Capital Access: SBA
Financing Options for Your
Small Business
Presented by
U.S. Small Business Administration’s
Colorado District Office
SBA Loan GuarantiesUnderstanding How It Works
SBA does not provide:
• Grants
• Low interest rate loans
• Minority- or women-owned small
business loans
• 100% financing
• Direct business loans
7(a) Loan Guaranty Program
• Applicant applies for commercial loan at
bank
• If commercial loan declined, applicant may
ask SBA participating lender to consider an
SBA 7(a) guaranteed loan.
• Lender submits SBA guaranty application to
SBA.
• After SBA guaranty approved, lender
disburses funds to applicant.
• SBA guaranties range from 50-90%.
SBA Eligibility Requirements
Businesses must:
• Be independently owned and operated for
profit
• Not dominant in its field of operation or
industry
• May not exceed SBA size standards
(based on average annual receipts for past
3 fiscal years or average number of
employees over last 12 months)
SBA Basic Requirements
• Management: related industry experience,
education, ownership and management experience
• Repayment ability: historical/projected cash flow &
debt service coverage
• Collateral: Secondary source of repayment
• Credit: personal/historical business credit
experience
• Leverage: debt/tangible net worth, retained earnings
& capitalization
• Equity injection: cash injection/seller carry-back
(Generally on full standby during term of SBA loan)
SBA Requirements (Con’t)
• Cash/Equity injection required: generally
20-30% in a normal economy
• SBA considers type of business & its
industry risk
• Availability of funds from other sources
• Personal guaranties required of all owners
of 20% or more of business
SBA Requirements (Con’t)
• Businesses Ineligible for SBA Guaranty:
•
•
•
•
•
•
•
Non-profits
Businesses engaged in lending activities
Speculative or investment type businesses
Businesses engaged in gambling
Illegal businesses
Businesses providing prurient sexual material
Businesses promoting religion
Use of Proceeds
• Expand & renovate facilities;
• Purchase machinery & equipment, construct
leasehold improvements, purchase land and
existing building for business;
• Finance receivables & augment working
capital;
• Refinance existing debt (with compelling
reason);
• Finance seasonal lines of credit; and/or
• Construct commercial buildings.
Loan Terms
Flexible maturities:
– Up to 10 years for working capital
– Up to 10 years for equipment
– Up to 25 years for fixed assets:
Real estate
• Construction
• Capital Equipment (based on economic life of equipment)
•
Interest rates:
• Negotiated between borrower & lender
• Under 7 year term cannot exceed base rate plus 2.25%
• Over 7 year term cannot exceed base rate plus 2.75%
• Base rate options: NY prime, 30-day LIBOR + 3% or SBA peg rate
(3.375%)
 May be higher for SBAExpress program or smaller loans
SBA Loan Programs
• 7(a) Loan Program
– Expedited Programs
• SBAExpress
• Small Loan Advantage
• Veterans Advantage
– CAPLines
• 504 fixed asset financing
• Micro-loan program
7(a) Loan
•
•
•
•
Can be used for basically any
purpose.
Loan up to $5M
SBA guaranty of 75% - 85%
Maturity length and interest rates as
discussed previously
SBAExpress
•
•
•
•
•
Lender uses its own forms
Loan or revolving lines of credit up to
$350,000
Limited SBA guaranty of 50%
Interest rates: 4.5% over prime for
loans over $50,000 but 6.5% over prime
for loans under $50,000
36-hour response from the SBA
Small Loan Advantage
• $350,000 Max Term Loan
• Uses expedited credit scoring method
• Maturity Length same as standard 7(a)
• Proceeds to be used for all of the same
items as listed in 7(a)
• 85% guaranty for loans $150,000 or less,
75% on loans greater than $150,000
Veterans Advantage
• Targets veterans and service-disabled
veterans, reservists, National Guard, their
spouses or widowed spouses
• Uses expedited SBA review & approval
process
• Maximum loan amount of $350,000
• 75-85% loan guaranty to bank depending
upon loan amount
• NO FEES!!!
CAPLines Working Capital Program)
• For short-term & cyclical working
capital needs
• Maximum loan of $5.0 million
• Proceeds advanced against
inventory or receivables
• Types of CAPLines:
Seasonal Line
Contract Line
Builders Line
Working Capital
504 Fixed Assets Financing
• Long-term, fixed-rate financing (10 & 20 year terms)
•
Up to $5.0 million in SBA-backed debenture under
job creation goal; $5.5 million for manufacturers
•
Used for Property, Building, and Large Fixed Assets
A Typical 504 Project —
•
A third party lender (bank/credit union)
provides 50% of project financing
•
504 loan through a CDC provides up to 40%
of project financing backed 100% by SBA
debenture sold to institutional investors
•
At least 10% of project financing provided by
applicant (additional 5% for single or limited
use building & additional 5% for startup
business)
Micro-Loans
•
•
•
•
•
SBA provides direct loan through non-profit
intermediary
Micro-lender loans of up to $50,000 to small
businesses
Term of up to six years
Used for —
• Machinery, equipment & fixtures
• Leasehold improvements
• Inventory
• Working capital
Technical assistance available
Questions & Answers