|
SBA1Step (directly
tied to one of the Top 5 National SBA Lenders and we're here to handle ALL of your
Owner Occupied Small Business lending needs.
You'll be amazed at how
quickly and simply this loan process moves. Before you know it, you'll
have a specialized program that integrates all aspects of business
financing/ refinancing with or without real estate including equipment buy-outs,
construction, and the integration of an operating capital credit line ALL molded
into a custom program that best suits YOU and YOUR Business needs.
When applying for a loan, you must prepare a
written loan proposal. Make your best presentation in the initial loan proposal
and application; you may not get a second opportunity. Once Denied... may
not be able to re-apply. That's why its soo important to do it RIGHT. That's why
SBA1Step is here!
Throughout the entire process,
will have direct contact with an Experienced Former SBA Credit Analyst (decision
maker) and Now Business Development Officer w/ One of the Top 5 Banks in the
Nation; able to transact loans in most states throughout the United States (and
personal contacts in certain states in which they don't lend)... and as previous
small business owner/ operators... our concern is to be sure you save money and
understand the benefits of these unique programs/ solutions.
The
U.S. Small Business Administration (SBA) was created in 1953 as an
independent agency of the federal government to aid, counsel, assist and protect
the interests of small business concerns, to preserve free competitive
enterprise and to maintain and strengthen the overall economy of our nation. We
recognize that small business is critical to our economic recovery and strength,
to building America's future, and to helping the United States compete in
today's global marketplace. Although SBA has grown and evolved in the years
since it was established in 1953, the bottom line mission remains the same. The
SBA helps Americans start, build and grow businesses. Through an extensive
network of field offices and partnerships with public and private organizations,
SBA delivers its services to people throughout the United States, Puerto Rico,
the U. S. Virgin Islands and Guam.
SBA provides a number of
financial assistance programs for small businesses. They have been specifically
designed to meet a business’s key financing needs including the need for debt
financing (loans), equity financing (investment/seed money), and surety bonds.
(SBA does not provide grant funds to finance small businesses). We can assist
in the complete understanding of the programs available below quickly with a
phone conversation.
|
SOME
PROGRAMS OF INTEREST
\ |
|
Basic 7A Program:
|
|
|
7(a) loans are the most basic and
most used type loan of SBA's business loan programs. Its
name comes from section 7(a) of the Small Business Act,
which authorizes the Agency to provide business loans to
American small businesses.
All 7(a) loans are provided by lenders who are called
participants because they participate with SBA in the
7(a) program. Not all lenders choose to participate, but
most American banks do. There are also some non-bank
lenders who participate with SBA in the 7(a) program
which expands the availability of lenders making loans
under SBA guidelines.
7(a) loans are only available on a guaranty basis. This
means they are provided by lenders who choose to
structure their own loans by SBA's requirements and who
apply and receive a guaranty from SBA on a portion of
this loan. The SBA does not fully guaranty 7(a) loans.
The lender and SBA share the risk that a borrower will
not be able to repay the loan in full. The guaranty is a
guaranty against payment default. It does not cover
imprudent decisions by the lender or misrepresentation
by the borrower.
Under the guaranty concept, commercial lenders make and
administer the loans.
The business applies to a lender for their financing.
The lender decides if they will make the loan internally
or if the application has some weaknesses which, in
their opinion, will require an SBA guaranty if the loan
is to be made. The guaranty which SBA provides is only
available to the lender. It assures the lender that in
the event the borrower does not repay their obligation
and a payment default occurs, the Government will
reimburse the lender for its loss, up to the percentage
of SBA's guaranty. Under this program, the borrower
remains obligated for the full amount due.
All 7(a) loans which SBA guaranty must meet 7(a)
criteria. The business gets a loan from its lender with
a 7(a) structure and the lender gets an SBA guaranty on
a portion or percentage of this loan. Hence the primary
business loan assistance program available to small
business from the SBA is called the 7(a) guaranty loan
program.
A key concept of the 7(a) guaranty loan program is that
the loan actually comes from a commercial lender, not
the Government. If the lender is not willing to provide
the loan, even if they may be able to get an SBA
guaranty, the Agency can not force the lender to change
their mind. Neither can SBA make the loan by itself
because the Agency does not have any money to lend.
Therefore it is paramount that all applicants positively
approach the lender for a loan, and that they know the
lenders criteria and requirements as well as those of
the SBA. In order to obtain positive consideration for
an SBA supported loan, the applicant must be both
eligible and creditworthy.
What SBA Seeks In A Loan Application:
In order to get a 7(a) loan, the
applicant must first be eligible. Repayment ability from
the cash flow of the business is a primary consideration
in the SBA loan decision process but good character,
management capability, collateral, and owner's equity
contribution are also important considerations. All
owners of 20 percent or more are required to personally
guarantee SBA loans.
Eligibility Criteria:
All applicants must be eligible to
be considered for a 7(a) loan. The eligibility
requirements are designed to be as broad as possible in
order that this lending program can accommodate the most
diverse variety of small business financing needs. All
businesses that are considered for financing under SBA’s
7(a) loan program must: meet SBA size standards, be
for-profit, not already have the internal resources
(business or personal) to provide the financing, and be
able to demonstrate repayment. Certain variations of
SBA’s 7(a) loan program may also require additional
eligibility criteria. Special purpose programs will
identify those additional criteria.
Eligibility factors for all 7(a) loans include: size,
type of business, use of proceeds, and the availability
of funds from other sources. The following links will
provide more detailed information on these eligibility
issues.
Size
Eligible And Ineligible Types Of Business
Use Of Proceeds
Availability Of Funds From Other Sources
Character Considerations:
SBA must determine if the
principals of each applicant firm have historically
shown the willingness and ability to pay their debts and
whether they abided by the laws of their community. The
Agency must know if there are any factors which impact
on these issues. Therefore, a "Statement of Personal
History" is obtained from each principal.
Other Aspects Of The Basic 7(a) Loan Program
In addition to credit and
eligibility criteria, an applicant should be aware of
the general types of terms and conditions they can
expect if SBA is involved in the financial assistance.
The specific terms of SBA loans are negotiated between
an applicant and the participating financial
institution, subject to the requirements of SBA. In
general, the following provisions apply to all SBA 7(a)
loans. However, certain Loan Programs or Lender Programs
vary from these standards. These variations are
indicated for each program.
Maximum Loan Amounts
Maturity Terms For 7A Loans
Interest Rates Applicable to 7A Loans
Percentage of Guaranty on 7A Loans
SBA Fees for 7A Loans
Prepayment Penalties for SBA 7A Loans |
|
|
CDC/504 Loan Program:
The CDC/504 loan program is a long-term
financing tool for economic development within a community. The 504
Program provides growing businesses with long-term, fixed-rate
financing for major fixed assets, such as land and buildings. A
Certified Development Company is a nonprofit corporation set up to
contribute to the economic development of its community. CDCs work
with the SBA and private-sector lenders to provide financing to
small businesses. There are about 270 CDCs nationwide, with each
covering a specific geographic area.
Typically, a 504 project includes a loan secured with a senior lien
from a private-sector lender covering up to 50 percent of the
project cost, a loan secured with a junior lien from the CDC (backed
by a 100 percent SBA-guaranteed debenture) covering up to 40 percent
of the cost, and a contribution of at least 10 percent equity from
the small business being helped.
Maximum Debenture
The maximum SBA debenture is $1,500,000 when
meeting the job creation criteria or a community development goal.
Generally, a business must create or retain one job for every
$50,000 provided by the SBA except for "Small Manufacturers" which
have a $100,000 job creation or retention goal (see below). The
maximum SBA debenture is $2.0 million when meeting a public policy
goal.
The public policy goals are as follows:
Business district revitalization.
Expansion of exports.
Expansion of minority business development.
Rural development.
Increasing productivity and competitiveness.
Restructuring because of federally mandated standards
or policies.
Changes necessitated by federal budget cutbacks.
Expansion of small business concerns owned and
controlled by veterans (especially service-disabled veterans)
Expansion of small business concerns owned and
controlled by women.
The maximum debenture for "Small Manufacturers" is $4.0 million. A
Small Manufacturer is defined as a small business concern that has:
Its primary business classified in sector 31, 32, or 33 of the North
American Industrial Classification System (NAICS); and All of its
production facilities located in the United States.
In order to qualify for a $4 million 504 loan, the Small
Manufacturer must 1) meet the definition of a Small Manufacturer
described above, and 2) either (i) create or retain at least 1 job
per $100,000 guaranteed by the SBA [Section 501(d)(1) of the Small
Business Investment Act (SBI Act)], or (ii) improve the economy of
the locality or achieve one or more public policy goals [sections
501(d)(2) or (3) of the SBI Act].
What funds may be used for :
Proceeds from 504 loans must be used for fixed
asset projects such as: purchasing land and improvements, including
existing buildings, grading, street improvements, utilities, parking
lots and landscaping; construction of new facilities, or
modernizing, renovating or converting existing facilities; or
purchasing long-term machinery and equipment.
The 504 Program cannot be used for working capital or inventory,
consolidating or repaying debt, or refinancing.
Terms, Interest rates and Fees:
Interest rates on 504 loans are pegged to an
increment above the current market rate for five-year and 10-year
U.S. Treasury issues. Maturities of 10 and 20 years are available.
Fees total approximately three (3) percent of the debenture and may
be financed with the loan.
Collateral:
Generally, the project assets being financed
are used as collateral. Personal guaranties of the principal owners
are also required.
Eligible Business:
To be eligible, the business must be operated
for profit and fall within the size standards set by the SBA. Under
the 504 Program, the business qualifies as small if it does not have
a tangible net worth in excess of $8.5 million and does not have an
average net income in excess of $3 million after taxes for the
preceding two years. Loans cannot be made to businesses engaged in
speculation or investment in rental real estate.
|
|
|
|
Papers Needed to Close On Any One of our Programs:
-
Last 2 months bank
statements,
-
Last two years tax
returns and W2's,
-
Latest 401K and
Stock account balance statements,
-
Last 30 days of
pay stubs,
-
Name of insurance
agent and contact info,
-
Copy of real
estate contract if purchase or construction,
-
Copy of recent mortgage statement if
refinance.
AGAIN, When
applying for a loan, you must prepare a written loan proposal. Make
your best presentation in the initial loan proposal and application;
you may not get a second opportunity. Once Denied... may not be able
to re-apply. That's why its soo important to do it RIGHT. That's why
we're here!
Always begin your proposal with a cover letter or executive summary.
Clearly and briefly explain who you are, your business background,
the nature of your business, the amount and purpose of your loan
request, your requested terms of repayment, how the funds will
benefit your business, and how you will repay the loan. Keep this
cover page simple and direct.
Many different loan proposal formats are possible. You may want to
contact your commercial lender to determine which format is best for
you. When writing your proposal, don't assume the reader is familiar
with your industry or your individual business. Always include
industry-specific details so your reader can understand how your
particular business is run and what industry trends affect it.
Description Of Business
Provide a written description of your business,
including the following information:
Type of organization
Date of information
Location
Product or service
Brief history
Proposed Future Operation
Competition
Customers
Suppliers
Management Experience:
Resumes of each owner and key management
members.
Personal Financial Statements:
SBA requires financial statements for all
principal owners (20% or more) and guarantors. Financial statements
should not be older than 90 days. Make certain that you attach a
copy of last year's federal income tax return to the financial
statement.
Loan Repayment:
Provide a brief written statement indicating
how the loan will be repaid, including repayment sources and time
requirements. Cash-flow schedules, budgets, and other appropriate
information should support this statement.
Existing Business:
Provide financial statements for at least the
last three years, plus a current dated statement (no older than 90
days) including balance sheets, profit & loss statements, and a
reconciliation of net worth. Aging of accounts payable and accounts
receivables should be included, as well as a schedule of term debt.
Other balance sheet items of significant value contained in the most
recent statement should be explained.
Proposed Business:
Provide a pro-forma balance sheet reflecting
sources and uses of both equity and borrowed funds.
Projections:
Provide a projection of future operations for
at least one year or until positive cash flow can be shown. Include
earnings, expenses, and reasoning for these estimates. The
projections should be in profit & loss format. Explain assumptions
used if different from trend or industry standards and support your
projected figures with clear, documentable explanations.
Other Items As They Apply:
Lease (copies of proposal)
Franchise Agreement
Purchase Agreement
Articles of Incorporation
Plans, Specifications
Copies of Licenses
Letters of Reference
Letters of Intent
Contracts
Partnership Agreement
Collateral:
List real property and other assets to be held
as collateral. Few financial institutions will provide
non-collateral based loans. All loans should have at least two
identifiable sources of repayment. The first source is ordinarily
cash flow generated from profitable operations of the business. The
second source is usually collateral pledged to secure the loan.
The 5 C's of Credit:
Your bank is in business to make money.
Consequently, when a bank lends money it wants to ensure that it
will be paid back. The bank must consider the 5 "C's" of Credit each
time it makes a loan.
Capacity to repay is the most critical of the five factors.
The prospective lender will want to know exactly how you intend to
repay the loan. The lender will consider the cash flow from the
business, the timing of the repayment, and the probability of
successful repayment of the loan. Payment history on existing credit
relationships - personal and commercial - is considered an indicator
of future payment performance. Prospective lenders also will want to
know about your contingent sources of repayment.
Capital is the money you personally have invested in the
business and is an indication of how much you will lose should the
business fail. Prospective lenders and investors will expect you to
contribute your own assets and to undertake personal financial risk
to establish the business before asking them to commit any funding.
If you have a significant personal investment in the business you
are more likely to do everything in your power to make the business
successful.
Collateral or guarantees are additional forms of security you
can provide the lender. If the business cannot repay its loan, the
bank wants to know there is a second source of repayment. Assets
such as equipment, buildings, accounts receivable, and in some
cases, inventory, are considered possible sources of repayment if
they are sold by the bank for cash. Both business and personal
assets can be sources of collateral for a loan. A guarantee, on the
other hand, is just that - someone else signs a guarantee document
promising to repay the loan if you can't. Some lenders may require
such a guarantee in addition to collateral as security for a loan.
Conditions focus on the intended purpose of the loan. Will
the money be used for working capital, additional equipment, or
inventory? The lender will also consider the local economic climate
and conditions both within your industry and in other industries
that could affect your business.
Character is the personal impression you make on the
potential lender or investor. The lender decide subjectively whether
or not you are sufficiently trustworthy to repay the loan or
generate a return on funds invested in your company. Your
educational background and experience in business and in your
industry will be reviewed. The quality of your references and the
background and experience of your employees will also be considered.
|
|
SOME HELPFUL LOAN READING INFORMATION:
|
|
