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Welcome to the
Intro Advantages Uses Eligibility 7(a) Program SBA EXPRESS 504 Program
through the U. S. Small Business
Administration IntroductionIn the years following World War II, returning servicemen entered the work force by the hundreds of thousands. A new pattern began to emerge that faces our country today in the largest proportions since that time. Increasing unemployment due to cost-cutting by major corporations and poor economic conditions have triggered the emergence of small, entrepreneurial businesses as the most important segment of our economy. With many of these businesses being started by veterans as well as non-veterans, it became abundantly clear that the Federal Government should address the needs of these businesses with programs and services. The solution was the creation of the U. S. Small Business Administration with the passing of the Small Business Act of 1953. What is the Small Business Administration (SBA) Guaranteed Loan Program? Under the general heading of SBA Loans there are many programs available to eligible "small businesses." The most commonly used program is the Guaranteed Loan Program. This program is for any individual needing money to buy a franchise, purchase an existing business, expand an existing business, and, in some cases start a business. Funds can be used to purchase real estate used in the operation of the small business, to provide working capital, to purchase machinery, equipment and vehicles for business use, and the purchase of inventory. Why is the SBA Guaranteed Loan Program so good? With the economy as poor as it is today, commercial banks, savings and loans, thrifts and even finance companies are extremely reluctant to grant the legitimate credit needs of small businesses. You have heard of the so called "credit crunch" - well it's real. Lenders are concerned about collateral values, examiner criticism and ability to repay. When you apply through the SBA Guaranteed loan program; the United States Government is your guarantor. Because the Government guarantees your loan, the lender is much more likely to approve your loan and on better terms and conditions than you might have gotten on your own. Terms of the Loan In the vast majority of cases, even if you secure your own loan, it will probably be for a shorter period of time and with a higher rate of interest than what is generally available under the SBA Guaranteed Loan Program. This means much higher monthly payments to you. When obtaining an SBA Guaranteed Loan, depending on the purpose of your loan, you may receive up to twenty-five years to repay. Interest rates on SBA guaranteed loans are usually based upon the lowest Prime Rate published in the Wall Street Journal which is very often lower than what many banks charge on a nationwide basis. Why Not Apply On Your Own? In applying for any loan from the federal government, what most people fear is the bureaucracy they will be faced with. While SBA employees are anxious to help, they are inundated by requests from many sources for many different purposes and the law requires that SBA employees be certain that loans approved by The Small Business Administration comply with regulations. To apply for your government guaranteed loan, you must first obtain the proper forms for this type of loan. You must be certain that all necessary forms are filled out in accordance with federal government standards. This is something that the SBA office does not have sufficient personnel to do and; therefore, can not help you with. You must submit a business plan and projections of how your business plans to and will be able to repay the loan requested. This too must be prepared in proper format. Even attorneys and accountants may not be able to help you unless they have extensive experience in the preparation of SBA loan packages and these professionals' fees could substantially exceed our charges. What Can Capital Finance Do To Help? In trying to deal with any large organization like the Federal Government, questions may arise that we can help you with quickly and efficiently such as:
Capital Finance will help you with all these questions, provide you with all the necessary government forms, assist you in the preparation of your business plans and financial projections, gather all the historical data required for your loan, recommend the right financial package and contact a lender for you who is able to help. Our staff is thoroughly experienced at all aspects of business finance and anxious to help your business get the credit it needs. Don't hesitate to call us or fax us with your questions.
Capital Finance Guide to SBA Loans The Small Business Administration ("SBA") is a federal agency which participates with Banks to assist eligible businesses with their growth and expansion plans. The SBA, by guaranteeing a portion of the loan amount, assumes much of the loan risk and allows us to provide long term loans ranging from 7 - 25 years. SBA loans can range from $5,000 to $2,000,000 (or more in certain cases) and have helped thousands of businesses get started, expand and prosper. This information guide has been prepared to help educate business owners and their advisors about the tremendous advantages provided by SBA loans, and the process involved in securing such financing. ADVANTAGES OF SBA FINANCING OVER CONVENTIONAL BANK LOANS:
WHEN SHOULD YOU CONSIDER SBA FINANCING? Always, but especially when:
Note: Refinancing of existing debt is an eligible loan purpose, providing such financing will benefit the applicant. SBA will not approve loans to finance existing debt, however, if the debt is on reasonable terms, or if the current creditor is in a position to sustain a loss. Call us for additional information. In general, SBA considers a business eligible if it is independently owned and operated, organized to generate a profit and is not dominant in its field. To apply this general definition, SBA has established size standards for specific industries. The size standards are based on NAICS/SIC codes and alternatively use employee counts or annual revenues in determining eligible business size. Generally, the maximum size standards are as follows:
Size standards can vary widely depending on the exact NAICS/SIC code. Please contact us for an exact determination of eligibility regarding your company size. SBA LOAN APPLICANTS MUST: 1. Demonstrate the ability to successfully operate the business and have adequate industry experience. 2. Show that the past earnings record and future prospects of the firm indicate the ability to repay the SBA loan and all other debts, out of the cash flow generated from the business. 3. Have enough capital so that the business can operate on a sound financial basis. 4. Have sufficient assets (both business and personal) to reasonably collateralize the loan. 5. For a new venture, be able to provide a minimum of one-third of the total required start-up investment (not required for the SBA Express program). 6. Show that the proposed loan is of such sound value as to reasonably ensure prompt servicing and full repayment. 7. For commercial real estate loans, the borrower must occupy and utilize over 51% of the facility. Further, the borrower must occupy 100% of the facility generally within a reasonable number of years. (These are general guidelines and each case is different. Please call us for more details regarding your specific situation.) WHAT IS NOT ELIGIBLE FOR SBA FINANCING?
Note: Firms owned by aliens may be eligible if the applicant can demonstrate resident alien status or visa class and if the loan proceeds will not be used to finance a business activity for which alien ownership is otherwise prohibited by law.
SBA Express simplifies the application process. SBA Express provides a rapid response from SBA, usually only two or three days. SBA Express focuses on character, credit and experience. How it works: SBA Express is for small business loans of $350,000 or less. SBA guarantees up to 50 percent of the loan. Who is eligible: Entrepreneurs starting a new business Businesses whose average annual sales for the preceding three years do not exceed $5 million, and employ 100 or less, including affiliates. Businesses that satisfy other statutory criteria Interest rates: Applicants negotiate terms with the lender. Interest rates are usually tied to the prime rate but may be fixed or variable; however, they cannot exceed SBA maximums. Maturity: Length of time for repayment depends on the ability to repay and the use of the loan proceeds; however, it may not exceed 25 years for fixed assets or 10 years for all other uses. Collateral: All loans are to be adequately secured, but loans generally are not declined where inadequate collateral is the only unfavorable factor. Normally business assets are pledged, and occasionally personal assets. Personal guarantees of the principals are required. Got questions?
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