SBA Loan

8 - SBA Loan

SBA Loan

CLASS A: $100k – $5M
SBA Loan SBA 407 SBa 7a rates from 6.5% .06/1/3/5/7/10/15/25 years fix
Less than 10 years old
LTV up to 85%
Points varies according to loan size
Recourse and Non Recourse
CLASS B/C/D: $100K – $5M
SBA Loan SBA 407 SBa 7a rates from 7.5% .06/1/3/5/7/10/15/25 years fix
Any age
Any type
LTV up to 85%
Personal guarantees required
C & D’s any condition higher rates & points
Points varies according to loan size

SBA 7(a), SBA 504, SBA 407 Owner Occupied

and other Commercial Loans

Multifamily 5+ Units, Assisted Living

Mixed Use, Mobile Home Parks (MHP’s)

Church, Synagogue, Day Care Center

Private School

SBA 7(a), SBA 504, USDA B&I

Franchise Financing

Non Qualifying SBA Program

Retail, Office Condos, Office Bldg

Single Tenant, Industrial, Strip Mall

Restaurants, Brake Shops, Tire Shops

Auto Repair, Working Farm, Self Storage

Bridge, Hard Money

Parking Lots and Garages

 

Primary Lender Criteria: Apartments 5+ Units, Student Housing, Mixed Use, Assisted Living Churches, Day Care, Schools, Office Buildings, Office Condos Restaurants, Grocery Stores, Office and Industrial, Retail Single Tenant, Owner Occupied, Investment Properties Parking Lots, Garages, Working Farms SBA 7(a), 504, USDA, B & I and Non Qualifying SBA Programs Purchase, Refinance, Rehabilitation, Construction Bridge, Hard Money, Accounts Receivable Factoring
Pre-Qualification Package Loan Summary Work Sheet Church Loan Pre-Qualification Input Form Church Loan Analysis Worksheet Commercial Loan Application SBA Application Factoring Intake Checklist Personal Financial Statement Multifamily DSCR Input Form Multifamily Rent Roll FHA-HUD 221(d)(4) Multifamily Construction to Perm FHA-HUD 221(d)(4) Construction Pre-Qualification Data FHA-HUD 221(d)(4) New Construction Questionnaire FHA-HUD 223(f) Multifamily Purchase or Refinance FHA-HUD 223(f) Refi Questionnaire FHA-HUD 232 Assisted Living Care Purchase and Refi FHA-HUD 232 Assisted Living Care Construction to Perm FHA-HUD 232 Assisted Living New Construction Questionnaire FHA-HUD 232 Assisted Living Construction and Substantial Rehab FHA-HUD 242 Hospital Purchase, Refi, Construction and Rehab

SBA Loans FAQs from (sba.gov)

How do I know if I qualify as a small business so that I can receive SBA assistance?

Approximately 95% of all businesses are eligible for SBA assistance. Size standards vary widely depending upon the industry; however, as a general rule, your business is within SBA size limits if it is in manufacturing or wholesaling with fewer than 100 employees or in retailing or service with annual sales under $5,000.000 To find out more about size standards, call the SBA Office of Size Standards at (202) 205-6618.

Do I have to be declined by a bank to be eligible for an SBA guaranteed loan?

No, you do not have to be turned down by a lender to qualify for a loan guaranteed by the SBA.

What are the SBA’s loan limits?

The SBA does not let loan minimums. Many lenders may prefer to process loans for under $100,000 under SBA’s LowDoc program. The maximum amount the SBA can guarantee is generally $750,000.

How much money do I need to have in order to qualify for an SBA loan?

A borrower’s capital contribution generally must be one-fifth to one-third of the total project cost.

How long will it take to get my loan?

A credit decision on a complete loan package is usually made within ten working days after it is received by the SBA, not including bank processing time. This assumes that the borrower and lender have provided all the information necessary to process the loan.

Where can I get an SBA loan application?

SBA loan forms are available from a participating lender, who will also be able to provide information about both the bank and SBA documentation required. The above text is taken from Small Business Resource Guides published for individual SBA District Offices in co-sponsorship with RENI Publishing of Winter Haven, FL 33880-3052. SBA’s participation in this publication is not an endorsement of the views, opinions, products, or services of the publisher or any advertiser or other participant appearing herein. All SBA programs or co-sponsored programs are extended to the public on a nondiscriminatory basis. Individual District Office editions are copyrighted. SBA Auth. No. 97-7110-64.

How do I get certified for special SBA programs?

Certification programs can help you market your business to both large business and government procurements. There are three core certification programs: the Small Disadvantaged Business Program (SDB), the 8(a) Business Development Program, and the HUBZone Program.

The Small Disadvantaged Business (SDB) Certification Program is designed to treat small companies equitably and empower them to pursue business in both the private and public sector contract arena. Once an SDB is certified, it will be eligible for specific procurement benefits.

The SBA’s 8(a) Business Development Program is an initiative that helps small disadvantaged businesses compete in the American economy. Program participation is divided into two stages. The developmental stage is designed to help 8(a) certified firms overcome their economic disadvantage by providing personalized business assistance in expanding their business and fostering meaningful business relationships. The transitional stage is designed to help program participants become more effective in both the large business and the government sector market in dealing with complex business deals and to prepare them for post 8(a) program expansion and development. The HUBZone Empowerment Contracting Program is designed to stimulate economic development and create jobs in urban and rural communities. The program provides contracting opportunities to small businesses located in and hiring employees from Historically Underutilized Business Zones.

What do I do when I am ready?

You have done your homework: you have a complete business plan, you know where you want to operate, you know how much cash you will need, and you have specific information on employee, vendor, and market possibilities. You now may want someone to look over your plans objectively. Contact the business department at a local college for another opinion. A SCORE representative at the Small Business Administration can also review your work and help with the fine-tuning. Then, when you have made the final decision to go ahead, it is time to call the bank and get going. Good luck! All of SBA’s programs and services are extended to the public on a nondiscriminatory basis.

SBA 504

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.

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:

IInterest 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 $7.5 million and does not have an average net income in excess of $2.5 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate.
SBA 7a

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

Small Business

What Is An SBA Loan?

SBA loans are loans to small businesses that are guaranteed by the Small Business Administration, an independent federal agency. These loans are made to help small companies get started, expand, and prosper.

What Is A “Small” Business?

SBA defines a small business as one that is independently owned and operated, is not dominant in its field, and which meets the following criteria (stated in maximums):

Type of Business Size
Service $5 – $21 million
Retail $5 – $21 million
Wholesale Up to 100 Employees
Manufacturing Up to 500 Employees

Most businesses are eligible for SBA loans with the exception of non-profit groups, real estate investment firms, leasing and finance companies, and affiliates of a large business.

Why An SBA Loan?

Many small businesses need longer term loans in order to prosper through economic ups and downs. Commercial lenders typically offer short term loans with a balloon payment at the end. A longer term loan available through SBA enables your business to:

  • lower monthly payments
  • improve business cash flow
  • eliminate the worry of a balloon payment
  • no need to refinance
  • no prepayment penalties

What Can An SBA Loan Be Used For?

SBA Loans can be used for a wide variety of business purposes, including:

  • construction of facilities
  • purchase land or buildings
  • expand or modernize
  • purchase machinery or equipment
  • purchase a business
  • refinance debts
  • finance accounts
  • receivables and inventory growth

What Are The Credit Requirements?

  • Management must have sufficient expertise in the field to successfully operate the business.
  • The business owner must have a reasonable amount of his or her own money invested in the business.
  • Demonstrate that the past earnings record and probable future earnings will be sufficient to repay the loan.
  • Owners must pledge sufficient assets to secure the loan. Personal guarantees are required. Liens on personal assets of the principals may also be required if business collateral is inadequate.
  • Owners, partners, principal stockholders, officers, and managers must be of good character.

How Much Can A Business Borrow?

Community Bank will lend from $50,000 to $5,000,000 under the SBA Guaranteed Loan program.

What Terms Are Available?

Typically the terms of an SBA Guaranteed Loan are based on the uses of the loan proceeds.

Up to 25 Years: Refinance Real Estate;
Purchase of land and or building
Up to 10 Years: Purchase of machinery, equipment, furniture and fixtures
7 to 10 Years: Purchase of inventory;
Pay off or consolidate debts
5 to 7 Years: Provide working capital

Terms may be blended to accommodate multiple purposes.