U.S. Small Business Administration Small Business Financing

U.S. Small Business Administration

Small Business

Financing


Indiana District Office

Peter D. SmithLender Relations Specialist

(317) 226-7272 x119

[email protected]

Millions of entrepreneurs useSBA resources and programs to:

• Start a new business

• Grow an existing business

• Export goods and services

Have you explored

the Small Business Advantage?


SBA Loan Guaranty Requirements

• Business must qualify as “Small” based on the North American Industry Classification System (NAICS)

• Business must be operated for profit

• Business must be open to the general public

• Owners must be U.S. citizens or have permanent residence status

• Owners must make reasonable investment into business, usually 10-25%

• Owners must be of good character

What is a Small Business?

Manufacturing 500-1,500 employees

Wholesaling 100 employees for financial assistance programs (500 employees for contracting assistance programs)

Services $6 million to $29 million in annual receipts, or 1,500 employees

Retailing $6 million to $24.5 million in annual receipts

General and heavy construction

$17 million to $28.5 million in annual receipts

Special trade construction

$12 million in annual receipts

Agriculture From $750,000 to $6 million in annual receipts

What is a Small Business?

Alternative Size Standard

Maximum tangible net worth not more than $15,000,000 and average net income after taxes for the full 2 fiscal years prior to the application not more than $5,000,000

The Role of SBA:

• The SBA does not offer grants to start or grow small businesses.


• SBA is primarily a guarantor of loans made by private and other institutions.

The 7(a) Loan Program

7(a) Guaranty Loan Program


• SBA’s primary business loan program

7(a) Guaranty Loan Program

• Wide range of financing needs

• Maximum loan amount of $ 5.0 million

• Maximum guaranty of $ 3.75 million


• Expansion/renovation

• Land/equipment/fixtures purposes

• Working capital

• Inventory

• Exporting

Uses for 7(a) Loan Proceeds


• Maximum maturities

– Up to 7 years for working capital

– Useful life or 10 years for equipment

– Up to 25 years for real estate

7(a) Loan Program Maturities


• Base Rate + 2.25% for loansof 7 years or less

7(a) Loan Program Maximum Interest Rates

• Base Rate + 2.75% for

loans over 7 years

• Rates can be higherfor smaller loans


• Prime Rate*

• LIBOR (One month)*

• SBA Peg Rate

* Rate in effect on first business day of the month

Three Options for Base Rate


$75,000 – 10 year loan

Prime Rate: 3.25% + 2.75% = 6.00 %

LIBOR (One month): .24% + 2.75% + 3.00% = 5.99%

SBA Peg Rate: 2.25% + 2.75% = 5.00%

– 3.00% added to One Month Libor

Maximum Rate Examples


• Based on guaranteed portion

7(a) Loan Program Guaranty Fees

• Fee = 2% to 3.75%

• Maturity 12 months or less – fee = ¼%


$30,000 loan 85% SBA guaranty

$30,000 x 85% = $25,500 guaranteed portion

$25,500 x 2% = $510 guaranty fee

7(a) Guaranty Fee Examples

$1,000,000 loan 75% SBA guaranty

$1,000,000 x 75% = $750,000 guaranteed portion

$750,000 x 3.5% = $26,250 guaranty fee

SBA Express

• Streamlined approval process

• Loans of $350,000 or less

• Credit not reviewed by SBA

• Term or revolving loans

• Lender uses own bank forms

• Lender must be pre-approved

Patriot Express

• For members of the Military Community

• Maximum loan amount $500,000

• Term or revolving loans

• One day SBA Approval

Patriot Express

• Veterans

• Service-disabled veterans

• Soon to be discharged active-duty service members

• Reservists and National Guard members

• Current spouse of: – any Veteran (other than dishonorably discharged), – any Service-Disabled Veteran, – any Active Duty Military member, or– any Reservist or National Guard member

• Widowed spouse of: – a service member who died while in service, or – a veteran (other than dishonorably discharged) who died

of a service-connected disability

Eligible participants:

Express & Patriot Express Collateral Policies

• No collateral required under $25,000

• Lenders use existing collateral policy for loans between $25,000 up to $350,000

• Lenders must take all available collateral for PE loans greater than $350,000


CapLines

• Maximum loan amount: $ 5.0 million

• Short-term/seasonal revolving line of credit

• Maturity: up to 5 years

• Maximum interest: vary with amount/type/length of loan

International Trade Loan Program

• Maximum loan amount: $ 5.0 million

• Uses: acquiring long-term, fixed assets or refinancing debt for that purpose

• Maturity: up to 25 years

• Maximum interest:vary with amount/type/length of loan


Export Working Capital Program

• Maximum loan amount: $ 5 million (may be combined with International Trade Loan)

• Uses: short-term working capital for exporters

• Maturity: generally 1 year or 1 transaction cycle

• Maximum interest: no cap


The 504 CDC Loan Program

504 Certified Development Company

Loan Program


• Maximum debenture amount: $5.0 to $5.5 million

• Uses: long-term; fixed assets

• Maturity: 10 or 20 years

• Maximum interest: fixed rate established when debenture backing sold

• Project costs: 504 CDC Loan 30% to 40% Third party lender 50% Borrower injection 10% to 20%

504/Certified Development Company Loan Program


Example of $1 million dollar project:

504/Certified Development Company Loan Program

Entity Amount % of Project

Terms Interest Rate

Collateral

Bank $500,000 50 % 10 years Market 1st DOT

CDC $400,000 40 % 20 years Fixed 2nd DOT

Borrower $100,000 10 %

$1,000,000 100 %


Regional Development Company – Portage, IN

Business Development Corporation - South Bend, IN

Community Development Corporation - Fort Wayne, IN

Indiana Statewide Certified Development Corporation – Indianapolis, IN

Premier Capital Corporation – Indianapolis, IN

SBA IndianaCertified Development Companies

Lender Visit – Be Prepared

What to take to the lender:

• Written business plan

• Personal tax returns

• Business tax returns

• Business financial statements

SBA’s Resource Partners:

• SCORE

• Small Business Development Centers (SBDC)

• Women’s Business Centers (WBC)



• SCORE

Lafayette Branch – Chapter 6Lafayette Chamber of Commerce337 Columbia StreetLafayette, IN 47901Phone: (765) 742-4041



• Small Business Development Centers (SBDC)

• Hoosier Heartland ISBDCBurton D. Morgan Ctr. 1201 West State StreetWest Lafayette, IN 47907Toll Free: (866) 961-7232


Your SBA

www.sba.gov/in

For more information about

your Indiana SBA resources go to:


Indiana District Office

Peter D. SmithLender Relations Specialist

(317) 226-7272 x119

[email protected]

Small Business Financing

QUESTIONS?

Documents

U.S. Small Business Administration Small Business Financing