7(a) & 504 Loan Seminar

U.S. Small Business Administration233 Peachtree Street, NE, Suite 1900

Atlanta, GA 30303

404-331-0100 www.sba.gov

BUSINESS LOANS & THE SBA

Guaranty Loans:

7(a) SBAExpress Special Loan Programs 504 Loan Program

WHO CAN GET AN SBA LOAN?

ELIGIBILITY

SizeType

Ownership

ELIGIBILITY – NAICS SIZE STANDARDS

Manufacturer - 500 employees

Wholesalers - 100 employees

Retail - $6.5 - $26.5 Million

Service - $6.5 - $23.5 Million

Contractors - $6.5 - $31.0 Million

•Note: Size standards includes affiliates

•www.sba.gov/size

ELIGIBLE LOAN PURPOSES

Business start-ups Improve site

Purchase building Acquire/install fixed assets Purchase inventory, supplies, raw

materials

ELIGIBLE LOAN PURPOSES

Renovate building Construct building Working capital Refinancing - subject to restrictions Business acquisitions Acquire land (purchase or lease)

GUARANTY PERCENTAGES

Loans up to $ 150,000 - 85%

Loans over $ 150,000 - 75%

SBAExpress – 50%

TERMS

Real Estate - up to 25 years

M & E - up to 10 years

Working Capital - up to 7 years

LOAN LIMITS

No lower limit

Maximum Gross Amount - $2,000,000

Maximum Guaranty Amount - $1,500,000

INTEREST RATES

Term less than 7 years NY prime + 2 1/4 %

Term 7 years and longerNY prime + 2 3/4%

Higher rates on small loans

Rate may be fixed or variable

Periodic adjustment allowable on variable rate

Loan AmountTerm is< 7 yrs

Term is > 7 yrs

Up to $25,000Prime +

4.25%Prime +

4.75%

$25,001 – $50,000Prime +

3.25%Prime +

3.75%

$50,001 & abovePrime +

2.25%Prime +

2.75%

(Excluding Express Loans)

MAXIMUM INTEREST RATES

Existing debt is not on reasonable terms & refinancing provides substantial benefit

Loan current for last 36 months for debt with same lender

Requires 10% cash flow improvement * *SOP 50 10 B 5 Effective 10/01/09

DEBT REFINANCING

INELIGIBLE - LOAN PROCEEDS

Payoff unsecured creditors

Repay debt to a director of the lender

Provide funds to an owner

Replenish working capital which has been used for any of the above

Alien, certain status

Anyone owing money to the government which is not current; IRS, Student Loans

GUARANTY FEES

Term of 12 months or less - 1/4 of 1% Term over 12 months:

Loans up to $150,000 2% of guaranteed amount

(Lender may retain 25% of this amount)

Loans over $150,000 to $700,000 3% of guaranteed amount

Loans over $700,000 3.5% of guaranteed amount

Additional Fee of .25% on guaranteed amount in excess of $1 million

GUARANTY FEES

LoanAmount

Guaranty %

Guaranty Fee %

GuarantyAmount

$150,000

$600,000

85% 2.0% $2,550

75% 3.0% $13,500

$800,000 75% 3.5% $21,000

CREDIT REQUIREMENTS

Good character

Ability to manage the business

Sufficient equity

Adequate repayment ability

Collateral: SBA will not decline a loan only on the basis of inadequate collateral

Answer eligibility questions

Determine prospect for approval

Provide borrower with application

Lender reviews application

Perform loan analysis

Submit package to SBA for approval

THE PROCESS

SBA REVIEW

SBA concurs in approval or denies and notifies lender

Lender closes loan

504 LOANS

Long Term Fixed Asset Financing

ADVANTAGES of 504 LOANS

Expand services to customer base

Provide longer terms

Exposure only 50%

First mortgage position / Secondary Mkt.

No restrictions on bank loan

Manufacturing projects up to $10 million

504 LOANS ELIGIBILITY

SBA size standards Firm’s net worth may not exceed

$7 million Net profits after Federal income taxes

may not exceed $2.5 million during the preceding two fiscal years

Job creation / retention project must create or retain 1 job for each

$65,000 of SBA assistance or must be considered a “community project”

for manufacturers, 1 job per $100,000

504 LOANS USE of PROCEEDS

Land and improvement at cost Construction of building

60% occupancy of space and demonstrate a need for future expansion Purchase/remodel existing building

must occupy at least 51% and funds can be used to remodel only portion to be used by business

Machinery & equipment - 10 year life Construction contingency fund up to 10% of construction

amount Soft costs

504 LOANS - INELIGIBLE USE OF PROCEEDS

Working capitalManagement feesConsulting feesFranchise feesFees connected with permanent financingAirplanes or automotive equipmentDebt refinancing (other than interim)

504 LOANS - LOAN LIMITS

$1,500,000 - Maximum amount of guarantee - SBA/CDC share

Exceptions to $2 million maximum when national objective/ public policy goals involved

Up to $4 million for manufacturing

TYPICAL 504 LOAN STRUCTURE

Local lender 50%

SBA/CDC 40%

Small Business 10%

504 LOANS INTEREST RATES

Lender portion - no restrictions

SBA/CDC - market rate at time of sale of debenture - fixed rate

504 LOANS TERMS

Lender portion - minimum of 10 years or 7 years on a 10 year debenture

SBA/CDC portion - maximum of 20 years

Prepayment penalty

504 LOANSCREDIT REQUIREMENTS

Same basic credit criteria as guaranteed loans Good character Ability to manage the business Sufficient equity invested Adequate repayment ability Collateral

504 LOANS PROCESS

CDC is responsible for developing and submitting application closing SBA/CDC loan

Funds from debenture sale wired directly to the bank

A Typical 504 Project

For-profit enterprise Acquiring or expanding a facility Construction period with interim financing by bank Jobs created

CERTIFIED DEVELOPMENT COMPANIES

Capital Partners Cert Dev Company Atlanta (404) 475-6002

Coastal Area District Dev Authority Brunswick (912) 261-2500 CSRA Business Lending Augusta (706) 210-2010 Economic Dev Corp Fulton County College Park (404) 836-7731 Georgia Certified Dev Corporation Atlanta (404) 442-2480 Small Business Access Partners, Inc Gainesville (770) 536-7839 Georgia Resource Capital Marietta (678) 560-2656 Georgia Small Business Capital Decatur (404) 373-8601 George Small Business Lender, Inc Macon (478) 751-6160 North Georgia Certified Dev Corp Dalton (706) 272-2300 Small Business Assistance Corp Savannah (912) 232-4700 South Georgia Area Dev Corp Valdosta (229) 333-5281

INTERNET ACCESS

SBA home page - all programswww.sba.gov

GA home page www.sba.gov/ga

Thank you!

Presented by:

Vianna HarrisonLender Relations Specialist

Georgia District Office(404) 331-0100, x607

Vianna.harrison@sba.gov