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SMALL BUSINESS ADMINISTRATION FINANCIAL ASSISTANCE PROGRAMS. Kansas City District Office 816-426-4900. Financial Assistance Programs. SBA primarily works through 3 different LOAN PROGRAMS to provide access to capital for small businesses: 7(a) Loan Guarantees 504 Fixed Asset Program

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SMALL BUSINESS ADMINISTRATIONFINANCIAL ASSISTANCE PROGRAMS

Kansas City District Office

816-426-4900


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Financial Assistance Programs

  • SBA primarily works through 3 different LOAN PROGRAMS to provide access to capital for small businesses:

    • 7(a) Loan Guarantees

    • 504 Fixed Asset Program

    • Microloans in selected areas

  • SBA does NOT have grants available to start or expand businesses.

  • SBA loans are only made to for-profit businesses

  • Credit decision by lender is made on a case-by-case basis.


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Financial Assistance Programs

  • The 7(a) loan guaranty program works with a lender of your choice to potentially finance business transactions of the start-up of new businesses, the expansion of existing businesses or facilitate the buy-sell of existing businesses. The SBA loan programs are only available for business purposes.


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Financial Assistance Programs

The participating lender may consider using SBA guarantee program for small business clients with these sub-programs:

  • Standard 7(a) Loan Program

  • Special Purpose 7(a) Loans: Capline, EWCP, IT

  • SBAExpress (SX)

  • Community Express (CX)

  • Patriot Express (PX)

    Not all lenders are designated to work with all of these loan programs. Please click on this link:

    http://www.sba.gov/localresources/district/mo/kansas/Financing/index.html

    for the current listing of special designation lenders that operate in the Kansas City District Office area.


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Financial Assistance Programs

  • Standard and Special Purpose 7(a) Loan Guaranty Program

    • Made by commercial lenders – not a direct loan program

    • SBA guaranties 75- 85% of the loan amount

    • No minimum loan amount however maximum loan amount can be up to $2,000,000

  • All 7(a) program requirements:

    • Good credit history

    • demonstrated record for success (for an existing business)

    • good character

    • sufficient funds to operate the business at a profit

    • collateralize the loan as fully as possible


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Financial Assistance Programs

  • 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 cannot exceed prime rate plus 2.75%, except:

      • Loans of $50,000 and less may be higher

      • SBAExpress loans may also be higher


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Financial Assistance Programs

7(a) Program Guaranty Fees:

SBA charges the guaranty fee to all participating lenders and lenders will generally pass on the fee directly to the SBA borrower.

http://www.sba.gov/services/financialassistance/basics/sbarole/SERV_7A_FEES.html

for any fee changes


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CAPLINES Loans

Used to meet short-term and cyclical working capital needs

Can be a one project type deal or can be on a revolving basis

Three Types: Seasonal, Contract, Small Builder

Also, Two Types of Asset Based Loans Are Available:

Standard Asset Based

Small Asset Based

(All Capline Loans are part of the 7(a) Loan Guaranty Program)

Financial Assistance Programs

Special Purpose Programs


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Financial Assistance Programs

Special Purpose Programs

Export Working Capital Loan – Loans under the 7(a) Program with up to a 90% Guaranty

  • Pre-Export and Post-Export Transactions

  • Paid back from proceeds of the export sales

  • No Import loan proceeds available

    International Trade Loan

  • Used for producing goods or services within the U.S. to export elsewhere

  • Can help firms adversely affected by import competition


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Financial Assistance Programs

  • 7(a) SBAExpress – Loans Up to $350,000

    • 50% guaranty to lender

    • Streamlined-Lender uses its own documentation

    • can be used for a variety of purposes, including funding working capital lines of credit

    • Most commonly used for existing business expansion

    • Over 65% of SBA lending is now done thru this SBAExpress program!


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Financial Assistance Programs

7(a) Community Express – Loans Up to $250,000

  • 75-85% guaranty to lender

  • Streamlined-Lender uses its own documentation

  • can be used for a variety of purposes, including funding working capital lines of credit

  • Lender pays for technical assistance to a pre-approved technical assistance provider for the SBA borrower to improve business operation

  • Limited local use by lending community


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Financial Assistance Programs

  • 7(a) Patriot Express – Loans up to $500,000

    • with 75% - 85% guaranty

  • Newest version of SBA Lending

    • Started June 28, 2007

    • Streamlined Pilot program extends to December 31, 2010

  • Created to Serve Special Customers

    • Honorably-discharged Veterans

    • Service-Disabled Veterans

    • Service Members Leaving Active Duty eligible for Transitional Assistance Program (TAP)

    • Reservists and National Guard Members

    • Current Spouses of any of the above

    • Widowed Spouse of a Service Member or Veteran who died during service, or of a service-connect disability


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Financial Assistance Programs

504 Fixed Asset Loan

Long-Term financing for fixed assets like buildings & equipment (not rolling stock).

Up to $1.5 million in SBA-backed debentures – more for public policy goals and manufacturers

Loan must generally create or retain one job for every $50,000 of debenture proceeds provided by the SBA.

Available throughout Kansas and Missouri from CDCs in specific areas (link: http://www.sba.gov/localresources/district/mo/kansas/financing/index.html)


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Financial Assistance Programs

  • MICROLOAN - $35,000 or less

    • Pool of Funds available thru microloan intermediary

    • RMI (Jefferson City) - statewide in MO 573-635-0136

    • Go Connection – KC metro area plus the Kansas Counties of Douglas & Shawnee, 816-235-6146


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Financial Assistance Programs

  • SURETY BOND GUARANTEES

    • Not a Business Loan Program

    • SBA guarantees bid, payment and performance bonds for construction, service, and supply contracts up to $2,000,000 on behalf of small businesses.

    • Guarantee proves incentives for surety companies to bond small business that would otherwise be unable to obtain bonding.

    • Web address: http://www.sba.gov/OSG


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HOW DOES AN APPLICANT APPROACH A LENDER ABOUT SBA LOANS?

  • Make advance appointment with commercial officer that handles business loans.

  • Be prepared with a written business plan. It should include identification of total cost of project with a breakout of what $$ are expected to be borrowed and what $$ are expected to be injected by business owner!


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WHAT SHOULD AN APPLICANT EXPECT FROM A LENDER?

  • A commitment from the lender to review the business plan by a specified date or an up-front explanation of why that lender does not want to do that type of loan.

  • Expect the lender to ask for applicant’s personal credit information so they can authorize a credit report and possibly a business credit report.


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TIPS FOR FINANCIAL PREPARATION

  • FIRST be prepared- Do have business plan completed before seeking a business loan!

  • Understand the loan process and consider how your application will be compared to industry peers.

  • You need to establish time frame for decision making that is realistic and decide if lender can meet those needs.


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NEGOTIATION ITEMS & LENDER DISCLOSURE

  • Interest rate

  • Term of loan

  • Who will personally guarantee loan

  • What fees will be charged

  • Time frame range in expecting an answer “YES or NO” and time frame to expect on disbursement of funds

  • Other services lender can provide


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WHY DOES A LENDER SAY “YES”?

  • Likes balance of credit factors – strengths outweigh weaknesses

  • Lender’s institution has favorable experience with that industry

  • Your business loan application credit risk fits in with lender’s target portfolio

  • Lending officer is willing and able to be your advocate in loan committee


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WHY DOES A LENDER SAY “NO”?

  • Weaknesses of individual deal outweigh strengths in areas such as:

    • Sales volume is optimistic or expenses are underestimated or industry in turmoil

    • Management has no direct experience

    • Lender risk too high in loan amount compared to applicant’s injection – Debt/Equity

    • Credit or character history is marginal or poor

    • Collateral offered doesn’t offset other risks

  • Lender’s institution has unfavorable experience with that industry


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TECHNICAL ASSISTANCE:LOCAL ADVICE ON FINANCING

See other training modules…….

  • www.sba.gov

  • SCORE – Counselors to America’s Small Business

  • Small Business Development Center (SBDC)

  • Womens Business Center (WBC)

  • Procurement Assistance Center (PAC)

  • Business Information Center (BIC)

  • www.kcsourcelink.com


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Please take a few minutes to complete the training evaluation form.

Thank you.

SBA Evaluation


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