Transcript Whatevering the Spirit of Business

ACCESS TO
CAPITAL FOR
SMALL
BUSINESSES
Annie Hudspeth
[email protected]
210.403.5918
Aixa Leath
[email protected]
210.403.5920
Lionel Davila
[email protected]
210.403.5917
Lender Relations Specialists
Lender Relations Division
U.S. Small Business Administration
(SBA)
 Mission

Established on July 30, 1953 to aid, counsel, assist
and protect the interests of small business concerns;
to preserve free competitive enterprise and to maintain
and strengthen the overall economy of our nation.

SBA helps Americans start, build and grow their
businesses.

SBA has the 3 Cs – Capital, Certification & Counseling
Lender Relations Division
Financing Your Business
Getting Started — Is Entrepreneurship for You?
Are you a self-starter?
How well do you get along with different personalities?
How good are you at making decisions?
Do you have the physical and emotional stamina to run a business?
How well do you plan and organize?
Is your drive strong enough?
How will the business affect your family?
Lender Relations Division
Financing Your Business
Young Entrepreneurs:
http://www.sba.gov/content/youth-entrepreneurship-0
Teen Business Link

mindyourownbiz.org
Lender Relations Division
SBA Today
Experience the New SBA.gov!
The Answers You Need Starts Here:
♦SBA Direct
♦Answers, Support and Resources for
Your Small Business. Fast and Easy!
♦Give you information and services based
on your unique business needs
♦Find Exporting Opportunities and much
more…
Lender Relations Division
Financing Options for Small Businesses
Personal Savings
 Friend & Relatives
 Credit Cards
 Business Earnings
 Partners

Lender Relations Division
Trade
Credit
Investors
Banks/Credit Unions
SBA
Factoring Companies
Micro Loans
Biggest Question Small Businesses ask…
Does SBA have grants?
 www.grants.gov
 Non-profit
agencies
 Environment
 Inventions
 Research & Development
 Science & Technology
Lender Relations Division
SBA Today

Financial Assistance - SBA is a government guarantee
loan program offered through SBA participating lenders
(banks and credit unions). SBA does not loan money
directly.

SBA is the largest single financial backer of the federal
government for the nation’s small businesses.

Used when a small business (start-up or existing)
cannot obtain financing on bank terms but is still viable.

SBA participating Lenders play the Central Role between
you and the SBA.
Lender Relations Division
Access to Capital

Grants NOT available from SBA

SBA offers loan guarantees to lenders
 Partial refund for defaulted loan
 Lender obtains guarantee

Lenders handle all loan transactions
 Application
 Approval
 Disbursement
 Servicing
 Collection
Lender Relations Division
Access to Capital
So Why Go With an SBA Guarantee??
Lender Relations Division
Access to Capital

Not everyone needs an SBA Guarantee

SBA guaranteed loan programs provide an
alternative

Used when a viable business cannot obtain
financing through normal lending channels on
reasonable terms.

If risk is too high –lender comes to SBA-guarantee reduces lender risk

SBA participating lenders play a Central Role
between you and the SBA.
Lender Relations Division
7(a) Loan Program
 Benefits
for small business:

Provides funding when financing is not otherwise
available on reasonable terms.

Longer Terms

Interest Rate not-to-exceed SBA maximums &
driven by prime-rate.

SBA supports start-up position.
Lender Relations Division
SBA Comes to mind when…





Start-up Business
Insufficient of Collateral
Lower Than Normal Down
payment (Equity)
Longer Term/Lower
Payments to Meet Debt
Coverage
Riskier Industries
(Entertainment, High-Tech,
Service, Retail)
Lender Relations Division





Uneven Historical Cash
Flow
Tighter Debt Coverage
Change of Ownership/
Management
Lending Limits
Reliance on Projections
Business Eligibility

Owned & Operated for “Profit”

Size Standards


NAICS Codes – www.sba.gov/size

Number of employees 500

Sales averaged - $7 million
Alternative Size Standard


Maximum Tangible Net Worth - < $15 Million
Average Net Income after Federal Income Taxes for two full
fiscal years - ≤ $5 Million

Type of Business

Use of Proceeds
Lender Relations Division
Common Use of Loan Proceeds
Purchase machinery,
equipment, fixtures,
buildings and land for
business
 Purchase inventory &
materials
 Working capital
 Leasehold
improvements

Lender Relations Division
Debt-Refinancing
 Buy existing
businesses
 Construct new
buildings
 Franchise
 Home-Based
 Lines of Credit

7(a) Loan Program
General 7(a) Loan Limitations
Max. Loan Amount
$5 Million
Max. amount of SBA guaranty to any
one Borrower (including all affiliates)
$3.75 Million (75%) beginning
1/1/2011
Max. SBA guaranty percentage
85% for loans of $150,000 or
less;
75% for loans greater than
$150,000
Lender Relations Division
7(a) Loan Program
SBA Guaranty Fees Quick Reference Chart
Gross Loan Size
Fees
Loans of $150,000 or less
Currently No Fee
$150,0001 to $700,000
3% of guaranteed portion
$700,001 to $5,000,000
3.5% of guaranteed portion up
to $1,000,000 PLUS 3.75% of
the guaranteed portion over
$1,000,000
Short Term Loans – Up to
$5,000,000
0.25% of the guaranteed
portion
Lender Relations Division
Notes
Maturities that exceed 12
months
Maturities of 12 months or
less
7(a) Loan Program
 Interest
Rates

Determined by lender (Negotiable)

Maximum variable interest rate:
 < 7 Year Term = [Prime + 2.25%] OR [(LIBOR + 3%) + 2.25%]
 ≥ 7 Year Term = [Prime + 2.75%] OR [(LIBOR + 3%) + 2.75%]
 Loan ≤ $25,000
 Additional 2%
 Loan $25,000 - $50,000
 Additional 1%
 SBA Optional Peg Rate –Published quarterly in the Federal Register
 Higher rates may apply for SBAExpress
Lender Relations Division
Maturity

Working Capital – will not typically exceed 7
years. In some cases may go up to 10 years.

Fixed Assets – other than real estate will be
limited to the economic life of those assets.

Real Estate – will not typically exceed 20 years.
In some cases may go up to 25 years.
Lender Relations Division
7(a) Specialized Loan Programs

SBAExpress Loan Program – $350,000

Veteran’s Advantage Loan Program - $350,000 (No Fees up to $350,000)

Export Express Loan Program - $500,000

Small Loan Advantage - $350,000

Community Advantage 7(a) Loan - $250,000
Non-7(a) Loans:

CDC/504 Loan Program $5,000,000 up to $5.5 million

Microloans - $50,000
Lender Relations Division
Community Advantage

Community Advantage - is a pilot initiative aimed at
increasing the number of SBA 7(a) lenders who reach
underserved communities, targeting mission-focused
financial institutions which were previously not able to offer
SBA loans.



Maximum Loan Size: $250,000
Guaranty: 85 percent for loans up to $150,000 and 75 percent
for those greater than $150,000.
Underserved Communities are small businesses in or that have more
than 50 percent of their workforce residing in low-to-moderate income
(LMI) communities; in Empowerment Zones and Enterprise
Communities; in HUBZones; start-ups (firms in business less than 2
years); and veteran-owned businesses and those that would be eligible
for Patriot Express.
Lender Relations Division
504 Loan Program
504 Loan Limitations
Maximum Loan Amount (generic 504)
$5 Million
Maximum Loan Amount if a public policy goal
$5 Million
Maximum Loan Amount if a small manufacturer
$5.5 Million
Maximum Loan Amount if at least 10% reduction $5.5 Million
in borrower’s energy consumption
Maximum Loan Amount if project generates
renewable energy or renewable fuels, such as
biodiesel or ethanol production
Lender Relations Division
$5.5 Million
CDC/504 Program

Long-term financing program







Land and Existing Buildings
Renovate or Expand Existing Facility
New Building Construction
Acquire/Install Machinery and Equipment
Debt refinancing opportunity for expansion projects
Soft Costs may be rolled into the project financing (i.e.
appraisal, environmental assessments, interest on interim
loan, etc.)
Access through Certified Development Company
(CDC)
Lender Relations Division
CDC/504 Program

Business Eligibility






For Profit
≤ 500 Employees
Job creation and retention
Net Worth ≤ $8.5 Million
Net Income After Taxes ≤ $3.0 Million
Max Debenture CDC/504 Loan Amount



$5.0M for regular 504 loans
$5.0M - businesses that meet specific public policy goals
$5.5M - for manufacturers, business reducing energy
consumption by @ least 10% and for plant, equipment and
process upgrades of renewable energy resources.
Lender Relations Division
CDC/504 Program

Typical Structure




Lender
504 Program
Owners’ Equity
Special circumstances
50%
40%
10%
 Single purpose building +5% Owners’ Equity
 Start-up business
+5% Owners’ Equity

Interest Rates



Longer Repayment Term



504 portion typically close to Prime Rate
504 portion fixed interest rate
Heavy Machinery/Equipment
Real Estate
10 Years
20 Years
Refinance Option

Eligible up to 50% of the new project costs
Lender Relations Division
Special Purpose Building
Examples
 Special use or special purpose properties include:

theaters, sports arenas, schools, dormitories, cold storage
plants, tennis clubs, golf courses, marinas, gasoline service
stations, automatic car wash properties, hospitals, medical
centers, nursing homes, funeral homes, cemeteries, historic
properties, sanitary landfills, museums, clubhouses, and
some recreational properties.
 Generally, SBA considers hotels or motels to be included
as a special-use or special-purpose property.
Lender Relations Division
Community Development and/or
Public Policy Goals
Opportunity to fund up to $5.0 Million and requirement
to Create one job for each $65,000 is waived
 Aiding Rural Development
 Promoting Women, Minority, or Veteran-Owned Businesses
 Expanding Exports
 Revitalizing Economic Development Districts
 Restructuring due to Federally Mandated Standards and/or Policies
 Modernizing Manufacturing Facilities – may go up to $5.5 million
 Job creation is not waived on manufacturing
 Changes Necessitated by Federal Budget Cutbacks
 Retrofitting to Save on Energy Consumption – may go up to $5.5 million
 Production of Alternative Energy Sources
Lender Relations Division
CDC/504 Program
Recent Addition: Energy Efficiency (GO GREEN)
 Max
Debenture CDC/504 Loan Amount $5.5M

Project reduces borrower’s energy consumption by at least 10%

Project generating renewable energy fuels
 Biodiesel or ethanol production
Projects that meet above criteria can qualify without job creation and
retention requirement, so long as the CDC portfolio average is at
least $50,000
Lender Relations Division
Microloan Program

Accessed through SBA Microloan Intermediaries
Intermediaries Borrow Dollars from SBA and Lend
Directly to Borrowers
 Use of Proceeds

 Working Capital
 Machinery and Equipment/Inventory
 Leasehold Improvements

Cannot be used for down payment of or to purchase
real estate
Lender Relations Division
Microloan Program

Maximum loan amount
 Up to $50,000

Eligibility
 Same as 7(a) Criteria

Maturity
 Short-term, Not to Exceed 6 Years

Fixed Interest Rates
 Negotiable
Lender Relations Division
Disaster Assistance

Loans for Federal Declared Disaster Zones





Physical Damage



Business
Homeowners
Renters
*Not for secondary homes or vacation properties
Max $200,000 – Home Loans
Max $40,000 - Personal Property Loans
Business

Max $2.0M – Business Loans
 Economic Injury Disaster Loans

Terms


Interest rates - typically 2 - 4%
Up to 30 years
Lender Relations Division
Common Ineligible
Businesses or Situations







Non-Profit
Financial Institutions
Investment Companies
Limited Membership Clubs
Over 1/3 of Revenues from
Legal Gambling
Default on Federal Loans
Delinquent Withholding
Federal Taxes
Lender Relations Division







Probation, Parole, or
Pending criminal charges
Pyramid Sales Plans
Race Tracks
Gambling & Illegal
Activities
Religious Teaching
Sexual Nature
Delinquent in Child
Support (60-90 days)
What Lenders Look For…
5
Cs of Credit
 Character
- Background, Education,
Experience, Credit
 Capacity
- Source of Repayment
 Collateral
 Capital
 Conditions
- Assets you own
- Money you have invested
- Your Industry
Also…
Debt Position (both Business & Personal)
Sound Business Plan
Lender Relations Division
Presentation-Presentation-Presentation!

The BUSINESS PLAN will be your FINANCIAL PROPOSAL as a
startup business and potential borrower especially for those larger
loan amounts.
Adds creditability!
Business Plan classes are offered by
SBA resource partners i.e. SCORE,
UTSA-SBDC And Women’s Business
Centers or you may go to www.sba.gov
for sample module and on-line class.
Lender Relations Division
SBA Today

Federal Procurement Assistance - Committed to increase business
participation to women, veterans, and minorities

Central Contractor Registration – http://www.sams.gov

8(a) Business Development Program - Offers a broad scope of assistance to socially
and economically disadvantaged firms, helping these entrepreneurs to compete in
the Federal contracting arena.
http://www.sba.gov/aboutsba/sbaprograms/8abd/index.html

SBA HUBZone Empowerment Program ("Historically Underutilized Business Zone”) Designed to promote economic development and employment growth in
economically distressed areas - Are you in a HUBZone?
http://www.sba.gov/hubzone

Mentor Protégé Program - Allows start-up companies to learn the ropes from
experienced businesses.
http://www.sba.gov/aboutsba/sbaprograms/8abd/mentorprogram/index.html

New! Women-Owned Small Business Program – authorizes contracting officers to
specifically limit, or set aside, certain requirements for competition solely amongst
women-owned small businesses (WOSBs) or economically disadvantaged womenowned small businesses (EWOSBs). www.sba.gov/wosb
Lender Relations Division
SBA Today


Surety Bond Guarantee Program - A surety bond is a type of insurance
that guarantees performance of a contract. If one party does not fulfill its
end of the bargain, then the surety bond provides financial compensation
to the other party.
 Bid Bond – guarantees the bidder will enter into a contract and
provide the required performance and payment bond
 Performance Bond: guarantees the contract will be completed in
accordance with terms, conditions and specifications.
 Payment Bond: guarantees the contractor will pay all contract
suppliers and vendors.
Any Federal Construction contract valued at $100,000+ requires a surety
bond as a condition of contract award. Most State & municipal
governments have similar requirements, as well as private entities. Many
service contracts, and occasionally, supply contracts, also require surety
bonds.
A list of surety companies and agents who participate in the SBA Surety Bond
Guarantee Program are provided at http://www.sba.gov/content/surety-bonds-explained
Lender Relations Division
SBA Today

Management & Technical Assistance –SBA Resource
Partners Nationwide
(Free confidential One-on-One Counseling Services,
Education and Training)





SCORE counselors
Small Business Development Centers
Women’s Business Centers
International Trade Centers – Specialized in Export/Import
SBA together with our resource partners are able to reach, teach and
educate potential business owners in our 55 counties territory.
Lender Relations Division
SBA Today
What SBA Resource Partners Can Do For You…
Start-Up Businesses
Existing Businesses
 Business
 Managing
Plan
Financial Projections
Financing Assistance
& Growing a New Business
Developing New Markets
Financing Assistance
Accounting Issues
Human Resources
International Trade
And much more…
Lender Relations Division
Summary
 STEP

Research the feasibility of starting up or expanding a
business. Do your homework!
 STEP

3
Approach Lender for Loan Request
 STEP

2
Prepare Business Plan/Financial Proposal
 STEP

1
4
Ask Lender regarding an SBA guaranty loan.
If yes, Lender will help you with the application process.
Lender Relations Division
Questions
Lender Relations Division