properties Physical Damage Max $200,000 Home Loans Max $40,000 - Personal Property Loans Business Max $2.0M Business Loans Economic Injury Disaster Loans Terms Interest rates - typically 2-4% Up to 30 years
27 Non-Profit Financial Institutions Investment Companies Limited Membership Clubs Over 1/3 of Revenues from Legal Gambling Default on Federal Loans Delinquent Withholding Federal Taxes Probation, Parole, or Pending criminal charges Pyramid Sales Plans Race Tracks Gambling & Illegal Activities Religious Teaching Sexual Nature Delinquent in Child Support (60-90 days)
28 5 Cs of Credit Character - Background, Education, Experience, Credit Capacity - Source of Repayment Collateral - Assets you own Capital - Money you have invested Conditions - Your Industry Also Debt Position (both Business & Personal) Sound Business Plan
29 The BUSINESS PLAN will be your FINANCIAL PROPOSAL as a startup business and potential borrower especially for those larger loan amounts. Adds creditability! Business Plan classes are offered by SBA resource partners i.e. SCORE, UTSA-SBDC And Women s Business Centers or you may go to for sample template and on-line class.
30 Federal Procurement Assistance - Committed to increase business participation to women, veterans, and minorities System for Award Management 8(a) Business Development Program - Offers a broad scope of assistance to socially and economically disadvantaged firms, helping these entrepreneurs to compete in the Federal contracting arena. SBA HUBZone Empowerment Program ("Historically Underutilized Business Zone ) - Designed to promote economic development and employment growth in economically distressed areas - Are you in a HUBZone? Mentor Protégé Program - Allows start-up companies to learn the ropes from experienced businesses. ml New! Women-Owned Small Business Program authorizes contracting officers to specifically limit, or set aside, certain requirements for competition solely amongst women-owned small businesses (WOSBs) or economically disadvantaged women-owned small businesses (EWOSBs).
31 Surety Bond Guarantee Program - A surety bond is a type of insurance that guarantees performance of a contract. If one party does not fulfill its end of the bargain, then the surety bond provides financial compensation to the other party. Bid Bond guarantees the bidder will enter into a contract and provide the required performance and payment bond Performance Bond: guarantees the contract will be completed in accordance with terms, conditions and specifications. Payment Bond: guarantees the contractor will pay all contract suppliers and vendors. Any Federal Construction contract valued at $100,000+ requires a surety bond as a condition of contract award. Most State & municipal governments have similar requirements, as well as private entities. Many service contracts, and occasionally, supply contracts, also require surety bonds. A list of surety companies and agents who participate in the SBA Surety Bond Guarantee Program are provided at
32 Management & Technical Assistance SBA Resource Partners Nationwide (Free confidential One-on-One Counseling Services, Education and Training) SCORE counselors Small Business Development Centers Women s Business Centers International Trade Centers Specialized in Export/Import SBA together with our resource partners are able to reach, teach and educate potential business owners in our 55 counties territory.
33 What SBA Resource Partners Can Do For You Start-Up Businesses Business Plan Financial Projections Financing Assistance Existing Businesses Managing & Growing a New Business Developing New Markets Financing Assistance Accounting Issues Human Resources International Trade And much more
34 STEP 1 Research the feasibility of starting up or expanding a business. Do your homework! STEP 2 Prepare Business Plan/Financial Proposal STEP 3 Approach Lender for Loan Request STEP 4 Ask Lender regarding an SBA guaranty loan. If yes, Lender will help you with the application process.