SBA 7(a) Government. Guaranteed Loan Program

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1 SBA 7(a) Government Guaranteed Loan Program

2 SBA Overview The U.S. Small Business Administration (SBA) Was Created By Congress In 1953 To Assist And Counsel Small Business Growth And Prosperity, Thereby Contributing To The General Welfare Of The Economy The SBA Has A Number Of Programs And Services Available. They Include Training And Educational Programs, Advisory Services, Publications, Financial Programs, And Contract Assistance. The Agency Also Offers Specialized Programs For Women, Minorities, Veterans, International Trade, And Rural Development

3 SBA 7(a) Program The 7(a) Program Is Designed To Enable Lenders To Expand The Terms And Conditions Of Commercial Financing, While Decreasing The Inherent Risk In Longer Loan Maturities The Local Lender Is Responsible For Originating, Funding And Servicing Of The Loan For The Full Term 75% To 85% Of The Loan Amount Is Guaranteed By The Full Faith And Credit Of The U.S. Government, Thereby Alleviating The Lenders Collateral Dependency.

4 Benefits to Businesses Longer Term Financing 7 Years For Working Capital 10 Years or Useful Life For FFM&E 25 Years For Real Estate No Balloon Provisions, Limited Prepayment Penalties Consolidation Of Loan Components Reduction In Equity And Collateral Requirements

5 Benefits to Participating Lenders Full Faith & Credit Guaranty Of The U.S. Government To 85% On Loans To $150M And 75% On Larger Loans. Provides Increased Liquidity & Earnings Through Secondary Market Sales Lenders Can Provide Financing In Excess Of Normal Statutory Lending Limits Guarantee Reduces The Lender s Reliance On Collateral Coverage & Concentration Of Credit Loans May Be Used For CRA Requirements

6 Eligibility Requirements 4 Primary Factors 1) Size Standards 2) Nature Of The Business 3) Use Of Proceeds 4) Availability Of Funds From Other Sources - Utilization Of Personal Assets

7 Eligibility Requirements (cont ) General SBA Size Standards Applicant & Affiliates Manufacturing Up To 500 Employees Wholesale Up To 100 Employees Retail Up To $6.5 Million In Average Annual Sales

8 Eligibility Requirements (cont ) Use of Proceeds Finance Business Start-up Or Acquisition Purchase Machinery, Equipment, Fixtures, Supplies, Leasehold Improvements, As Well As, Land And/Or Owner-Occupied Real Estate Expand Or Renovate Facilities Finance Working Capital Refinance Existing Debt Under Certain Conditions

9 Maximum Loan Amount Gross Loans To $5,000,000 With A Maximum SBA Guaranty Of $3,750,000

10 Loan Guarantee Limits Up To 85% For Loans Of $150,000 Or Less 75% For Loans Over $150,000 And Up To $5 Million

11 Collateral Every SBA Loan Is To Be Secured By All Available Assets Lenders Will Discount Collateral Consistent Within LTV Policy

12 Fees and Costs One-time Guaranty Fee Based On The Guaranteed Portion Of The Loan Loans To $150,000-85% 2% Fee (i.e. $150,000 X 85% X 2% = $2,550 Fee) Loans Of $150,001 To $700,000-75% 3% Fee (i.e. $700,000 X 75% X 3% = $15,750 Fee) Loans Of $700,000 To $1 Million 3.5% Fee; $1 Million 3.75%

13 Personal Guarantees & Liquidity Requirements The Personal Guaranty Of All Principals Maintaining A 20% Or Greater Ownership Interest Is Required Personal Liquidity Of Guarantors Loans < $250,000 Maximum Of 2 Times The Loan Amount Or $100,000, Whichever Is Greater Loans Of $250,000 To $500,000 Maximum Of 1.5 Times The Loan Amount Or $500,000, Whichever Is Greater Loans > $500,000 Maximum Of 1 Times The Loan Amount Or $750,000, Whichever Is Greater

14 Interest Rate Fixed Or Variable Alternatives Negotiated Between Lender And Borrower Loans < 7 Years, Maximum 2.25% Over Prime (Variable); Adjusted Quarterly Loans > 7 Years, Maximum 2.75% Over Prime (Variable); Adjusted Quarterly

15 Servicing Requirements 1% Servicing Fee Retained by Lender;.55% remitted to Colson Services (FTA) and SBA

16 Prepayment Penalties Loans With Maturities Of 15 Years Or More Where The Borrower Is Prepaying Voluntarily Prepayment Amount Exceeds 25% Of The Outstanding Balance Of The Loan Prepayment Is Made Within The First 3 Years After The Date Of The First Disbursement (Not Approval) Of The Loan Proceeds.

17 Prepayment Penalties (Cont ) The Prepayment Fee Calculation Is As Follows: During The First Year After Disbursement, 5% Of The Amount Of The Prepayment; During The Second Year After Disbursement, 3% Of The Amount Of The Prepayment; Or During The Third Year After Disbursement, 1% Of The Amount Of The Prepayment

18 Contact Information: Michael D. Ryan, Principal Office: (610) Cell: (610) E Mail: [email protected] David D. Puyear, CPA/CFO Cell: (215) E Mail: [email protected] Website: InnovativeFinancingSolutions.net