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SBA Cleveland District Office
SBA Lending UpdateBurton D. Morgan Series
Hudson Public Library
Mark Hansel, Cleveland [email protected]
216-522-4191
Entrepreneurship & SBA
• The three “Cs”• Credit, counseling and contracting
• Start-ups, purchases, franchises• Venture capital• Tech transfer
SBA Cleveland District Office
About SBA
• Guaranty loans for banks and CDCs• Over 60K and over $30B for FY’11• 1,400 and $360M for Cleveland District
• Two loan programs: 7(a) and 504
• About 90% of volume under 7(a)
SBA Cleveland District Office
SBA Loan Limits
• $5 M for 7(a)
• $350 K for Express• $500 K for Patriot Express
• $5-$5.5 M for 504
SBA Cleveland District Office
Types of 7(a) Loans
• Regular • SBA approves
• Preferred (PLP) and Express• Bank approves with nod from SBA• About 80% of volume for ‘11
SBA Cleveland District Office
SBA Cleveland District Office
Loan Uses
• Working capital• Equipment• Real estate and leaseholds• Refinance• Buy-outs
SBA Cleveland District Office
Eligible Businesses
• For profit• Based in US • Active, not passive• Some types not eligible
• Like gambling or banking
SBA Cleveland District Office
Eligible Owners
• Good character
• Satisfactory credit
• US or LPR status
SBA Cleveland District Office
Eligible Transactions
• Arm’s length
• No partial buy-outs
• No payment to an “associate”
• No “passive” investments
Eligible Transactions
• Can refinance debt
• Can buy used equipment
• Can do eligible franchises
• Can do change of ownerships
SBA Cleveland District Office
Franchises
• Franchise registry• www.franchiseregistry.com• Clear or “repaired”
• May not be on registry• But still eligible
SBA Cleveland District Office
SBA Cleveland District Office
SBA Usual Limits• 7 years usually for working capital
• 10 years or more for equipment
• 25 years for real estate
• No balloons on SBA notes
SBA Cleveland District Office
SBA Interest Rates
• Base rates of Prime or LIBOR+3• Usually 2.25 or 2.75 over base rates• Fixed or floating• Fixed rate price choice on Colson site• May be higher under Express
Collateral Issues
• “Principals” must guaranty• Joint PFS’s required
• Personal assets may be required
• May be short on collateral
SBA Cleveland District Office
Collateral Issues
• Defer to bank on Express • Bank’s usual policy
• Some CRE requires Phase I
• Assignments of life insurance
SBA Cleveland District Office
SBA Cleveland District Office
Guaranty Fees
• Based on guaranteed amount• 2% to $150K• 3% over $150K to $700K• 3.5% over $700K • .25% surcharge over $1M
Fees in General
• No “origination” fees• Banks may charge “packaging” fee
• “Extraordinary servicing” fee• Permitted for DFP and CAPLines
SBA Cleveland District Office
Revised CAPLines
• Full guaranty up to $5 M
• Easier for bank to manage
• Different programs(1) Working Cap (2) Seasonal
(3) Contract (4) Builders
SBA Cleveland District Office
504 and Refinance
• Regular 504: Bank, CDC and Borrower
• 504 Refinance • New revisions• Up to 90% of appraised value
SBA Cleveland District Office
More Information
• www.sba.gov
• Cleveland District Office• 216-522-4180
SBA Cleveland District Office