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Business Loan Seminar

Business Loan Seminar. SBA’s Role in Business Financing. SBA does NOT make grants to businesses www.grants.gov No Direct Loans from SBA (except for disasters) Obtain loan from Financial Institution. Financial Assistance Programs. 504 Certified Development Company (CDC) Loan Program

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Business Loan Seminar

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  1. Business Loan Seminar Indiana District Office

  2. SBA’s Role in Business Financing • SBA does NOT make grants to businesses • www.grants.gov • No Direct Loans from SBA • (except for disasters) • Obtain loan from Financial Institution Indiana District SBA

  3. Financial Assistance Programs • 504 Certified Development Company • (CDC) Loan Program • 7(a) Loan Guaranty Program Indiana District SBA

  4. 504 CDC Loan Program • Eligible Business: • Operated for profit • Size standards • Tangible net worth up to $15 million • Preceding 2 year average net income after taxes up to $5.0 million No speculation or investment in rental real estate Indiana District SBA

  5. 504 CDC Loan Program • Proceeds may be used for: • Purchasing land • Construction of new facilities • Improvements to existing facilities • Improvements to real estate • Purchase major machinery and equipment • Project cost financing • Bank finances 50% • CDC/SBA finances 30 – 40% • Customer finances 10 – 20% Indiana District SBA

  6. 504 CDC Loan Program • Loan Maximums: • $5.0 million – general • $5.5 million – manufacturers • Maximum Loan Terms: • Buildings – 20 years • Equipment – 10 years • Job Creation or Retention: • 1 job for every $65,000 of debenture Indiana District SBA

  7. 504 CDC Loan Program • Advantages of a SBA 504 loan • Low down payment • Low fixed rate • Low monthly payments Indiana District SBA

  8. Indiana Certified Development Companies • Business Development Corporation • South Bend, IN 574-288-5758 • Community Development Corporation of Northeast Indiana • Fort Wayne, IN 260-427-1127 • Indiana Statewide Certified Development Company • Indianapolis, IN 317-844-9810 • Premier Capital Corporation • Indianapolis, IN 317-974-0504 • Regional Development Company • Valparaiso, IN 219-476-0504 Indiana District SBA

  9. Financial Assistance Programs • 7(a) Loan Guaranty Program Indiana District SBA

  10. 7(a) Loan Guaranty Program • Eligibility requirements • Must qualify as “small” according to the North American • Industry Classification System (NAICS) • For Profit • Open to general public • U.S. citizen or permanent residence status • Reasonable investment, usually 10 – 20% • Good character Indiana District SBA

  11. 7(a) Loan Guaranty Program • What is a small business? • “one that is independently owned and operated and which not dominant in its field of operation.” This definition will vary from industry to industry. The business sizes listed below indicates the maximum size a business can be based on major industry type and still be considered a Small Business. Indiana District SBA

  12. 7(a) Loan Guaranty Program • The 7(a) program also has alternative size standards available. They are: • Tangible net worth is $15,000,000 or less • AND • 2. Average income after taxes is $5,000,00 or less for the past 2 years Indiana District SBA

  13. 7(a) Loan Guaranty Program • Purpose of the 7(a) Loan • Working capital • Purchase equipment/ furniture/ fixtures • Acquire land/buildings • Construct new facilities • Debt refinancing • Purchase an existing business Indiana District SBA

  14. 7(a) Loan Guaranty Program • Ineligible uses of a 7(a) Loan • Purchase partial ownership of a business • Repay owners for their investment in the business • Pay for delinquent taxes • Refinance of delinquent loans • Speculative, lending or investing purposes • Real estate held for investment, sale or rent • Illegal or gambling activities nor for sexually oriented businesses • Business pyramids • Political, lobbying or religious activities Indiana District SBA

  15. 7(a) Loan Guaranty Program • Borrower benefits • Funding for start-ups • Longer amortizations • No balloon payments • No prepayment penalties (loans under 15 year maturity) • Reduced owner investment & collateral • requirements • The SBA guaranty encourages lenders to loan • money Indiana District SBA

  16. 7(a) Loan Guaranty Program • Maximum Loan Amount • $5,000,000 • Guaranty fees • 2 – 3.75% • Guaranty percentages • 75 – 85% Indiana District SBA

  17. 7(a) Loan Guaranty Program • Loan Maturities • Working capital 1 to 10 years depending on cash flow needs • Equipment up to the expected useful life • Building/land up to 25 years Indiana District SBA

  18. 7(a) Loan Guaranty Program • Interest rates • Negotiated between the borrower and lender • Subject to SBA maximums • May be fixed or variable Indiana District SBA

  19. 7(a) Loan Guaranty Program • Maximum Interest Rates Indiana District SBA

  20. 7(a) Loan Guaranty Program • Base Rate Options: • Variable Rate Options: • Wall Street Prime • 1 Month LIBOR + 3% • SBA Peg Rate • Fixed Rate Option: • LIBOR SWAP • (1 month LIBOR + 3% + Ave of 5 and 10 year LIBOR) Indiana District SBA

  21. 7(a) Loan Guaranty Program • January 2016 Interest Rate Maximums • (Loans $50,000 and greater; over 7 years) • Wall Street Prime = 3.5 + 2.75 = 6.25% • 1 month LIBOR = .42 + 3.0 +2.75 = 6.17% • SBA Peg Rate = 2.38 + 2.75 = 5.13% • Fixed Rate = 5.36 + 2.75 = 8.11% Indiana District SBA

  22. 7(a) Loan Guaranty Program • What a Lender looks for in an SBA Loan • Management ability • A feasible business plan • Repayment out of business proceeds • Capital injection by owners • Collateral • Personal guarantees • Credit scores Indiana District SBA

  23. 7(a) Loan Guaranty Program • Business Plan • ABC Company Business Plan • Section One: Executive Summary • Section Two: The Business • Description of business • Product/service • Marketing information • Location • Competition • Management • Personnel • Application and expected life of loan • Section Three: Financial Data • Section Four: Supporting Documents Indiana District SBA

  24. 7(a) Loan Guaranty Program • Financial Information Required • New businesses • Detailed estimate of needed capital • Projections of revenues, expenses and profits - 12 month minimum • Cash flow projection - 12 month minimum • Narrative of major assumptions • List of collateral Indiana District SBA

  25. 7(a) Loan Guaranty Program • Financial Information Required • Established businesses • Current balance sheet and 3 full years income (profit/loss statements) • Projections of revenues, expenses and profits - 12 month minimum • Cash flow projection – 12 month minimum • Narrative of major assumptions • Current personal financial statement for each owner, partner or stockholder • List of collateral • Statement of the loan amount and intended uses Indiana District SBA

  26. Additional 7(a) Sub Programs • SBAExpress • $350,000 maximum • 50% guaranty • Faster processing Indiana District SBA

  27. Other SBA Finance Programs • International Trade Loans • United States Export Assistance Center • John O’Gara • 211 West Fort Street, Suite 2200 • Detroit, MI 48226 • Phone: 313-226-3670 Indiana District SBA

  28. 7(a) Loan Guaranty Program • Entrepreneurial Development Assistance • SCORE – Counselors to America’s Small Business • 11 Chapters in Indiana • http://www.score.org • Small Business Development Centers • 10 center in the state • http://www.isbdc.org • Central Indiana Women’s Business Center • Indianapolis – 317-917-3266 http://www.nsibiz.org • Women’s Economic Opportunity Center for Indiana • Fort Wayne – 260-416-3400 http://www.niic.net • Additional information can be found on the Indiana SBA website http://www.sba.gov/in/ Indiana District SBA

  29. Contracting and Certification Programs • First steps for government contracting: • DUNNS number www.dnb.com • System for Award Management www.sam.gov • Contracting opportunities www.fedbizopps.gov • Contact Marty Anderson or Vernice Mathis • 317-226-7272 Indiana District SBA

  30. Things to Remember • Lender is not SBA • Prepare a written business plan • Know and understand what the plan says • Talk with SBA Resource Partners and other stakeholders before visiting lender • What happens if the lender says “No” to your loan request? Indiana District SBA

  31. Luann Lieurance • Lender Relations Specialist • Indiana SBA District Office • 8500 Keystone Crossing, Suite 400 • Indianapolis, IN 46240 • 317-226-7272 x 114 • Luann.lieurance@sba.gov Indiana District SBA

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