U.S. Small Business Administration

1
Welcome!
U.S. Small Business Administration
THE SBA ADVANTAGE
Ray Milano Business Development Specialist
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SBA History

• Agency of the Federal Government.
• Created by Congress in1953 to provide financial,
  technical, and management assistance to small
  businesses.

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Our Mission
Maintain and strengthen the nation's economy by
aiding, counseling, assisting and protecting the
interests of small businesses and by helping
families and businesses recover from national
disasters.
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• In Fiscal Year 2007, the SBA
• Guaranteed 110,275 loans!
• Guaranteed 20.6 Billion in loans!
• In Massachusetts
• 2,213 loans for 311 Million

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Why This Presentation?

• Almost everyone considers owning a small business
  at some point in their life.
• 90 of all businesses today are considered to be
  small business.
• You are likely to find yourself working for a
  small business at some point in your life.
• You may find yourself in a position where you
  must consider purchasing the business you work
  for.

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The SBA Advantage
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Reasons for Going into Business for Yourself

• Be Your Own Boss
• Job Security
• Creative Freedom
• Determine Your Own Destiny
• The Challenge of Building an Empire
• Financial Independence - Opportunity to realize
  the American Dream

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Starting a New Business

• You MUST be thoroughly prepared
• Seek counseling if necessary (its free at SBA!)
• Talk it over with family and friends
• You must prepare a good business plan
• Good cash flow statements are essential

• You must know your competition

• Convince yourself that your business will succeed
  based on your research and statistics -
  not on your hopes and dreams

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Some Risk Factors

• Type of Business
• Location
• Uncontrollable Market Factors
• Changes in Competition
• Social, Economic, and Technological Changes
• Personal and Family Demands

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Reasons for Not Going into Business for Yourself

• Risk of Failure (no guarantee of success)
• Long Hours (you have to make it happen)
• No Guaranteed Pension Plans
• Headaches (you are the boss)
• Employee Problems (they all go to you)
• Liability (you are the owner)
• Its not easy to quit if you tire of it

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Can it be Done Today?

• Inc Magazines 500 Fastest Growing Companies
• 56 started in founders home
• 93 were from working or middle-class families
• Median age of founder - 34 years old
• 46 founders had less than a 4-year degree
• 24 started with less than 10,000
• 70 started with less than 50,000
• 62 started with at least one partner
• 81 founders were married when company founded
• Average age of company - 8 years old
• Founders median annual compensation - 215,000

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Alternatives to Starting Your Own Business
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Purchasing an Existing Business

• MOST IMPORTANT - Get the seller to finance part
  of the sales price - and subordinate to other
  debt
• Study the business very carefully yourself,
  however, get a third-party, independent business
  valuation
• Work in the business for a period of time prior
  to purchasing - if at all possible
• Negotiate for the seller to work in the business
  for a period of time after you purchase the
  business
• Dont let your enthusiasm for owning the business
  blind you to otherwise obvious negative attributes

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A Word About Franchises Which were the Top 10
Franchises for 2006?

• Subway
• Quiznos Sub
• Curves
• UPS Store
• Jackson Hewitt Tax Service
• Dunkin' Donuts
• Jani-King
• RE/MAX International Inc.
• 7-Eleven Inc.
• Liberty Tax Service
• (Entrepreneur Magazine)

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Advantages and Disadvantages of Franchises
Disadvantages
Advantages

• Revenue Sharing
• Advertising Controls
• Purchasing Controls
• Operational Control
• Ability to Innovate
• Ownership Interest?

• Name Recognition
• Advertising
• Products - Supplies
• Training
• Moral Support
• Financial Assistance

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What does a Franchise Cost?

• Up-front Fee - 5,000 to 50,000
• On-going Fee - 2 to 10 of Sales
• Equipment - 5,000 to 100,000
• Leasehold Improvements - 10,000 plus
• Stand-alone Store - 200,000 plus
• Out of Pocket Cost - 5,000 to 100,000

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SBA Franchise Registry

• For franchisors and franchisees
• Free for franchisees
• Eliminates document review for franchisees in the
  SBA loan process
• More information available at
• www.franchiseregistry.com

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• Business Financing

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What a Lender Looks for When Reviewing a Loan
Request

• Good Character
• borrowers background, credit history, references
• Management Expertise and Commitment
• borrowers experience and desire to succeed
• Feasible Business Plan
• does it make sense and is it sufficiently
  thorough?
• Reasonable Personal Contribution
• borrowers stake in the business
• Collateral
• does it provide sufficient protection to the
  lender?
• Repayment
• Will the loan repay from earnings of the business?

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CollateralWhat is it and what is Required

• Anything of value that you can pledge
• Lien on business assets always required
• Liens on personal assets usually required
• Personal guaranties from 20 percent owners always
  required

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Reasons for Loan Declines

• Applicant is not properly prepared
• No business plan, no current financials, etc.
• Poor credit - no credit
• History of late payments / charge-offs /
  collection accounts / tax liens / low credit
  scores
• Lack of experience in the business, no partners,
  no experienced employees under contract
• Little personal investment into the business
• No earnings history / questionable loan repayment
• Apparent Lack of commitment on part of borrower

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Financing Resources

• Home Equity Loans
• Government Agency Loans and Grants
• Regional Economic Development Agencies
• Private Agency Loans
• Finance Companies
• Credit Cards

• Personal Savings
• Family Friends
• Private Lenders
• Private Investors
• Seller Financing
• Supplier Financing
• Leasing
• Landlord Concessions

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Investor Capital

• What is it?
• Capital injection into your business by private
  investors
• What is the positive side of investor capital?
• It doesnt have to be repaid
• What is the negative side?
• You give up a percentage of your business
• How are investors repaid?
• From earnings and growth of your business

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Inc Magazines 500 Fastest Growing Companies
How They Got Start-up Capital 2006 CEO Survey

• 87 - Founders Personal Assets
• 28 - Partners Personal Assets
• 19 - Family and Friends
• 62 - Bank Loans
• 49 - Venture Capital

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How Can SBA Help You?
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Seek Out SBA

• Training Counseling
• Access to Capital
• Government Contracting
• Disaster Assistance

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SCORE(Counselors to Americas Small Businesses)
Over 300 SCORE volunteers statewide in 7
chapters and 29 branch locations
Training Counseling

• Experienced Volunteers Offering
• Expert business counseling
• Marketing advice
• Business plan preparation
• Loan application assistance
• Online or in person counseling

Boston www.scoreboston.org
Springfield www.scorewesternma.org
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Contact SCORE

• Boston . 617-565-5591
• Springfield . 413-785-0314
• Worcester ... 508-753-2929
• Pittsfield . 413-443-1326
• Cape Cod 508-775-4884
• Southeastern MA ... 508-587-2673
• New Bedford ... 508-991-3122
• Northeastern MA ... 978-927-2282

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SBDCSmall Business Development Centers

• Professional Business Advisors
• Loan application assistance
• Business plan assistance
• Provide management and technical assistance
• Combine resources of SBA, local government,
  private sector and academia
• Over 900 locations across the country
• Typically located at colleges and universities

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MSBDC Locations

• Boston
  617-287-7750
• Berkshire MA (Pittsfield)
  413-499-0933
• Central MA (Worcester)
  508-793-7615
• No. Eastern MA (Salem)
  978-542-6343
• Southeastern MA (Fall River)
  508-673-9783
• Western MA (Springfield)
  413-737-6712
• Amherst State Office
  413-545-6302
• Procurement Technical Assistance Ctr.
  413-737-6712 x 105
• Mass.
  Export Center
• State Transportation Bldg.
• 10 Park Plaza, Ste 4510
• Boston, MA
• 617-973-8664
• 
  www.msbdc.org

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Womens Business Centers

• Provide training, counseling, mentoring
• Tailor programs to local community needs
  includes assistance to economically and socially
  disadvantaged women
• Center for Women Enterprise
• Boston www.cweboston.org 617-536-0700
• Worcester www.cweworcester.org . 508-363-2300

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Womens Business Centers Online

• Management, networking, market research
  information
• Interactive mentoring
• More information available at

www.onlinewbc.gov
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OTHER RESOURCES IN YOUR AREA
Business Resource Centers

• Berkshire Enterprises Pittsfield (413)
  448-2755
• Business Information Center of Cape Cod (508)
  362-2131
• Lawrence Business Center Lawrence (978)
  738-0502 X 1499
• Lynn Small Business Resource Center Lynn (781)
  477-7222
• Metro South Business Assistance Ctr Brockton
  [phone]
• South Coast Business Info Center Fall River
  [phone]
• Springfield Enterprise Center Springfield
  [phone]
• Worcester Business Information Center at (508)
  363-0303
• MLK, Jr. Business Empowerment Center,
  Worcester

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SBA Online Resources
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www.sba.gov
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www.sba.gov/ma
MASSACHUSETTS DISTRICT WEBPAGE
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www.sba.gov/services/training/onlinecourses/index.
html
ONLINE TRAINING
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WWW.BUSINESS.GOV
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• SBA ONLINE RESOURCES
• FOR VETERANS
• www.sba.gov/vets

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Access to Capital
Help Financing Your Business
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Financial AssistanceSBA Guaranteed Loans

• Basic 7(a)
• SBA Express
• Community Express
• CDC/504 Program
• Micro Loans
• Disaster Recovery

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Guaranteed Loans
Primarily made by private lenders, with SBA
guaranties

• Maximum loan size 2 million
• Up to 85 of loan lt150,000
• 75 of loans gt 150,000
• Maximum guaranty is 1.5 million

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Basic 7(a) Loan
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Basic 7(a) Loan Guarantee ProgramUse of Proceeds

• You apply for a loan guaranty with a SBA
  participating lender.
• 7(a) loans may be used to
• Purchase machinery, equipment, fixtures,
  buildingsand land for business
• Finance receivables and augment working capital
• Refinance existing debt (with compelling reason)
• Finance seasonal lines of credit and/or
• Expand, renovate facilities
• Construct commercial buildings.

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Eligibility Requirements

• Businesses must
• Be operated for profit
• Not exceed SBA size standards
• Not engage in lending, real-estate development,
  investments or speculation

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Terms

• Flexible Maturities
• Up to 10 years for working capital
• Up to 25 years for fixed assets
• Real Estate
• Construction
• Equipment
• Interest Rates
• Negotiated between borrower and lender
• Typically, can not exceed Prime plus 2.75

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SBA Express
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SBA Express

• Term loans or revolving lines of credit, up to
  350,000
• SBA guarantee of 50
• Uses lenders forms, processes and procedures,
  not the SBAs
• 90 of loans in Massachusetts now being done
  Express

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PATRIOT EXPRESS

• Loans up to 500,000 for military
• community members, including

• Veterans
• Service Disabled Veterans
• Soon to be discharged active-duty service
• members eligible for the militarys
• Transition Assistance Program
• Reservist and National Guard Members
• Current spouses of any of the above
• The widowed spouse of a service member
• or veteran who died during service or of a
• service-connected disability

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Patriot Express Initiative Loan
Can be used for

• Start-up

• Expansion

• Equipment purchases

• Working capital

• Inventory purchases

• Business real-estate purchases

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504 Certified Development Company Program
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504 Certified Development Company Program

• Long-term financing for major fixed assets
• Up to 4.0 million in SBA-backed debentures
• Must apply through SBA approved certified
  development company

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Typical 504 Program Project

• Bay Colony Development Corp. [phone]
• New England Certified
• Boston [phone]
• Chicopee [phone]
• Worcester Business Development Corporation (508)
  753-2924
• Granite State Development Corporation (603)
  436-0009

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SBA Microloans

• The Micro Loan Program
• Direct loans up to 35,000
• Interest Rate
• Generally between 8 and 13, depending upon the
  intermediary and costs from U.S. Treasury .
• Maturity
• Up to 6 years, depending on loan amount, borrower
  needs
• Collateral
• Intermediary requires collateral and owners
  personal guaranty.

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SBA Microlenders

• Dorchester Bay Economic Dev. Corp.
• 594 Columbia Road, Suite 302
• Dorchester, MA 02125
• [phone]
• Service area Lower Roxbury and Dorchester
• Economic Dev. Industrial Corp. of Lynn
• Lynn City Hall, 3 City Hall Square, Room 401
• Lynn, MA 01901
• [phone]
• Service Area City of Lynn

• Economic Stabilization Trust
• The Schraftt Center
• 529 Main Street, Suite 110
• Boston, MA 02129
• [phone]
• Service area Middlesex and Essex Counties,
  except for the city of Lynn
• Greater Springfield Entrepreneurial Fund
• 1441 Main Street
• Springfield, MA 01103
• [phone]
• Service Area Greater Springfield, Hampden County

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SBA
Microlenders

• Jobs for Fall River, Inc.
• One Government Center
• Fall River, MA 02722
• [phone]
• Service Area City of Fall River
• New Bedford Economic Development
• 700 Pleasant Street, 4th floor
• New Bedford, MA 02740
• [phone]
• Service Area City of New Bedford

• South Eastern Economic Development
  Corporation/SEED
• 80 Dean Street
• Taunton, MA 02780
• [phone]
• Service Area SE Massachusetts - Norfolk,
  Bristol, Plymouth, Barnstable, Dukes, and
  Nantucket counties
• Western Massachusetts Enterprise Fund
• 308 Main Street, Suite 2B/P.O. Box 1077
• Greenfield, MA 01302
• [phone]
• Service Area Berkshire, Franklin, Hampshire,
  Hampden Counties and parts of Worcester County.

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Other Programs

• CapLines
• Contract Line Seasonal Line Builders Line
  Small Asset Based Line Standard Asset Based Line
• Export Working Capital/Export Express
• Community Express
• Disaster (Business and personal physical
  disaster and economic injury)
• Small Business Investment Company Program
• Surety Bond Guaranty Program (bid, performance
  and payment bonds up to 2,000,000)

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Grants

• www.grants.gov
• Private Sources ( www.guidestar.org )

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GOVERNMENT CONTRACTING
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Government Contracting

• Purchases by military and civilian installations
  exceeds 200 million/year
• 23 of all government buys are supposed to go to
  small businesses
• Contract goals for
• Women-owned businesses (5)
• Small disadvantaged businesses (5)
• HubZone businesses (3)
• Service disabled veteran-owned businesses (3)

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Central Contractor Registration (CCR)
www.ccr.gov

• Primary Vendor Database for
• DOD
• U.S. Department of Treasury
• U.S. Department of Transportation
• NASA
• Collects information needed for electronic funds
  transfers (EFT)
• Validates registrants information and
  electronically shares the data with Federal
  agencies paperless procurement and payment
  through EFT
• Firms are required to complete a one-time
  registration process
• Registration must be renewed annually. Both
  current and potential vendors must register in
  CCR to be awarded contracts, and to be paid by
  the above noted agencies.

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Procurement Technical Assistance Center

• University of Massachusetts Amherst
• Peter Cokotis, Program Manager
• 227 Isenberg School Of Management, Room 205
• 121 Presidents Drive
• Amherst, MA 01003
• [phone]
• For PTAC staff listing throughout the state, go
  to
• http//www.msbdc.org/ptac/staff.html

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HUBZones

• (Historically Underutilized Business Zone Program)

• Develops historically underutilized urban and
  rural areas
• Establishes federal award preferences for small
  businesses
• More information is available at
• https//eweb1.sba.gov/hubzone/internet

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The HUBZone Program

• A qualified tract

• A qualified non-metropolitan county

• Indian Country

• To qualify
• Must be a small business by SBA size standards
• Must have its principal office located within a
  Historically Underutilized Business Zone,
  including federally recognized Indian
  reservations
• Must be at least 51 owned and controlled by U.S.
  citizens, a community development corporation, an
  agricultural cooperative or an Indian tribe and
• Must have at least 35 of its employees residing
  in a HUBZone

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The 8(a) Business Development Program

• Programs for minorities anddisadvantaged
  individuals.

• Helps businesses grow by way of Federal contracts.

• The Small Disadvantaged Business Certification
  Program.

• Management and/or technical assistance.

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8(a) What is it?

• Assists socially and economically disadvantaged
  business owners in gaining equal access
• Counseling
• Training
• Federal government contracting
• Must be 51 owned by disadvantaged entity
• Call [phone] to get info on 8(a)BD

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Disaster Assistance

• Loan Programs
• Homes Personal Property
• Businesses Physical Pre-disaster
• Mitigation
• Economic Injury
• Military Reservist Economic Injury

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How to Contact SBA

• Phone [phone]
• Fax [phone]
• E-Mail raymond.milano_at_sba.gov
• SBA Online
• National Page www.sba.gov
• Massachusetts Page www.sba.gov/ma

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Questions?
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Thank You!
RAY MILANO Business Development Specialist (617)
565-8417