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
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