WHERE THE LENDING WORLD IS TODAY
Lending environment has gone through a dramatic change
Less money and it has become harder to access that money
Forced to find other ways to fund a business
TIGHT CREDIT IS A NATIONAL PROBLEM
The U.S. is experiencing a $100 billion small business credit gap.
Since the recession, small business lending and small dollar
lending have shrunk dramatically – 14.7% and 17.9%,
respectively.
While SBA total lending dollars may be up, the number of loans
is down 16%.
SBA LENDING HAS FOCUSED ON LARGER LOANS
SO NOW WHAT ???
Ask family
SO NOW WHAT ???
Ask family
Win the lottery
SO NOW WHAT ???
Ask family
Win the lottery
Go to a loan shark
OTHER TYPES OF FUNDING
SBA Loans
401(k)/IRA Rollover Funding
Equipment Leasing
Securities Backed Loans
THE SBA 7A LOAN PROGRAM
Most common for business start-ups and existing businesses
Maximum loan amount raised from 2 million dollars to 5
million dollars
Currently, the maximum rate is 6%
Typical loan amount is from $100k to $2 Million
Loan can take 30 to 60 days
WHAT THE 7A LOAN PROGRAM IS USED FOR
Funding Start Up Costs of New Business
Purchase of Commercial Real Estate
Construction of a New Building
Tenant Improvements
Refinance of Business Debt
Equipment Financing
Purchase of an Existing Business
Inventory
Working Capital
7A LOAN PROGRAM ELIGIBILITY REQUIREMENTS
Strong personal credit
Written Business Plan
Industry experience of 2 years
Provide 3 years of tax returns
May need to provide collateral
Personal financial statement
Usually 20% to 30% down
A Resume
SBA 504 LOAN PROGRAM
Less common than 7A Loans
Some key differences:
The business loan must include
real-estate or equipment
The bank takes a first
mortgage of 50%
You typically put down 10%
Most 504 projects are in the $200k
to $5 million plus range
Longer terms/amortizations are
available
The SBA guarantees 40%
THE SBA SLA LOAN PROGRAM
Designed to increase the number of loans under $350K
Replaces the Community Express Loan
Guarantee: 85 percent for loans up to $150,000 and 75 percent for
those greater than $150,000.
401 (K) - IRA ROLLOVER FUNDING
One of the more popular funding strategies to purchase a new business
10% of the franchises sold in the U.S. utilized retirement plan rollovers as
part of the funding
Why was this created? How does this work? What are the benefits?
WHY RETIREMENT PLAN FUNDING IS NEEDED
1974 Congress creates IRA’s allowing Americans to save for their
retirement tax deferred
1980 401(k)’s were established increasing the amount Americans could
save tax deferred
Most Americans have the bulk of their savings in their
Retirement Plan
Withdrawal of savings incurs taxes and penalties
WHAT IF I WANT TO WITHDRAW THE MONEY ?
Here is an example of the tax implications for someone withdrawing
$200,000 from their retirement plan
10% early withdrawal penalty
30% state and federal taxes
Leaves the individual with $120,000 of the $200,000
TYPES OF PLANS THAT QUALIFY
401(k) Plans
407 Plans (Government agencies)
Cash Balance Plans
Employee Stock Ownership
Money Purchase Plans
SEPs
403(b) Plans
Annuity Plans
Defined Benefits Plans
IRAs
Rollover Plans
SIMPLE Plans
Roth IRAs do not qualify – Most Employers require employment
termination prior to using retirement funds.
*Other plans may qualify
HOW IT WORKS
WHAT ARE THE BENEFITS ?
No Loan payments
Current credit score not a factor
Does not affect one’s debt ratio or
credit rating
Can be used as capital injection
for SBA
Saves money
Builds wealth
Reduces emotional and
financial concerns
Can take a salary
SECURITIES BACKED LINES OF CREDIT
Uses your current investment portfolio
as collateral for a loan
Investments Remain in your name
Interest rate, currently around 4%
Usually lower than an SBA or Home
Equity Loan
Keep all the appreciation and dividends
from your portfolio
You are borrowing money at say 4% and
earning 9% on your
investments
Borrow approximately 70% of the value
of your equity portfolio and as much as
80% of a fixed income or bond portfolio
EQUIPMENT LEASING
If you’re contemplating purchasing a product whose technology and capabilities could
quickly become obsolete, leasing may be a better, option.
Cash flow
Assets may include:
Some advantages to leasing:
Office Furniture
Computer equipment
Company vehicles
Printers
Fitness Equipment
100% financing
No down payments
Cash flow
Potential tax advantages
Up to $90K for start-ups
Many different ways to get the funding you need
We have almost 30 years of experience helping visionary
entrepreneurs launch their dreams!
Please contact us at Benetrends.com