SBA Loan Programs. Presenter: Bridget Bean. January 19, 2012

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1 SBA Loan Programs Presenter: Bridget Bean January 19,

2 PRESENTER In April of 2009, Bridget Bean was named District Director of the Washington Metropolitan District Office for the U.S. Small Business Administration (SBA). Prior to this appointment, Ms. Bean served in numerous leadership positions within SBA s headquarters. Most recently, she served as Deputy Associate Administrator for the agency s 68 field offices across the nation. In this position, she was in daily contact with all the SBA District Directors a strategic position that allowed her to identify the practices and habits of the most effective offices in the country. Her experience in the areas of Small Business Advocacy, Government Contracting and Procurement, and Entrepreneurial Development Assistance, will have particular benefit for the more than 300,000 local firms including 1,584 firms currently participating in the SBA s 8(a) Business Development program through the District Office. These previous positions provide her a keen understanding of policy development which will help her implement the key areas of SBA activity vital to the growth and development of small businesses in the Metropolitan D.C. area. The SBA s Washington Metropolitan District Office has a staff of 33 professionals dedicated to providing timely service, of the highest quality, to existing and future small business owners. She holds a BA in European Studies from George Mason University. As a member of the Senior Executive Service, Bridget brings a demonstrated commitment to small business growth and development for our local and our national well being. 2

3 PRESENTER ANDREA PEOPLES HAS BEEN WITH THE U.S. SMALL BUSINESS ADMINISTRATION (SBA) FOR ALMOST 4 YEARS. SHE IS A SENIOR EXAMINER AND FINANCIAL ANALYST FOR THE OFFICE OF CREDIT RISK MANAGEMENT. HER DAY-TO-DAY DUTIES CONSIST OF OVERSEEING A $6 BILLION SBA PORTFOLIO GENERATED BY BANKS AND CERTIFIED DEVELOPMENT COMPANIES. MOST RECENTLY, SHE HAS BEEN ASSIGNED TO WORK ON VARIOUS, SPECIALIZED PROJECTS FOR THE DIRECTOR OF THE OFFICE OF FINANCIAL ASSISTANCE. ANDREA HAS OVER A DECADE OF EXPERIENCE IN THE LENDING ARENA FROM WORKING AS A LOAN OFFICER TO EXAMINING FINANCIAL INSTITUTIONS FOR A STATE REGULATOR. PRIOR TO JOINING THE SBA, SHE WAS AN AUDITOR FOR THE DISTRICT OF COLUMBIA WHERE SHE CONDUCTED FINANCIAL AND OPERATIONAL AUDITS FOR THE CHIEF FINANCIAL OFFICER. ANDREA GRADUATED CUM LAUDE WITH A BACHELOR S DEGREE IN BUSINESS MANAGEMENT FROM BRIDGEWATER STATE UNIVERSITY IN BRIDGEWATER, MA. SHE IS CURRENTLY PURSUING HER MBA WITH A FINANCE CONCENTRATION. 3

4 FIVE PROGRAMS 7(a) Loan Program 504 Loan Program Temporary 504 Debt Refinance Loan Program Surety Bond Program Microloan Program 4

5 7(a) LOAN PROGRAM 5

6 7(a) ELIGIBILITY BASIC PURPOSE / USE OF PROCEEDS Working Capital, Machinery & Equipment, Real Estate, Inventory, Floorplan and Furniture & Fixtures SIZE (What is a Small Business?) # Employees or $ Receipts Alt. Based on Net Income and Assets TYPE OF BUSINESS For Profit, For General Public (Not Discriminating), etc. 6

7 7(a) CREDIT POLICY Promote small business financing when it is otherwise unavailable on reasonable terms Primacy of cash flow lending Loans not denied strictly for lack of collateral 7

8 7(a) PORTFOLIO ATTRIBUTES Loans not meeting lender s conventional credit policies may be SBA eligible Term to maturity Start-up business Outside lender s credit box Typically more risky enterprises (Start ups, Hotels, Contractors, Restaurants) Mostly underserved borrowers including women, minorities, veterans and rural concerns Loans range in size from $5,000 to $5.5 million $90+ Billion outstanding 8

9 7(a) LOAN TERMS GUARANTY PERCENTAGE 50%, 75-85% GUARANTY FEE - 2% TO 3.75% LOAN AMOUNT - $5.0 million MATURITY UP TO 10 YEARS FOR WORKING CAPITAL UP TO 25 YEARS FOR REAL ESTATE INTEREST - UP TO PRIME + 2 ¾% Higher rates for SBAExpress and Community Advantage 9

10 7(a) LOAN APPROVAL PROCESS Business Plan, Market Analysis & Strategy Cash Flow Forecasts Monthly Bank Application SBA Guaranty Request 10

11 504 LOAN PROGRAM 11

12 Project financing vehicle for long-term, fixed-rate financing: Owner occupied 504 LOAN PROGRAM Purchasing or constructing facilities purchasing machinery & equipment Maximize public/private sector financing partnership Provides main street access to wall street expertise Fulfill community/public policy goals Source of job creation 12

13 504 PROGRAM FEATURES Most 504 loans- $5.0 million Manufacturers and Energy Conservation/Production projects $5.5 million (no limit on the number of projects) Maturities of 504 loans are: 10 years Machinery 20 years Real Estate 13

14 TYPICAL 504 PROJECT SBA provides balance of financing secured by second mortgage Borrower provides at least 10 percent equity First mortgage lender provides 50 percent of financing (no SBA guaranty) Use of proceeds to purchase land and building for expanding business 14

15 Temporary 504 Debt Refinance Loan Program 15

16 What is it for? TEMPORARY 504 DEBT REFINANCE LOAN PROGRAM To refinance owner-occupied commercial property and equipment (not already government guaranteed) Debt must be at least two years old Can finance up to 90% of current appraised value With sufficient equity, other businesses expenses and debt can be financed 16

17 TEMPORARY 504 DEBT REFINANCE LOAN PROGRAM (CONT D) Works like regular 504 Equity in other fixed assets can be pledged to increase the financing Lock in long-term, low fixed-rate financing for working capital as well as real estate Must be current the past 12 months Program expires September 27,

18 EXAMPLE CASE STUDY #1 Refinancing Using Equity in the Property Appraised Value of Property $1,400,000 Outstanding Balance of Debt $1,260,000 90% LTV $1,260,000 First Mortgage Loan $700,000 SBA 504 Loan $560,000 Borrower Equity Contribution $140,000 Borrower uses equity in property to lock in 44% of debt at long-term, low fixed-rates 18

19 EXAMPLE CASE STUDY #2 Maximum Working Capital Appraised Value of Property $1,400,000 Outstanding Balance of Debt $1,000,000 90% LTV $1,260,000 First Mortgage Loan $700,000 SBA 504 Loan $560,000 Borrower Equity Contribution $140,000 Proceeds for Working Capital $260,000 Borrower benefits from lower cost working capital and 44% of debt at longterm, low fixed-rates 19

20 EXAMPLE CASE STUDY #3 Other Collateral Added to the Deal to Maximize SBA Debt Appraised Value of Property $ 800,000 Outstanding Balance of Debt $1,000,000 Appraised Value of Other Pledged Collateral $ 600,000 80% of Total LTV $1,120,000 First Mortgage Loan $560,000 SBA 504 Loan $560,000 Borrower Equity Contribution $280,000 Available for Working Capital $120,000 Borrower gets: - 50% of their debt fixed - to refinance an underwater loan - working capital 20

21 Surety Bond Program 21

22 SURETY BONDS Insurance that guarantees contract completion Bid Bond Payment Bond Performance Bond 22

23 ELIGIBILITY REQUIREMENTS Classified as small Unable to obtain a bond without an SBA guarantee Public or private contract or subcontract cannot exceed $2 million 23

24 BOND GUARANTEE FEES SBA charges the small business.729% of the contract price for a final bond (payment/performance bond) There is no charge for a bid bond SBA charges the surety company 26% of the fee charged by the surety company to the small business. 24

25 Microloan Program 25

26 Microloan Program Loans up to $50,000, often under $25,000 Interest rate varies (up to C.O.F %) Made by non-profit, mission oriented lenders (double bottom line). About 160 active around the country Focus on traditionally un-bankable borrowers (character lending) Technical Assistance may be required 26

27 SBA District Office or other resource partner SBA District Offices Other SBA Resources One stop shop for all SBArelated questions Information on capital, contracting, and counseling opportunities Visit to find your local District Office 900+ Small Business Development Centers (SBDCs) provide consulting and training 13,000 volunteer counselors available through SCORE 110 Women s Business Centers (WBCs) Visit for more information!

28 Questions? 28