Business Loan Seminar
Indiana District Office
SBA’s Role in Business Financing
SBA does NOT make grants to businesses
www.grants.gov
No Direct Loans from SBA
(except for disasters)
Obtain loan from Financial Institution
Indiana District SBA
Financial Assistance Programs
504 Certified Development Company
(CDC) Loan Program
7(a) Loan Guaranty Program
Indiana District SBA
504 CDC Loan Program
Eligible Business:
Operated for profit
Size standards
• Tangible net worth up to $15 million
• Preceding 2 year average net income after taxes up to
$5.0 million
No speculation or investment in rental real
estate
Indiana District SBA
504 CDC Loan Program
Proceeds may be used for:
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Purchasing land
Construction of new facilities
Improvements to existing facilities
Improvements to real estate
Purchase major machinery and equipment
Project cost financing
• Bank finances 50%
• CDC/SBA finances 30 – 40%
• Customer finances 10 – 20%
Indiana District SBA
504 CDC Loan Program
Loan Maximums:
$5.0 million – general
$5.5 million – manufacturers
Maximum Loan Terms:
Buildings – 20 years
Equipment – 10 years
Job Creation or Retention:
1 job for every $65,000 of debenture
Indiana District SBA
504 CDC Loan Program
Advantages of a SBA 504 loan
Low down payment
Low fixed rate
Low monthly payments
Indiana District SBA
Indiana Certified Development Companies
Business Development Corporation
South Bend, IN
574-288-5758
Community Development Corporation of Northeast Indiana
Fort Wayne, IN
260-427-1127
Indiana Statewide Certified Development Company
Indianapolis, IN
317-844-9810
Premier Capital Corporation
Indianapolis, IN
317-974-0504
Regional Development Company
Valparaiso, IN
219-476-0504
Indiana District SBA
Financial Assistance Programs
7(a) Loan Guaranty Program
Indiana District SBA
7(a) Loan Guaranty Program
Eligibility requirements
• Must qualify as “small” according to the North American
Industry Classification System (NAICS)
• For Profit
• Open to general public
• U.S. citizen or permanent residence status
• Reasonable investment, usually 10 – 20%
• Good character
Indiana District SBA
7(a) Loan Guaranty Program
What is a small business?
“one that is independently owned and operated and which not dominant in its field of
operation.” This definition will vary from industry to industry. The business sizes
listed below indicates the maximum size a business can be based on major industry
type and still be considered a Small Business.
Manufacturing
Wholesaling
500 – 1,500 employees
100 employees for financial assistance programs
(500 for contracting programs)
Services
$6 million to $29 million in annual receipts OR
1,500 employees
Retailing
General and Heavy construction
Special trade construction
Agriculture
$6 million to $24.5 million in annual receipts
$17 million to $28.5 million in annual receipts
$12 million in annual receipts
$750,000 to $6 million in annual receipts
Indiana District SBA
7(a) Loan Guaranty Program
The 7(a) program also has alternative
size standards available. They are:
1. Tangible net worth is $15,000,000 or less
AND
2. Average income after taxes is $5,000,00 or
less for the past 2 years
Indiana District SBA
7(a) Loan Guaranty Program
Purpose of the 7(a) Loan
Working capital
• Purchase equipment/ furniture/ fixtures
• Acquire land/buildings
• Construct new facilities
• Debt refinancing
• Purchase an existing business
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Indiana District SBA
7(a) Loan Guaranty Program
Ineligible uses of a 7(a) Loan
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Purchase partial ownership of a business
Repay owners for their investment in the business
Pay for delinquent taxes
Refinance of delinquent loans
Speculative, lending or investing purposes
Real estate held for investment, sale or rent
Illegal or gambling activities nor for sexually oriented
businesses
• Business pyramids
• Political, lobbying or religious activities
Indiana District SBA
7(a) Loan Guaranty Program
Borrower benefits
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Funding for start-ups
Longer amortizations
No balloon payments
No prepayment penalties (loans under 15 year
maturity)
• Reduced owner investment & collateral
requirements
• The SBA guaranty encourages lenders to loan
money
Indiana District SBA
7(a) Loan Guaranty Program
Maximum Loan Amount
$5,000,000
Guaranty fees
2 – 3.75%
Guaranty percentages
75 – 85%
Indiana District SBA
7(a) Loan Guaranty Program
Loan Maturities
• Working capital
1 to 10 years depending on cash flow needs
• Equipment
up to the expected useful life
• Building/land
up to 25 years
Indiana District SBA
7(a) Loan Guaranty Program
Interest rates
• Negotiated between the borrower and lender
• Subject to SBA maximums
• May be fixed or variable
Indiana District SBA
7(a) Loan Guaranty Program
Maximum Interest Rates
Loan amount
under 7 years
7 years or more
up to $25,000
Base rate + 4.25% Base rate + 4.75%
$25,001 - $50,000
Base rate + 3.25% Base rate + 3.75%
$50,001 or more
Base rate + 2.25% Base rate + 2.75%
Indiana District SBA
7(a) Loan Guaranty Program
Base Rate Options:
Variable Rate Options:
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Wall Street Prime
1 Month LIBOR + 3%
SBA Peg Rate
Fixed Rate Option:
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LIBOR SWAP
(1 month LIBOR + 3% + Ave of 5 and 10 year LIBOR)
Indiana District SBA
7(a) Loan Guaranty Program
January 2016 Interest Rate Maximums
(Loans $50,000 and greater; over 7 years)
Wall Street Prime = 3.5 + 2.75 = 6.25%
1 month LIBOR = .42 + 3.0 +2.75 = 6.17%
SBA Peg Rate = 2.38 + 2.75 = 5.13%
Fixed Rate = 5.36 + 2.75 = 8.11%
Indiana District SBA
7(a) Loan Guaranty Program
What a Lender looks for in an SBA Loan
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Management ability
A feasible business plan
Repayment out of business proceeds
Capital injection by owners
Collateral
Personal guarantees
Credit scores
Indiana District SBA
7(a) Loan Guaranty Program
Business Plan
ABC Company Business Plan
• Section One: Executive Summary
• Section Two: The Business
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Description of business
Product/service
Marketing information
Location
Competition
Management
Personnel
Application and expected life of loan
• Section Three: Financial Data
• Section Four: Supporting Documents
Indiana District SBA
7(a) Loan Guaranty Program
Financial Information Required
New businesses
• Detailed estimate of needed capital
• Projections of revenues, expenses and profits
- 12 month minimum
• Cash flow projection - 12 month minimum
• Narrative of major assumptions
• List of collateral
Indiana District SBA
7(a) Loan Guaranty Program
Financial Information Required
Established businesses
• Current balance sheet and 3 full years income
(profit/loss statements)
• Projections of revenues, expenses and profits - 12 month
minimum
• Cash flow projection – 12 month minimum
• Narrative of major assumptions
• Current personal financial statement for each owner,
partner or stockholder
• List of collateral
• Statement of the loan amount and intended uses
Indiana District SBA
Additional 7(a) Sub Programs
SBAExpress
• $350,000 maximum
• 50% guaranty
• Faster processing
Indiana District SBA
Other SBA Finance Programs
International Trade Loans
United States Export Assistance Center
John O’Gara
211 West Fort Street, Suite 2200
Detroit, MI 48226
Phone: 313-226-3670
Indiana District SBA
7(a) Loan Guaranty Program
Entrepreneurial Development Assistance
SCORE – Counselors to America’s Small Business
• 11 Chapters in Indiana
• http://www.score.org
Small Business Development Centers
• 10 center in the state
• http://www.isbdc.org
Central Indiana Women’s Business Center
•Indianapolis – 317-917-3266 http://www.nsibiz.org
Women’s Economic Opportunity Center for Indiana
• Fort Wayne – 260-416-3400 http://www.niic.net
Additional information can be found on the Indiana SBA
website http://www.sba.gov/in/
Indiana District SBA
Contracting and Certification Programs
First steps for government contracting:
• DUNNS number www.dnb.com
• System for Award Management www.sam.gov
Contracting opportunities
www.fedbizopps.gov
Contact Marty Anderson or Vernice Mathis
317-226-7272
Indiana District SBA
Things to Remember
• Lender is not SBA
• Prepare a written business plan
• Know and understand what the plan says
• Talk with SBA Resource Partners and other
stakeholders before visiting lender
• What happens if the lender says “No” to your
loan request?
Indiana District SBA
Luann Lieurance
Lender Relations Specialist
Indiana SBA District Office
8500 Keystone Crossing, Suite 400
Indianapolis, IN 46240
317-226-7272 x 114
Luann.lieurance@sba.gov
Indiana District SBA