SBA Lending Update
Burton D. Morgan Series
Hudson Public Library
Mark Hansel, Cleveland SBA
mark.hansel@sba.gov
216-522-4191
SBA Cleveland District Office
Entrepreneurship & SBA
• The three “Cs”
• Credit, counseling and contracting
• Start-ups, purchases, franchises
• Venture capital
• Tech transfer
SBA Cleveland District Office
About SBA
• Guaranty loans for banks and CDCs
• Over 60K and over $30B for FY’11
• 1,400 and $360M for Cleveland District
• Two loan programs: 7(a) and 504
• About 90% of volume under 7(a)
SBA Cleveland District Office
SBA Loan Limits
• $5 M for 7(a)
• $350 K for Express
• $500 K for Patriot Express
• $5-$5.5 M for 504
SBA Cleveland District Office
Types of 7(a) Loans
• Regular
• SBA approves
• Preferred (PLP) and Express
• Bank approves with nod from SBA
• About 80% of volume for ‘11
SBA Cleveland District Office
Loan Uses
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Working capital
Equipment
Real estate and leaseholds
Refinance
Buy-outs
SBA Cleveland District Office
Eligible Businesses
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For profit
Based in US
Active, not passive
Some types not eligible
• Like gambling or banking
SBA Cleveland District Office
Eligible Owners
• Good character
• Satisfactory credit
• US or LPR status
SBA Cleveland District Office
Eligible Transactions
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Arm’s length
No partial buy-outs
No payment to an “associate”
No “passive” investments
SBA Cleveland District Office
Eligible Transactions
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Can refinance debt
Can buy used equipment
Can do eligible franchises
Can do change of ownerships
SBA Cleveland District Office
Franchises
• Franchise registry
• www.franchiseregistry.com
• Clear or “repaired”
• May not be on registry
• But still eligible
SBA Cleveland District Office
SBA Usual Limits
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7 years usually for working capital
10 years or more for equipment
25 years for real estate
No balloons on SBA notes
SBA Cleveland District Office
SBA Interest Rates
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Base rates of Prime or LIBOR+3
Usually 2.25 or 2.75 over base rates
Fixed or floating
Fixed rate price choice on Colson site
May be higher under Express
SBA Cleveland District Office
Collateral Issues
• “Principals” must guaranty
• Joint PFS’s required
• Personal assets may be required
• May be short on collateral
SBA Cleveland District Office
Collateral Issues
• Defer to bank on Express
• Bank’s usual policy
• Some CRE requires Phase I
• Assignments of life insurance
SBA Cleveland District Office
Guaranty Fees
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Based on guaranteed amount
2% to $150K
3% over $150K to $700K
3.5% over $700K
.25% surcharge over $1M
SBA Cleveland District Office
Fees in General
• No “origination” fees
• Banks may charge “packaging” fee
• “Extraordinary servicing” fee
• Permitted for DFP and CAPLines
SBA Cleveland District Office
Revised CAPLines
• Full guaranty up to $5 M
• Easier for bank to manage
• Different programs
(1) Working Cap
(3) Contract
(2) Seasonal
(4) Builders
SBA Cleveland District Office
504 and Refinance
• Regular 504: Bank, CDC and Borrower
• 504 Refinance
• New revisions
• Up to 90% of appraised value
SBA Cleveland District Office
Floor Planning
• Cars, boats, etc.
• Line of credit
• $500K to $5M
SBA Cleveland District Office
More Information
• www.sba.gov
• Cleveland District Office
• 216-522-4180
SBA Cleveland District Office