| Small Business Administration (SBA) |
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| WHAT IS A SMALL BUSINESS: |
Determined by industry and by loan program. Generally: |
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| Retailers - annual
sales less than $3,500,000 |
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| Service Companies -
annual sales less than $3,500,000 |
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| Wholesalers - less
than 100 employees |
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| Manufacturers -
less than 500 employees |
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| Construction -
annual sales less than $9,500,000 |
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| PLAYERS: |
1) |
U.S.
Small Business Administration |
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| “Public-private partnership” |
2) |
Private
sector lender (bank) |
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| 3) |
Loan
packager - prepares application package (7[a]) |
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4) |
CDC -
Certified Development Company (504 only) |
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| LOAN TYPES: |
SBA offers several types of loans. The following are more common loans. Contact the SBA at 1 (800)827-5722 or
website: www.sba.gov |
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| 1) |
7 (a)
Loan Program -
most common, can be used for: |
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Acquisition
of land and building |
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Acquisition
of machinery and equipment |
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Acquisition of working assets (inventory, build-up of accounts
receivables) |
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Debt
refinance (if credit is not available elsewhere) |
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Includes
the following loan types: |
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Term loans, Line of Credit, Pollution Control loans, Energy
loans |
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a) |
Direct loans - very limited: Vietnam veteran, disabled veteran, low income,
handicapped - maximum $150,000 |
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b) |
Guaranteed loan program - most common - loan made by bank “co-signed” by the SBA |
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| 2) |
504
Loan Program |
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Excellent
for equipment & building expansions |
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Fixed interest rate - 20 years |
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Actually involves two loans - a 1st mortgage to the bank and a
2nd mortgage through the SBA |
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| HOW TO APPLY: |
1) |
Prepare
your loan request |
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| 2) |
Make
application to your bank |
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| 3) |
*Bank analyzes the request and either decides to proceed or
decline the loan |
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*SBA
application package is prepared |
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| 5) |
*Bank
submits SBA application package to SBA |
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SBA analyzes the application and either issues “authorization”
or declines the loan |
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| 7) |
*Bank
closes the loan |
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| * For 504 (CDC loans), the CDC
also analyzes. The CDC prepares and
submits the application package and has a separate loan closing. |
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| WHO’S NOT
ELIGIBLE: |
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Passive
investment companies |
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Not-for-profits |
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Lending
institutions |
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Gambling
operations |
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Academic
schools |
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Real
estate investment companies/developers/landlords |
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| 7(a) No-No’s |
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Excess assets: If owners
of the company have the resources to finance the project, the SBA expects
them to do so. |
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Highly
leveraged companies: |
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1) |
Debt to net worth for start up companies should generally not be
more than 2:1. |
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2) |
Debt to net worth for existing companies should generally not be
more than 5:1. |
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(debt
to net worth = Total Liabilities) |
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Net Worth |
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Lines of Credit: Company
must have at least 12 months operating results for seasonal need or for
specific contract. |
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| Source: Small Business Administration |
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