SBA Guaranty Loan Options for
Small Businesses
W. Lewis BurgerLender Relations Specialist
Georgia District OfficeAtlanta, GA
(404) 331-0100 Ext [email protected]
SBA Loan Guaranties-Understanding How It Works
SBA does not provide
Direct business loans(except in a natural disaster)
• Applicant applies for commercial loan at bank – first approach your current banker
• If loan doesn’t fit standard underwriting guidelines & needs credit enhancement, applicant and lender may consider an SBA guaranty
• Lender submits application to SBA• After SBA guaranty approved, lender closes
and disburses funds• SBA (US tax payer - co-signs) guaranties
range from 50-85%
SBA Loan GuarantyProcess
SBA Eligibility Requirements
• For profit
• May not exceed SBA size standards (Generally less than 500 employees and $15M in Gross Sales)
Businesses must:
SBA Requirements (Con’t)
• Cash/Equity injection required: generally 20-30%
• Personal guaranties required for all with 20% + ownership
• Collateral is required – expect to pledge your home.
SBA Requirements (Con’t)
• Ineligible Businesses:• Non-profits• Businesses engaged in lending activities• Speculative or investment type businesses• Businesses engaged in gambling• Illegal businesses• Businesses providing sexual material• Businesses promoting religion
Use of Proceeds
• Expand & renovate facilities• Purchase machinery & equipment, construct
leasehold improvements• Finance receivables & working capital• Refinance existing debt (with compelling reason)• Finance seasonal lines of credit• Construct or purchase of commercial buildings
(Owner Occupied: 51%+ occupied by your business)• Hospitality/RV Park – OK• Mobile Home Park/Apartments – not OK
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• Capital Equipment (based on economic life of equipment)
Interest rates:• Prime plus (depends on program)
Fees
Guarantee Fee
Up front of 0% to 3.75% and
ongoing of 0% to 0.519%And a
Packaging Feeper SBA Guidelines
SBA Guaranty Loan Programs
• 7(a) loan guarantees– Basic (Up to $5M)– Industry Specific/Subset
CAPLines (Capital Lines of Credit) Export Working Capital Program (EWCP) International Trade term loans
– Expedited (Express) Programs• 504 fixed asset financing• Micro-loan program
SBA Guarantee Loan Programs
Specifics of 7a’s –
See Quick Reference to
SBA Loan Guaranty Program Matrixupdated October 2014
504 Fixed Assets Financing
• Sometimes referred to the “Real Estate Loan”, but is use for ‘non-rolling’ equipment too
• Long term - 10 & 20 year terms
• Provided by Certified Development Companies (CDC) – see page 11 of GA Small Business Guide
• Owner Occupancy: 51% of existing structure or 66% for new construction
To Qualify for a 504 Loan
• Eligible and Ineligible: Same as 7a
A Typical 504 Project
• A lender (bank) provides 50% • first position lien at 50% Loan to Value
• CDC (504 loan) provides up to 40% • second position lien
• At least 10% down payment by applicant
Micro-Loans
• Micro Lenders more likely to do start ups • Up to $50,000 (maybe more) to small businesses • Used for
• Machinery, equipment & fixtures• Leasehold (Tenant) Improvements - TI• Inventory• Working capital
• Business management assistance is available and maybe mandatory
• For list of Micro Lenders, see page 29 of the Georgia Small Business Resource on our site
• Business Plan Including:– Purpose of loan– Business Managerial History (resume’)– Business and Personal Financial Statements
- Accounts receivable and payable– Copy of Lease– Owner investment - cash and/or other hard assets – Projections of income, expenses & cash flow
Visit with SCORE and/or Small Business Development Centers (SBDC) for assistance before going to bank
What to take with you to the bank
SBA Websitesba.govsba.gov/ga for Georgia-specific informationsba.gov/financing for SBA loan programssba.gov/for-lenders for SBA lending partners
Additional Information
www.sba.gov/ga
Georgia OfficeResource Guide
Click here
Page 29 for Mirco Lenders
Questions & Answers
Q & A
W. Lewis BurgerLender Relations Specialist
Georgia District OfficeAtlanta, GA
(404) 331-0100 Ext [email protected]
