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A Guide to SBA Loans
By Sophia Ramos of Always A Pleasure
A guide to SBA's Loan Guaranty Programs Sources of capital most frequently used by small businesses Raising capital is the most basic of all business activities. The primary source comes from the owners funds, savings, friends, family, or from banks or non-bank lenders. Basic Finance Principles
No such thing as 100% financing.
No such thing as a government grant for a small business.
SBA does not directly lend money to small businesses, they are a guarantor backing you up.
Your credit history is important.
Lenders will require a personal guarantee.
A lender wants to know this!
The purpose of the loan.
The amount you are requesting.
When and how long will you need the funds.
How will you repay?
What collateral will be used?
Will the business owner provide a personal guaranty?
Prepare a loan request package or proposal.
Have your business plan or excerpts of it.
A statement of purpose (executive summary)
Financial statements (cash-flow, income, balance sheet and personal financial statement.) Lenders will apply the 3 C's when making decisions
Character- its a check on your financial habits, experience, education
Capacity- having sufficient cash flow to pay back a loan
Collateral- as a last resort it will lower the lenders risk that the loan will be paid on time and in full. Tips from a banker
Be prepared
Know your options
Prepare a written loan request package that includes a business plan with current financial statements
Proofread what you prepare
Learn from your mistakes SBA's loan guaranty program
General Characteristics
Longer terms
Competitive interest rates
Over $10 billion annually
Specific SBA Loan Programs
7(a) Loan Program- most basic and popular of all loan programs, more than 80% of loans are made under this program. Patriot Express, SBA Express, Community Express
Special Purpose Loans-to support export markets, international trade loans, caip program, export express, pollution control, employee trust.
Micro-Loan Program- small loans under $35,000, average loan size is $13,000
Certified Development Company/504 Program- Economic development loan program, shared SBA/CDC financing to support fixed asset needs of small businesses and to create jobs
fixed rates Eligibility requirements include:
Specific Size Standards- wholesale:not more than 100 employees; retail or service: not more than $21 million annually; Manufacturing: not more than 500 employees; Construction: average sales not more than 17.5 million. Type of Business- not to non profit organizations
financial real estate for investment
illegal business activities
gambling speculation lending or investment activities
monopolies or businesses engages in pyramid sales
Loan Purpose
Purchase land or buildings
Acquiring equipment or machinery
Long or short term working capital needs
Refinancing existing business indebtedness that is not already structured with reasonable terms
Purchase an existing business Info and Resources
Maturity- depends on economic life of the assets being financed and the applicants ability to repay subject to the following maximums; working capital: up to 7-10 years; machinery & equipment: up to 10-25 years; real property or business purchase: up to 25 years
Interest Rates- negotiated with the lender, ties to prime rate, but cannot exceed maximums, may be fixed or variable, prevailing market rates
Percentage of Guarantee- only on a portion of the loan is guaranteed by them, max is 75% or $1,500,000.
Guarantee fee- based on the maturity of the loan and the amount of SBA's share.
Estimate your business start up costs or funds needed to grow your business
Visit a local bank or lender to review available small business loan programs
Prepare a draft loan proposal
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U.S.Small Business Administration
Certified!
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This intel was contributed by ®Sa
®Sa
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May, 2012
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