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SBA Overview
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  1. SBA Overview September 2012

  2. Presenter –Rich Bradshaw Richard Bradshaw Head of SBA TD Bank, America’s Most Convenient Bank O (864) 552-9088 richard.bradshaw@td.com Based in Greenville, S.C., Bradshaw manages TD Bank’s expanding SBA team in delivering competitively-priced, government-backed financing programs that help small businesses grow and succeed. He steers the bank’s efforts to achieve SBA portfolio growth and become a top SBA lender throughout the Maine to Florida footprint. TD Bank is currently the 7th largest SBA lender in the U.S. (as of April 30, 2012). Bradshaw brings more than 20 years of experience in the lending field to TD Bank. He is a graduate of the U.S. Air Force Academy with a Bachelor of Science Degree in Management and a Masters of Business Administration from Pepperdine University. Rich serves on the Board of Directors for Greenville Literacy Association, Inc

  3. . As of April 2012 • Headquarters Toronto, ON Canada • Asset Size $773.2 B • Deposits $470.0 B • Loans $394.3 B • Customers 22 MM • NYSE Traded TD • Market Capitalization* $75.8 B • Founded 1855 • Bank Branches 2,441

  4. Presenter – Julie Huston Julie Huston SBA Division President U.S. Bank O (858) 530-9700 julie.huston@usbank.com As President of U.S. Bank’s SBA Division, Julie Huston oversees Small Business Administration lending from San Diego, California. Huston has been part of the SBA lending community since 1986. Her passion for small business has translated into building programs, developing products, improving delivery systems and creating methods to ensure that small businesses receive the funding and services they need to succeed. Under Julie’s leadership, U.S. Bank is currently ranked as the 3rd largest SBA lender in the U.S. (as of June 30, 2012). Before joining U.S. Bank in 2010, she held various senior management roles at leading financial services organizations. Julie serves on the Board of Directors for the National Association of Government Guaranteed Lenders and CDC Small Business Finance.

  5. U.S. Bancorp Businesses 2Q12 Dimensions • Asset Size $353 B • Deposits $241 B • Loans $216 B • Customers 17.4 MM • NYSE Traded USB • Market Capitalization* $63 B • Founded 1863 • Bank Branches 3,080 • ATMs 5,085 * As of July 31, 2012

  6. U.S. Banking Industry Source: FDIC March, 2012

  7. U.S. Banking Industry - Performance Source: FDIC March, 2012

  8. What is the U.S. Small Business Administration (SBA)? Created in 1953 Independent agency of the United States federal government Mission: • To aid, counsel, assist and protect the interests of small business concerns • To preserve free competitive enterprise • To maintain and strengthen the overall economy of the nation

  9. Why Use SBA? Why do Banks use the SBA’s Guaranty? • Borrower needs a long term loan that exceeds internal credit requirements of the bank • Borrower does not meet lender’s collateral requirements • Borrower can not meet the lender’s “down payment” requirements • Borrower is outside the established limits of the range of the credit risk of the bank • Borrower is a start up business or one with no borrowing history • Loan is in an industry with which the lender is comfortable

  10. The Value of the SBA Guaranty

  11. Historical Loss Rates • For the quarter ending March 31, 2012, the past 12-month actual charge-off rate was 3.2%, which is down from a high of 3.5% in September 2010 Source: SBA Lender Portal

  12. SBA and Special Interests • Special SBA Loan Programs include: • Disaster lending • Women and minority lending • Counseling and training opportunities: • Women Business Centers • Veterans Business Outreach Centers • SCORE • Entrepreneurial development for SMEs • Small Business Development Centers • Partnerships with other special interest groups (i.e. Native American Affairs)

  13. SBA Loan vs. Conventional Loan • The SBA is primarily a guarantor of loans under the 7a program and also makes direct commercial second mortgages under the 504 program • The SBA helps small businesses by providing loan terms that exceed conventional lending criteria (amortization, equity, etc) • Not all companies are eligible for a SBA enhanced loan. Must meet certain size criteria and business type

  14. What types of SBA loans are available? Two main loan programs: • Section 7(a) Loan Guaranty Program • Section 504 Certified Development Company Program

  15. 7(a) Loan Program

  16. Section 7(a) Loan Guaranty Program • Provides for broad financing needs of small businesses, including startups and existing small businesses • Maximum Loan Amount = $5 million • Maximum Term: • Commercial Real Estate (CRE) = 25 years • Equipment = 15 years • W/C= 7 to 10 years • Rate is negotiable but is subject to SBA maximums (~6.0% today) • 7(a) Express Product maximum loan amount= $350,000

  17. How can proceeds of a 7(a) loan be used? • Purchase land or buildings • Construct commercial buildings • Expand or renovate facilities • Finance receivables and supplement working capital • Purchase machinery, equipment, fixtures, and leasehold improvements • Refinance existing debt under some circumstances • Purchase an existing business

  18. Ineligible use of 7(a) proceeds: • For a non-sound business purpose • To repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow • To make a partial change of ownership or change in the business that will not benefit the business • To refinance existing lender debt where the SBA would be placed in an inferior position • To permit reimbursement of funds owed to any owner of the business

  19. SBA 7(a) – Advantages to the Customer • Goal is to enhance cash flow • Longer Terms • No Balloon Payments/Calls • Fixed Rates (certain lenders only)

  20. Advantages to the Bank • Targets: • Doctors • Dentists • Veterinarians • CPAs • Real Estate • Franchises • Business Expansion • Safety: • 75% guarantee from the U.S. government • 7(a) Express = 50% • Product Differentiation

  21. Annual 7(a) Approvals Source: SBA.gov and NADCO

  22. 504 Loan Program

  23. SBA 504 Example • $1,000,000 – Commercial Real Estate Purchase • $100,000 – Equity from borrower (10%) • $500,000 – Bank 1st mortgage (50% LTV), fixed or variable (conventional) • $400,000 – SBA debenture, 2nd mortgage (90% LTV), fixed for 20 years – 100% U.S. Gov’t Guarantee

  24. Terms of 504 Loan (Debenture) • Maximum Loan Amount = $5.5MM (2nd Mortgage) • Maximum Term = 20 years • Interest rates are pegged to an increment above the current market rate for 5 and 10-year Treasury issues (currently ~ 4.7%) • Fees normally are approximately 3% of the debenture • Generally the project assets are used as collateral • Personal guarantees of the principal owners required

  25. Eligibility for 504 Loan • Must be operated for profit • Must have tangible net worth of less than $15 million • Must have an average net income of less than $5 million after taxes for preceding two years • Job creation criteria must be met

  26. Borrower Benefits of a 504 Loan • Lower Down-payment • 10-20% of total project cost • 10% Baseline • Additional injections are cumulative Therefore, minimal equity requirements

  27. Section 504 Certified Development Company Program • Provides financing for “bricks and mortar” - the purchase of real estate and fixed assets • Funds cannot be used for working capital or inventory • Requires cooperation of a certified development company (“CDC” – Privately held agencies)

  28. Annual 504 Loan Approvals Source: SBA.gov and NADCO