SBA Guaranty Loan Options for Small Businesses

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1 SBA Guaranty Loan Options for Small Businesses

2 W. Lewis Burger Lender Relations Specialist Georgia District Office Atlanta, GA (404) Ext 304

3 SBA Loan Guaranties- Understanding How It Works SBA does not provide Direct business loans (except in a natural disaster)

4 SBA Loan Guaranty Process Applicant applies for commercial loan at bank first approach your current banker If loan doesn t fit standard underwriting guidelines & needs credit enhancement, applicant and lender may consider an SBA guaranty Lender submits application to SBA After SBA guaranty approved, lender closes and disburses funds SBA (US tax payer - co-signs) guaranties range from 50-85%

5 SBA Eligibility Requirements Businesses must: For profit May not exceed SBA size standards (Generally less than 500 employees and $15M in Gross Sales)

6 SBA Requirements (Con t) Cash/Equity injection required: generally 20-30% Personal guaranties required for all with 20% + ownership Collateral is required expect to pledge your home.

7 SBA Requirements (Con t) Ineligible Businesses: Non-profits Businesses engaged in lending activities Speculative or investment type businesses Businesses engaged in gambling Illegal businesses Businesses providing sexual material Businesses promoting religion

8 Use of Proceeds Expand & renovate facilities Purchase machinery & equipment, construct leasehold improvements Finance receivables & working capital Refinance existing debt (with compelling reason) Finance seasonal lines of credit Construct or purchase of commercial buildings (Owner Occupied: 51%+ occupied by your business) Hospitality/RV Park OK Mobile Home Park/Apartments not OK

9 Loan Terms Flexible maturities: Up to 10 years for working capital Up to 10 years for equipment Up to 25 years for fixed assets: Real estate Capital Equipment (based on economic life of equipment) Interest rates: Prime plus (depends on program)

10 Fees Guarantee Fee Up front of 0% to 3.75% and ongoing of 0% to 0.519% And a Packaging Fee per SBA Guidelines

11 SBA Guaranty Loan Programs 7(a) loan guarantees Basic (Up to $5M) Industry Specific/Subset CAPLines (Capital Lines of Credit) Export Working Capital Program (EWCP) International Trade term loans Expedited (Express) Programs 504 fixed asset financing Micro-loan program

12 SBA Guarantee Loan Programs Specifics of 7a s See Quick Reference to SBA Loan Guaranty Program Matrix updated October 2014

13 504 Fixed Assets Financing Sometimes referred to the Real Estate Loan, but is use for non-rolling equipment too Long term - 10 & 20 year terms Provided by Certified Development Companies (CDC) see page 11 of GA Small Business Guide Owner Occupancy: 51% of existing structure or 66% for new construction

14 To Qualify for a 504 Loan Eligible and Ineligible: Same as 7a

15 A Typical 504 Project A lender (bank) provides 50% first position lien at 50% Loan to Value CDC (504 loan) provides up to 40% second position lien At least 10% down payment by applicant

16 Micro-Loans Micro Lenders more likely to do start ups Up to $50,000 (maybe more) to small businesses Used for Machinery, equipment & fixtures Leasehold (Tenant) Improvements - TI Inventory Working capital Business management assistance is available and maybe mandatory For list of Micro Lenders, see page 29 of the Georgia Small Business Resource on our site

17 What to take with you to the bank Business Plan Including: Purpose of loan Business Managerial History (resume ) Business and Personal Financial Statements - Accounts receivable and payable Copy of Lease Owner investment - cash and/or other hard assets Projections of income, expenses & cash flow Visit with SCORE and/or Small Business Development Centers (SBDC) for assistance before going to bank

18 Additional Information SBA Website sba.gov sba.gov/ga for Georgia-specific information sba.gov/financing for SBA loan programs sba.gov/for-lenders for SBA lending partners

19 Georgia Office Resource Guide Click here

20 Page 29 for Mirco Lenders

21 Questions & Answers Q & A W. Lewis Burger Lender Relations Specialist Georgia District Office Atlanta, GA (404) Ext 504 W.Burger@SBA.gov

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