SBA Programs

Presented by:Michael Elkin

Assistant District DirectorEntrepreneurial Development

U.S. Small Business AdministrationSan Francisco District Office455 Market Street, 6th FloorSan Francisco, CA 94105(415)744-6820

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Bank Financing with SBA’s Guarantee

SBA is not a direct lender SBA partners with banks and lenders SBA guarantees bank loans (50%-85%) Bank’s risk is offset by the SBA guaranty Applicants apply directly to the bank/lender Bank decides when to use the SBA Bank gets paid if business fails Business remains liable for the debt

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Regular 7(a) GuarantyLoan Terms

SBA does not set actual terms, but does set parameters – Terms are negotiated between bank &

borrower Maximum Loan Amount: $2,000,000 Maximum SBA Guaranty

75% to 85% of the loan, up to $1.5 million maximum

Term (maturity) based on use of proceeds Generally 7-10 years for non-real estate

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Regular 7(a) GuarantyLoan Terms (continued)

SBA Guaranty fee: 2% to 3½% of SBA-Guaranteed amount For $100,000 loan, fee = $1,700 For $500,000 loan, fee = $11,250 Guaranty fee may be financed as part of loan

Interest Rate Usually variable rate loan Generally Prime plus up to 2.75%

Rate can be higher for loans under $50k or for SBAExpress Loans

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SBA Guaranty LoanEligible Use of Proceeds

All Legitimate Business Purposes Inventory Machinery & Equipment Working Capital Real Estate (owner-occupied only) Debt repayment (business debts only) Business Acquisitions Franchises (must be an eligible

franchisor)

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SBA Loan – Eligibility Issues

Must be a for-profit business Must qualify as a small business concern

Must be an eligible type of business Must meet personal financial resources

test Must be at least 51% owned by U.S.

Citizens or Legal Permanent Residents Cannot be on probation or parole

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Benefits of the SBA Loan

Reduces lender’s risk, making it more likely to approve a small business loan application

Provides a longer loan term, or maturity

All SBA loans are fully amortizing, i.e., no balloon payment

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What Do I Need to Qualify? Five C’s of Credit

C apacity to Repay C apital C apable

Management C haracter & Credit C ollateral

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How to Apply for an SBA Loan, continued

Gather your business & personal financial information Personal financial statement Personal income tax returns for the last 3

years Business financial statements & tax returns

for 3 years if already in business Decide on a Lender – factors to consider:

Your experience with the lender Type of lender – National, regional,

community bank

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SBA Guaranty Loan Process

SBA

1.2.

4.$$

Business Owner Lender/Banker

1. Business Owner applies to Lender2. Lender contacts SBA if lender requests SBA

guaranty3. If approved, SBA guarantees lender’s loan4. Lender then can disburse loan to Business Owner

3.

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SBA Express Loan

Loan amounts up to $350,000 Offered by participating SBAExpress lenders Variable interest rate – Up to 6.5% over prime

for loans of $50,000 or less; up to 4.5% over prime for loans over $50,000

Loan term of 7 to 10 years May be used as a line of credit with a term up

to 7 years No collateral required for loans up to $25,000

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SBA Patriot Express Loan

For Veterans & spouses and military community

Fast turnaround for approvals Lowest interest rates, 2.25% - 4.75% over

prime Maximum loan amount - $500,000 Use of Proceeds same as for 7(a) Apply through specially approved lenders

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Other SBA Loan Programs

SBA 504 Loan Only for Purchase/Improvement of long-

term fixed assets such as real estate Apply through a lender, or an SBA-

approved Certified Development Company (CDC)

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SBA Microloan Program

Loans up to $35,000 (average $10,500) Made by “Microloan Intermediaries” funded by SBA Fixed interest rate – ranges from 8 to 11% Maximum loan term is 6 years, fully amortized Training and technical assistance is provided to

the borrower Apply to the SBA Microloan Intermediary that

serves your county

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SBA Microloan Intermediaries

OBDC Small Business Finance www.obdc.com, 510-763-4297

Alameda, Contra Costa, Solano counties

Southeast Asian Community Center 415-885-2743

Alameda, Contra Costa, Marin, Merced, Sacramento, San Francisco, San Joaquin, San Mateo, Santa Clara & Stanislaus counties

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SBA RESOURCES

Service Corp of Retired Executives

Small Business Development Centers

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SBA RESOURCES

Women Business Centers AnewAmerica Community Corp. Bayview Business Resource Center Renaissance Entrepreneurship Center Women’s Initiative for Self Employment C.E.O. Women

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SBA WebsitesSBA Home Page: www.sba.gov

SBA Loan Programs:www.sba.gov/financing

SBA San Francisco District Office:www.sba.gov/ca/sf