SBA L SBA endi ding Program Overview

Transcription

1 SBA Lending Program Overview

2 SBA Loans The U.S. Small Business Administration (SBA) offers numerous loan programs to assist small businesses. The SBA is primarily a guarantor of loans made by banks and non-bank lenders and does not offer loans directly to small businesses. The SBA guaranty DOES NOT make bad loans good!

3 SBA Loans Benefits For Borrowers: Longer terms Lower equity requirements Lower debt service coverage requirements Less restrictive collateral parameters

4 SBA Loans Uses Purchase owner occupied real estate Construction and expansion of business premises Leasehold improvements Purchase machinery and equipment, furniture and fixtures Business acquisition iti Debt refinance/consolidation Working capital / inventory purchase

5 Ineligible SBA Borrowers Businesses that do not occupy at least 51% of the property for which they are requesting financing Investment tproperty Non Profit Entities Owners with ihliquid id assets exceeding one of the following formulas: Loan Amount Formula* < $250,000 2x project cost or $100,000 $250, to $500, x project cost or $750, > $500,001 project cost or $750,000 * Whichever h is greater.

6 SBA Loan Programs At Founders Bank, we offer two prominent SBA loan programs: 7(a) 504

7 7(a) Loans Overview Helps qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels Financing available for a variety of general business purposes including: working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements and debt refinancing i (under special ilconditions) CUSTOMERS: Start up and existing for profit small businesses that are owner operated. Equity requirements generally range between 20% 30%.

8 Terms 7(a) Loans Terms & Conditions Real lestate: New construction up to 25 years; Ei Existing i building up to 20 years Machinery & Equipment up to 10 years Working Capital up to 10 years Business Acquisitions up to 10 years Interest Rates Loan > $50,000, 000 Term < 7 years: Maximum rate = Prime % 25% Loan > $50,000, Term 7 years or more: Maximum rate = Prime % Adjusts monthly with any change in Prime Variable rates Loan Amount Maximum: $2 million (SBA guarantees lesser of 75% or $1,500,000) 000) Typically looking for loans of $250,000 or more.

9 504 Loans Overview Long term, fixed rate financing for the acquisition of real estate, machinery or equipment and limited amounts of debt refinance. Typical projects include a loan secured from a private sector lender (Founders Bank) with a senior lien for no less than 50% of the project cost, a loan secured from a Certified Development Company (CDC) with a juniorlien covering up to 40 percent of the total cost, and a contribution of at least 10 percent equity from the borrower. Target Customers: Small businesses requiring brick and mortar financing.

10 504 Loans Overview Available for real estate and equipment financing and limited amounts of debt refinancing only Similar borrower liquidity requirements as any SBA 7(a) () loan, however business size eligibility requirements are relaxed Start ups t or existing iti businesses Fixed rate on the CDC 2nd lien 504 loan Up to 90% financing i available

11 504 Loans Overview Typical Structure is : 50% of Project Costs = 1 st Lien Lender (FB) 40% of Project Costs = CDC 40% of Project Costs = CDC 10% of Project Costs = Equity from Borrower

12 504 Loans Overview Founders Bank Finances 50% of project costs Secured by 1 st Lien DT Variable Interest Rate CDC Finances up to 40% of project costs Secured by 2 nd Lien DT Guaranteed dby SBA Fixed Rate Borrower Minimum 10% equity contribution* *5% additional for start ups *5% additional for single purpose buildings

13 504 Loans Overview Maturities: 1 st Lien Lender: up to 25 years, fully amortizing CDC: up to 20 years, fully amortizing

14 504 Loans Overview Eligibility Requirements: The 504 program is about economic development so applicant s need to be able to create one full time job within 2 years of loan s funding for every $65,000 of CDC loan proceeds Ex: CDC Loan = $500,000/$65,000 = 8 new jobs

15 504 Loans Overview Eligibility Requirements: Business must operate for a profit $3,500, in taxable income per tax returns (can be averaged over 2 years) $8,500,000 in net worth

16 504 Loans Overview Eligibility Requirements: Working Capital and Inventory are not eligible for 504 financing

17 504 Loans Overview Advantages borrower: Provides growing companies with permanent fixed asset financing Lower equity injection requirements conserve applicant s operating capital 20 yr fixed rate financing on CDC 2 nd lien note Long term fully amortizing ii maturities ii Up to 90% financing available

18 Good SBA Loan Prospects Business Acquisitions iii Loans to professionals: Doctors, Dentists, Veterinarians Hotels Pet Hotels/Boarding Facilities Child Care Facilities Real lett Estate Financingi Franchise Restaurants Gas Stations/Convenience Stores Car Washes General Automotive Grocery Stores Service Companies Manufacturers & Wholesalers

19 Who We ve Helped Since opening our SBA Lending department in the Spring of 2008, we ve approved 7a and 504 loans exceeding $21million for the following types of Houston area small businesses; Daycares Physicians offices and urgent care centers Veterinary clinics Auto collision repair facilities Law firms Gas station/convenience stores Commercial lreal lett Estate offices Car washes Franchised businesses

20 How We ve Helped Founders Bank SBA loan proceeds have been used for a variety of needs, including; Debt refinance Real Estate acquisition Existing building renovation/expansion New building construction Business acquisition Machinery & equipment purchases Start up capital

21 How You Qualify Lending is like a jigsaw puzzle all the pieces have to fit together. Successful applicants will have; Experience Repayment ability Personal funds to inject into project Collateral Cleanpersonal credit andrepayment history

22 Paul Reade Sr. Vice President Founders Bank SBA Lending 4690 Sweetwater Blvd Sugar Land, Texas Office: Cell: d follow me at twitter.com/foundersbanksba