SBA Express Loan Program
SESSION WILL COVER History Lender eligibility issues Program parameters Loan processing Loan closing Practical uses
Program Designed to: Increase lender participation Increase number of small loans Minimize SBA forms/procedures Expedite loan processing Standardize routine loans Attain centralized efficiency Reduce costs to lenders and SBA
What Does the Express Program Offer? Available for loans up to $350,000 Lenders use own forms and procedures to approve, service and liquidate Can be used for term loans or lines of credit 50% guaranty Higher guaranty allowed on loan up to $500,000 if proceeds used to enter or expand exports or loan is to a veteran owned business
Lenders Use Own Documents for: Application Internal Credit Memoranda Note (Legally enforceable) Collateral Documents Liquidation Documents
SBA Documents Limited to: Supplemental Information for Express Processing Form 1920SX (Part B) Eligibility Information Checklist Form 1920SX (Part C) Form 1919 - SBAExpress Borrower Information Form Required for all guarantors and owners 20% or more Lender retains forms in their file, DO NOT SEND to SBA
Lender Uses Own Procedures Same as for non-sba loans Lender does credit analysis Lender screens for eligibility Lender uses own collateral policy Credit scoring is allowable
Eligibility Requirements Use SBA Express Checklist Must be small business operated for profit # of employees or avg. receipts based on industry Find NAICS Code and size standard at www.sba.gov/size Owners must: Be of good character Be a citizen or documented alien Meet SBA s personal resource test Must be eligible type of business not engaged in lending, real-estate development, investments or speculation For Patriot Express loans SBC must: be 51% owned by an eligible military member Provide VA or DOD documentation to lender
Loan Limits Aggregate amount of SBA portions for this application and all outstanding loans to applicant and its affiliates can t exceed $4.5mm Aggregate balance of all SBAExpress loans can t exceed $350,000 No piggyback loans Existing SBA loans need to be current Can be short-term or long-term and can revolve (includes credit cards)
Eligible Use of Proceeds Most legitimate business purposes: Purchase or renovate real estate Equipment, Inventory, Working Capital Buy an existing business* Refinance Debt* No payments/reimbursements to owners *special requirements
Requirements for Change of Ownership Copy of Purchase and Sale Agreement required Business Valuation must be documented in file If lender prepared, must include synopsis with application If buyer and seller are related, must have independent valuation Seller must provide 3 years tax returns to be verified by IRS 100% change of ownership
Requirements for Debt Refinance Must provide a 10% overall improvement in cash flow (exclude balloon payments, shortterm or interest only loans) Debt service on any one loan can not increase May refinance lender s own debt that has been current for past 3 years, providing that lender does not decrease their exposure Can t refinance SBA loans
Collateral Requirements No collateral required on loans under $25,000 Over $25,000-up to $350,000: Lender to follow own policies & procedures used for non guaranteed loan portfolio
Interest Rate Interest rate maximums apply as an overall effective rate not on individual loans Maximum interest rates up to 6.5% over prime for loans of $50,000 or less, and up to 4.5% over prime for loans over $50,000 Base rate can be established by lender (If sold, must be published prime rate)
Special Requirement for Lines of Credit Revolving Lines of Credit Maximum term 7 years, including revolving and term out period Often done for 5 years revolving and 2 years term out of balance Workouts may be termed out beyond 7 years but not to exceed 3 additional years Can be on demand, but must have a stated maturity
Lines of Credit (cont.) Can be renewable annually but must have stated maturity if renewing a 1 year revolver, lender must pay additional guaranty fee May be sold on secondary market May be credit card accessed, but lender must ensure uses are all business related May be increased with SBA approval
What Fees are Involved? Regular guaranty fees apply Reminder loans of $150,000 or less, lender can keep 25% of the guarantee fee (or pass savings along to customer) Prepayment penalty for loans with maturity of 15 years or more During the 1 st year 5% of the prepayment amount During the 2 nd year 3% of the prepayment amount During the 3 rd year 1% of the prepayment amount On-going servicing fees apply currently 0.55%
Patriot Express Maximum loan size $500,000 85% guaranty loans of $150,000 or less 75% guaranty loans over $150,000 Business must be owned at least 51% by an eligible military member or spouse of the same May be used for lines of credit
Export Express Maximum loan size $500,000 90% guaranty loans of $350,000 or less 75% guaranty loans over $350,000 Business must use the loan to enter export markets or expand exporting May be used as a line of credit
How to submit electronically All SBA Express Lenders are required to use E-Tran Can use commercially available software or in-house designed process Takes experienced lender about 15 minutes to complete the data entry Lender receives loan number within seconds of submitting their request no forms or paperwork sent to SBA
Closing Requirements Lender uses own policies & procedures to close and disburse Note must be legally enforceable & assignable w/ stated maturity Statement that proceeds only used for business purposes Draft and follow Authorization IRS Verification Hazard & Life insurance based on normal requirements Flood search, if required Environmental reviews, if required Do not send closing documentation to SBA
Questions? Thank You!
Amy Bassett, Deputy District Director (603) 225-1606 Amy.bassett@SBA.gov