Financing Trends
SBA 2014
Presented by
David Tiller- Public Information Officer
U.S. Small Business Administration TN District Office
David.Tiller@sba.gov – 615-736-7176
Get the Trend
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FY 2013 Loans totaled $247 million
435 Loans approved for the fiscal year
9% increase in the volume of loans
91 SBA Lenders are active in TN
Top Lenders of the Year in several
categories: Dollars, Number of Loans,
Patriot Express, Small Loan Advantage,
Community Bank, CDC, Microlender
SBA Financial
Programs
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International Trade Loans-up to $5m
Micro Loans—up to $50,000
SBA Community Advantage & Small Loan Advantagetypically $5k to $50k
504 Loan Program-to $5m
7(a) Loan Guaranty Program-to $5m
SBAExpress Loan Program- to $350k
Business
Checklist
To qualify as a small business:
• Demonstrate less than $15 million in
tangible net worth and two years’ net
income after taxes of less than $5 million.
Various SBA programs have other
qualification criteria.
Checklist
for Start Ups
• What will/how will the business be named?
Trademarks? Online considerations?
• What equipment or supplies will be needed?
• What financing will be needed?
• What are resources available?
• “How will I compensate myself?” – as owner?
Consider Types of
Business Structures
• Sole Proprietorship
• General Partnership
• Limited Partnership
• Corporation
• Limited Liability Company (LLC)
Financing
a Business
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Personal Savings
Friends and relatives
Crowd-funding
Angel & Venture Capital
Banks/SBA and Credit Unions
Non-bank Lenders
Borrowing
Money$$$
• Small business people have a difficult time
borrowing money. True or False?
• Banks make money by lending money. You
must show them their investment in you will pay
• Requesting a loan when you are not properly
prepared sends a signal to your lender. That
message is: HIGH RISK!
Business Plan &
Loan Proposal
• What is the opportunity the business presents?
• Business Description
• Management Profile
• Market Information
• Financial Info-most bankers, CPAs read this 1st
What to Take
to the Bank
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Purpose of the Loan: Sources and Uses of Capital
History of the business
Financial statements for 3 years. (existing business)
Aging of accounts receivable and payable. (existing business)
Projected opening-day balance sheet. (new business)
Lease details – copy of the lease or contract for sale
Amount of investment in the business by the owner.
Projections of income, expenses and cash flow-3 years
Signed personal financial statements.
Personal resume – bio may be best
What SBA
Looks for
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Good Character
Management Expertise and Commitment
Sufficient Funds (including loan) for operation
Feasible business plan
Adequate equity investment in the business
Sufficient collateral
Ability to repay the loan
Your Credit Report
What is considered:
1. Credit Score – 700 or above - good
2. Delinquent Accounts - Judgments
3. Payments over 30 days past due
Free Credit Report: www.annualcreditreport.com
How a Loan
Request is Viewed
The Five “C’s” of Credit
1. Character
2. Cash Flow
3. Collateral
4. Capitalization
5. Conditions
SBA Serves
a Wide Variety of
Capital Needs
$5.0
million
$5.0 $5.5million
million
If mfg.
Growth in Business &
Changes in Capital Needs
$350,000
$50,000
Microloans
$50,000
Small Loan
Advantage
7(a)
SBAExpress Loans
504
Loans
MICROLOANS
One Micro Lender in
TN—Pathway Lending
www.pathwaylending.com
(formerly SE Community Capital)
Finan
MicroLoans
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Direct loans through nonprofit intermediaries
Loans of up to $50,000
Fast turnaround
Up to six years to repay
Used for —
– Machinery, equipment, fixtures
– Leasehold improvements
– Inventory
– Working capital
• Technical and management assistance available
SBAExpress
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Underwriter uses own forms -- not SBA’s
Use bank’s lending policies -- not SBA’s
Loans or revolving lines of credit to $350,000
SBA guaranty is 50%
Interest rate maximums apply
Financial Assistance
Loans for Fixed Assets
SBA 504 Program
• 504 Certified Development Co. Program
• Long-term, fixed-rate financing
• Up to $5 million in SBA-backed
debentures
• SBA debenture guaranty of up to 40% of
total loan
• Must create or retain one job for every
$50,000 of SBA debenture proceeds
Financial Assistance
Benefits of a SBA 504
Loan
• High-leveraged financing for fixed-asset
purchases
• Long-term pay back - 10 or 20 years
• Lower interest rate
Financial Assistance
To Qualify for a 504
Loan*
• Business must be operated for a profit
• Tangible net worth of less than $15million
• Average net income of $5million or less
for the preceding two years
* Business cannot be involved in speculation
or rental real estate investment
Financial Assistance
A Typical 504
Project
• A private sector loan covering up to 50%
• A loan from the CDC covering up to 40%
(100% SBA-guaranteed debenture)usually secured by a 2d mortgage
• At least 10% equity from the business
• Participating lender has first lien on
assets
Financial
Assistance
7(a) Loan Guaranty
All TN SBA 7(a) Lenders are listed
at the TN District Office website:
www.sba.gov/tn
Basic 7(a) Loan Guaranty
Program
• Borrower applies for a loan guaranty with an
SBA participating lender
• Interest rates are negotiable
Lender submits application for SBA review and
approval
• Loans are centrally processed
• After SBA approval, lender disburses funds
• Borrower pays the bank, not the SBA
Financial Assistance
Loan Proceeds Eligible for
Most Business Uses
• 7(a) loans may be used to:
– Expand, renovate facilities
– Buy machinery, equipment, fixtures, buildings
and land for business
– Finance receivables and augment working capital
– Refinance existing debt (with compelling reason)
– Finance seasonal lines of credit
– Construct commercial buildings
– Finance direct costs on contracts
Financial Assistance
Small Loan
Advantage
Program Began June 2012
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Loans to $25k-prime +3.75%-no collateral
Loans $26k-50k-prime +3.75% + collateral
$26k-50k—may require UCC filing
DUNS number required-free to borrower
Loan payments come from business
checking account
• Loan is made in the business’ name
WhtEat We Do @ 15,000 FT
t SBIR & STTR Programs
Small Business Innovation Research (SBIR)
– A set-aside program for small business to engage in Federal R&D –
with potential for commercialization
SBIR/STTR
Success Stories
– 2.8% of the extramural research budget (~ $2.5 billion) for all agencies,
growing to 3.2% by 2017 with a budget greater than $100MM per year.
Small Business Technology Transfer (STTR)
– A set-aside program to facilitate cooperative R&D between small
business concerns and U.S. research institutions – with potential for
commercialization.
– 0.35% of the extramural research budget (>$250 million) for all
agencies with a budget greater than $1B per year.
Qualcomm
Symantec
iRobot
Genzyme
Nimble
Systems
NanoMech
Autonomous
Technologies
Adaptec
Ecovative
Design
Children’s
Progress Inc
JENTEK
Sensors
SQUID
Milestone-Driven Award Process
Phase I | Feasibility Study or Prototype
 $150 thousand maximum and 6 months
Phase II | Full Research and Development Effort
Participating Federal Agencies
 $1 million maximum and 24 months
Phase III | Commercialization Effort
 Private funds only
TECH TRENDS FOR INNOVATORS,
INVENTORS, AND TECHPRENEURS
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• Thank You!
David Tiller-Public Information Officer
District International Trade Officer
SBIR/STTR Coordinator
david.tiller@sba.gov
615-736-7176
»Questions