SBA Bank Loans for Business

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SBA Loan Programs
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Bank Financing with SBAs Guarantee

• SBA is not a direct lender
• SBA partners with banks and lenders
• SBA guarantees bank loans (50-85)
• Banks risk is offset by the SBA guaranty
• Applicants apply directly to the bank/lender
• Bank decides when to use the SBA
• Bank gets paid if business fails
• Business remains liable for the debt

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Regular 7(a) GuarantyLoan Terms

• SBA does not set actual terms, but does set
  parameters
• Terms are negotiated between bank borrower
• Maximum Loan Amount 2,000,000
• Maximum SBA Guaranty
• 75 to 85 of the loan, up to 1.5 million
  maximum

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Regular 7(a) GuarantyLoan Terms (continued)

• SBA Guaranty fee
• 2 to 3½ of SBA-Guaranteed amount
• For 100,000 loan, fee 1,700
• For 500,000 loan, fee 11,250
• Guaranty fee may be financed as part of loan
• Interest Rate
• Usually variable rate loan
• Generally Prime plus up to 2.75
• Rate can be higher for loans under 50k or for
• SBAExpress Loans

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SBA Guaranty LoanEligible Use of Proceeds

• All Legitimate Business Purposes
• Inventory
• Machinery Equipment
• Working Capital
• Real Estate (owner-occupied only)
• Debt repayment (business debts only)
• Business Acquisitions
• Franchises (must be an eligible franchisor)

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SBA Loan Eligibility Issues

• Must be a for-profit business
• Must qualify as a small business concern
• Must be an eligible type of business
• Must meet personal financial resources test
• Must be at least 51 owned by U.S. Citizens or
  Legal Permanent Residents
• Cannot be on probation or parole

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Benefits of the SBA Loan

• Reduces lenders risk, making it more likely to
  approve a small business loan application
• Provides a longer loan term, or maturity
• All SBA loans are fully amortizing, i.e.,
• no balloon payment

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What Do I Need to Qualify?

• Five Cs of Credit
• C apacity to Repay
• C apital
• C apable Management
• C haracter Credit
• C ollateral

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How to Apply for an SBA Loan, continued

• Gather your business personal financial
  information
• Personal financial statement
• Personal income tax returns for the last 3 years
• Business financial statements tax returns for 3
  years if already in business
• Decide on a Lender factors to consider
• Your experience with the lender
• Type of lender National, regional, community
  bank

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SBA Guaranty Loan Process
1.
2.
Business Owner
Lender/Banker

4.
3.
SBA

1. Business Owner applies to Lender
2. Lender contacts SBA if lender requests SBA
   guaranty
3. If approved, SBA guarantees lenders loan
4. Lender then can disburse loan to Business Owner

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SBA Express Loan

• Loan amounts up to 350,000
• Offered by participating SBAExpress lenders
• Variable interest rate Up to 6.5 over prime
  for loans of 50,000 or less up to 4.5 over
  prime for loans over 50,000
• Loan term of 7 to 10 years
• May be used as a line of credit with a term up to
  7 years

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SBA Patriot Express Loan

• For Veterans spouses and military community
• Fast turnaround for approvals
• Lowest interest rates, 2.25 - 4.75 over prime
• Maximum loan amount - 500,000
• Use of Proceeds same as for 7(a)
• Apply through specially approved lenders

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Other SBA Loan Programs

• SBA 504 Loan
• Only for Purchase/Improvement of long-term fixed
  assets such as real estate
• Apply through a lender, or an SBA-approved
  Certified Development Company (CDC)

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SBA Microloan Program

• Loans up to 35,000 (average 10,500)
• Made by Microloan Intermediaries funded by SBA
• Fixed interest rate ranges from 8 to 11
• Maximum loan term is 6 years, fully amortized
• Training and technical assistance is provided to
  the borrower
• Apply to the SBA Microloan Intermediary that
  serves your county

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SBDC TV Online Training
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