Transcript SBA 7(a) program
7(a) Loan Guaranty Program
SBA is not a direct lender
• SBA 7(a) program offers guaranty to lenders – Guaranty is a partial refund for a failed loan – Lender obtains guaranty from SBA Visit us at
www.sba.gov
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7(a) Loan Guaranty Program
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Lenders originate and service loans
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The SBA loan guaranty program is not a guaranty of a low interest rate
Visit us at
www.sba.gov
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7(a) Loan Guaranty Program
Not everyone needs an SBA Guaranty If risk is too high - lender comes to SBA • Start-up businesses • Insufficient collateral • Non-standard repayment terms • Industry Risk Visit us at
www.sba.gov
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7(a) Loan Guaranty Program
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SBA lending relies primarily on a demonstration of adequate cash flow.
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There must be a reasonable expectation that the loan will be repaid.
Visit us at
www.sba.gov
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Size Requirements
• Must be independently owned and operated • Must be a small business as defined by SBA • Federal standard – NAICS • SBA.GOV/SIZE • Maximum size examples • Wholesaling – less than 100 Employees • Retail/Service – average sales $4.5M to $32.5M • Manufacturing – less than 500 Employees • Construction – average sales $13M to $32M Visit us at
www.sba.gov
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Ineligible Businesses
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Gambling or Speculation
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Real Estate Investment
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Adult Industry
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Non-Profit Organizations
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Religious Organizations
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Defaulted on a Federal Loan
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www.sba.gov
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7(a) Use of Proceeds
• Working capital • Inventory • Lines of credit • Expansion / renovation • Leasehold improvements • Land or buildings • Furniture / fixtures / equipment • Refinance debt for compelling reasons Visit us at
www.sba.gov
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Loan Maturity Dates
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Working Capital Loans - Up to 7 Years
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Machinery and Equipment Up to 10 Years
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Construction of Plant Facilities - Up to 25 Years
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www.sba.gov
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7(a) Loan Amounts
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Maximum amount $2 million
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Guaranteed portion
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Less than $150,000 = 85%
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Greater than $150,000 = 75%
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90% to a maximun of $1,500,000 thru 12/31/2009
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www.sba.gov
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7(a) Interest Rates
• Negotiated between borrower and lender • Maximum interest rate: – Less than 7 Year Term 2.25% = Prime + – Greater than 7 Year Term = Prime + 2.75% – Higher rates permitted for loans of less than $50,000 and SBA Express Loans Visit us at
www.sba.gov
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7(a) Cost of Guaranty
SBA Guaranty Fees
• Can be included in loan • Calculated on guaranteed portion of loan – Maturity less than or equal to 1 year • 0.25% –
Maturity greater than 1 year
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Less than $150,000 = 2% $150,000 - $700,000 = 3% Greater than $700,000 = 3.5%
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Guaranty greater than $1M
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Additional 0.25%
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www.sba.gov
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What is new?
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Reduce Fees Increase guaranty Expand Secondary Market
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Up to $15 Billion to purchase loan securities on the secondary market.
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Refinancing using 504 loans Business stabilization loans
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www.sba.gov
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