# Presentation: 094746

## Financial Assistance

**Financial Assistance**

- Loans
- Primarily made by private lenders, with SBA guaranties
- Guaranties are generally up to 85% of loans to $150,000; 75% of loans above $150,000
- Equity Investment
- Provided by SBA-licensed small business investmentcompanies
- Surety Bonds
- Guaranties of bid, performance and payment bonds

**Financial Assistance**

**Notes:**
Financial assistance to America’s small business men and women is an extremely important part of what we do. SBA’s financial assistance can be accessed through our myriad of loan guaranty programs, through equity investment provided by one of SBA’s licensed Small Business Investment Corporations, or through our Surety Bond guaranty program. These three programs are designed to accomplish three different missions, but they work much the same. A borrower contacts the lender, SBA-licensed venture capital firm or an SBA-licensed surety and, if approved, the federal government guarantees up to 90% of these transactions.

## Why SBA Loans areImportant to Small Business

- SBA loan guarantees give banker’s an added incentive to make small business loans
- SBA loans can provide longer terms for borrowers
- SBA loan guaranties allow banks to provide funds when bank policy prohibits a loan

**Financial Assistance**

**Notes:**
SBA loan guaranties are extremely important for new businesses. Many banks are reluctant to lend money to small businesses, especially startups, due to a failure rate that is much higher than that for larger and established businesses. By providing loan guaranties to the bank that range as high as 85% of the total loan, we give the banker the incentive to help new enterprises get off the ground or to provide needed capital to expand. More importantly,  SBA loan guaranties give the banker the flexibility to stretch out the terms for the loan to as much as 25 years for real estate, buildings, machinery and equipment and as much as seven to 10 years for working capital. This allows the small business person to spread out their indebtedness over several years. This is particularly important in the early years when the possibility for failure is the greatest. Many banks have policies that prevent long-term lending, that prohibit loans to certain types of businesses or do not lend to startups. The SBA loan guaranties provide a bridge that allows the bank to make loans despite that policy. It truly is a win-win-win situation for the banker, the small business owner and the taxpayer. Almost everyone agrees, without the SBA, few, if any, of the businesses started with an SBA loan would be in existence today.

## SBA Serves a Wide Variety of Capital Needs

- $35,000
**Microloans**

- $150,000
**SBA*****LowDoc***
- $250,000
**SBA*****Express***

- $1.3
- million
- (Guaranty)
**504**
**Loans**

- Equity
**SBIC**

- $1
- million
- (Guaranty)
**All Other**
**7(a) **
**Loans**

- $2.0
- million
**Surety **
**Bonds**

**Financial Assistance**

**Financial Assistance**

**SBA Serves a Wide Variety of Capital Needs**

**Notes:**
Capital needs for small companies vary greatly from business to business. That’s why the SBA offers such a wide variety of loan guaranty programs. More and more small businesses today get their start with SBA’s microloan program for capital needs of $35,000 or less. Many other startup companies utilize our SBAExpress program designed to serve capital needs of $150,000 or less. SBA’s LowDoc program with a simple one-page application can be used for loans up to $150,000. Our regular 7(a) guaranty program provides loan guaranties up to $1 million. For established businesses we have our 504 fixed asset program that has up to a $1.3 million guaranty, and our surety guaranty program that goes up to $2 million. At the top end, our Small Business Investment Corporations are designed to provide equity financing for small businesses. All of these programs are designed to work hand-in-hand with each other. 

## SBA Lending Enhances Community Involvement

- Because of extended maturities of loans, businesses are long-term customers
- Jobs created in the community, increasing customer base
- Cross-selling opportunities for owners and employees
- Ability to leverage lender’s available assets to meet community needs

**Financial Assistance**

**Notes:**
When a business becomes an SBA borrower, it is in a close, long-term relationship with the participating lender. For the lender, this opens up many doors of opportunities for cross-selling payroll services, employee accounts, trust services and numerous other products and services. The jobs created in the community broaden the base of customers and related businesses, all needing lender services. Another competitive advantage is realized when other lenders are in a tight lending situation. The SBA lender, because of the asset leverage it allows, is still able to meet the needs of the community.

## Basic 7(a) Loan Guaranty Program

**Basic 7(a) Loan Guaranty Program**

- You apply for a loan guaranty with an SBA participating lender
- Lender submits application for SBA review and approval
- After SBA approval, lender disburses funds

**Financial Assistance **

**Notes:**
The mainstay of all SBA lending is our 7(a) Loan Guaranty Program. This program is an original part of the law that created SBA in 1953. All of our lending products are a part of this original section of the law, with the exception of our 504 fixed assets loan program, which we will tell you about later. The 7(a) process is very simple. The borrower applies for a loan guaranty with an SBA participating lender. The lender submits an application to SBA for review and approval. After SBA approval, the lender disburses the funds. The process is really that simple.

## 7(a) GuarantyProgram is Versatile

- Proceeds can be used for a wide variety of business purposes
- Maximum guaranty is 85%
- 75% when loan exceeds $150,000
- Maximum guaranteed dollars is $1 million
- Total loan cannot exceed $2 million

**Financial Assistance**

**Notes:**
The 7(a) Loan Guaranty Program is the mainstay of all SBA lending. Every loan product we offer, with the exception of the 504 Certified Development Company Loan Program, is a derivative of the 7(a) program. The versatility of 7(a) is time-tested and proven by SBA’s ability to spin off products like LowDoc and SBAExpress from this original section of the law creating SBA. By using some form of the 7(a) Loan Guaranty Program lenders can provide capital to a wide variety of small businesses. The guaranteed dollar amount cannot exceed $1 million. Except in the case of smaller loans, the guaranty cannot exceed 75%. However, lenders can, and often do, make substantially larger loans and simply reduce the guaranty percentage, so as not to exceed the $1 million limit. The loan total cannot exceed $2 million. 

## Loan Proceeds Eligible for Most Business Uses

**Financial Assistance**

**Loan Proceeds Eligible for Most Business Uses**

- 7(a) loans may be used to:
- Expand, renovate facilities
- Buy machinery, equipment, fixtures, buildingsand land for business
- Finance receivables and augment working capital
- Refinance existing debt (with compelling reason)
- Finance seasonal lines of credit
- Construct commercial buildings
- Finance direct costs on contracts

**Notes:**
Funds from an SBA guaranteed loan can be used for most legitimate business purposes such as expanding and renovating facilities; purchase of machinery, equipment and fixtures;  as well as real estate and improvements for use by the small business. Additionally, proceeds from the loan can be used to finance receivables and for working capital; refinancing existing debt, and financing seasonal lines of credit. These represent just a few of the types of expenditures that are permissible from the proceeds of an SBA loan.  

## Maximum Size Standards

**Financial Assistance**

**Maximum Size Standards**

- Manufacturing
- 500 employees or less
- Wholesaling
- 100 employees or less
- Service and Retail
- $6 million or less in annual receipts
- There are many variations so check with the District Office if you feel your business is close to these maximums

**Notes:**
The SBA maintains a detailed listing of size standards that determine eligibility as a small business for financial assistance under our loan guaranty programs. Generally, manufacturing operations with 500 or fewer employees and wholesaling operations with 100 or fewer employees are eligible. Service and retail operations are measured on total annual sales and they cannot exceed $6 million to qualify. There are numerous exceptions to these size standards and some types of businesses may qualify under these exceptions, so please be sure to contact the district office if your business is close to or appears to exceed these general standards. 

## Eligibility Requirements

**Financial Assistance**

**Eligibility Requirements**

- Business must:
- Be operated for profit
- Not exceed size standards
- Not be engaged in lending, real-estate development, investments or speculation
- Not be engaged in promotion of a specific religion
- Not restrict patronage
- Not engage in prurient sexual materials or services
- Not be a gambling enterprise

**Notes:**
To be eligible for an SBA loan guaranty, the small business must be operated for profit and  must not exceed our size standards. Additionally, the small business cannot be engaged in lending, real-estate development, investments or speculation. Other types of businesses not eligible for SBA loan guaranties include those engaged in the promotion of a specific religion, those that restrict patronage and those businesses offering prurient sexual materials or services or gambling enterprises. With these few exceptions, virtually every other type of small business is eligible for our loan guaranty program. 

## SBA Lender Requirements

**Financial Assistance**

**SBA Lender Requirements**

- Common documentation includes:
- Purpose of loan
- Business history*
- 3 years of company tax returns*
- Current financial statements*
- Schedule of term debts and leases*
- Aging of accounts receivable and payable*
- Projected opening-day balance sheet**
- Amount of owner investment in business**
- Projections of income, expenses and cash flow**
- Signed personal financial statements**
- Personal résumés**
- * for existing businesses     ** for new businesses

**Notes:**
The items required of a lender to submit an application for an SBA loan guaranty are pretty basic and are generally the type of information a prudent lender would require if doing the loan conventionally. The lender must describe the purpose of the loan and the history of the business in a narrative. For existing businesses 3 years of financial statements and tax returns, a schedule of term debts and leases, aging of accounts receivable and payable, amount of owner investment, projections of income, expenses and cash flow, borrower resumes and signed personal financial statements must be submitted. For start-up businesses, where current financials do not exist, the lender must submit a projected opening-day balance sheet and adequately explain the source of the equity injection. 

## SBA Borrower Requirements

**Financial Assistance**

**SBA Borrower Requirements**

- Good character
- Management expertise and commitment to succeed
- Reasonable personal contribution or business equity
- Feasible business plan
- Sufficient collateral
- Ability to repay loan from projected operating cash flow

**Notes:**
The basic SBA requirements for the borrower include good character. This is generally reflected by a near spotless credit report and no recent arrests or convictions. The borrower needs to have management expertise related to the business and a commitment to succeed. Generally, the SBA prefers an equity injection of 25% to 33% of the total project cost and there should be a feasible business plan. There should also be sufficient collateral and, most importantly, the ability to repay the loan from projected operating cash flow.

## Terms

- Flexible maturities:
-  Generally 7 to 10 years for working capital
-  Generally up to 25 years for fixed assets:
-  Real estate
-  Construction
-  Equipment (Not to exceed useful life of equipment)
-  Interest rates:
- Negotiated between borrower and lender
- Typically cannot exceed prime rate plus 2.75%

**Financial Assistance**

**Notes:**
Loan terms are one of the many advantages that the SBA provides to small businesses and lenders participating in our loan guaranty programs. Our programs allow lenders to offer longer terms on their loans, thus improving the cash flow position of the small business and greatly increasing the chance for survival in the formative years. Terms are usually 7 to 10 years for working capital, and up to 25 years for fixed assets such as real estate, construction and equipment, with terms not to exceed the useful life of the equipment. The interest rates are negotiated between the applicant  and lender and typically they cannot exceed the prime rate plus 2.75%, except in our SBAExpress program, where higher rates can be negotiated between the lender and the applicant.

## SBA One-Time Borrower Fees

**Financial Assistance**

**SBA One-Time Borrower Fees**

**Maturity****	****     Total Loan Amount****	****	****Guaranty Fee**
- Year or Less	     Any amount up to $2 million	0.25%
- Over 1 Year	     $150,000 or less			2.0%
- Over 1 Year	     Over $150,000 to $700,000	3.0%
- Over 1 Year	     Over $700,000			3.5%
- * Fees apply only to guaranteed portion of loan

**Notes:**
Fees for SBA loans are collected from the borrower by the lender. These fees are reasonable and necessary to help defray the cost of operating the loan guaranty program and reduce the subsidy provided by the taxpayers. For loans of one year or less, the fee is one-fourth of one percent. When the term of the loan exceeds one year, the fee is two percent for loans of $150,000 or less. When the loan exceeds $150,000 up to $700,000, the fee goes to three percent. Loans over $700,000 are subject to a 3.5% fee. Fees are paid only on the guaranteed portion of the loan. On loans of $150,000 or less, the lender retains one-fourth of the fee.

## Fee Calculation Example

**Financial Assistance**

**Fee Calculation Example**

**Total Loan         x  Guaranty %   =    Max. Guaranty     Total Fee**
- $150,000            x    85%	               =    $127,500	            $  2,550
- $700,000	x    75%	               =    $525,000                 $15,750
- $1,000,000         x    75%                =    $750,000                 $26,250
- $1,333,000	x    75%                =    $1 million               $35,000

**Notes:**
This example will give you a more detailed idea of how the fees are structured on several different sized loans. As an example, total fees for a $150,000 loan are $2,550. Once the total loan goes over $150,000 the fees escalate to 3% up to $700,000. As you can see, the fees on a $700,000 loan are $15,750. The fees are calculated on only the SBA guaranteed portion of the loan that ranges from 85% on smaller loans of $150,000 or less and 3% to 3.5% on larger loans from over $150,000 to $2 million. The maximum fee that could ever be charged would be $35,000 where the guaranteed portion of the loan reaches $1 million. Considering that this capital would not likely be available to the small business without the SBA guaranty, these fees are very reasonable.

## Collateral

**Financial Assistance**

**Collateral**

- Personal guaranties from principals owning 20 percent or more
- Liens on personal assets may be required
- Loans are not declined solely for insufficient collateral

**Notes:**
Collateral, including those assets owned by the borrower that are needed to secure the loan in the event of a business failure, is a necessary part of commercial lending. Personal guaranties are required on SBA loans from any principal owning 20% or more of the business. Liens on personal assets, such as the borrower’s home, may be required. While the SBA does not decline loans based solely on the lack of collateral, the lender may elect not to submit the loan for that reason. If collateral is available and the borrower refuses to pledge it, the loan may be declined on that basis.

## SBA 7(a) LoanGuaranty Programs

**Financial Assistance**

**SBA 7(a) Loan****Guaranty Programs**

- Lender submits a completed loan applicationto the SBA
- SBA analyzes entire application
- Approval process usually 5 days or less
- Processing can occur in the local District Office, Hazard, KY or Sacramento, CA
- Type of loan determines processing location

**Notes:**
SBA’s 7(a) loan guaranty program is one of the original sections of the law which created the agency in 1953 and all loan guaranty products are derived from this section of the law, with the exception of our 504 Loan Program. In the 7(a) guaranty process, the lender submits a completed application package to the SBA, loan officers then analyze it and give the lender an answer, usually in five days or less. All regular 7(a), CLP and 504 loans are processed in the local District Office, while PLP loans are processed in Sacramento, CA and LowDoc loans are processed in Hazard, KY as well as Sacramento. 

## SBALowDoc Low Documentation Loan Program

**Financial Assistance**

**SBA*****LowDoc***** ***Low Documentation Loan Program*

- For loans up to $150,000
- Generally 7 to 10 years for working capital;
- 	25 years for fixed assets
- 85% guaranty
- One-page SBA application
- SBA response to lender within 36 hours

**Notes:**
SBA’s LowDoc or Low Documentation Loan Program is one of the most successful lending product ever introduced by this agency. In fact, it currently accounts for nearly 18% of all loans approved by the SBA. It is reserved for loans of $150,000 or less and generally provides for terms of 7 to 10 years for working capital and up to 25 years for fixed assets. The guaranty is 85% for loans up to $150,000. The LowDoc application is one page -- one side for the applicant and one side for the lender. The lender then faxes the loan to the LowDoc processing center and a response is given in 36 hours or less. It’s really that simple!

## Eligibility Issues onSBALowDoc Program

- Maximum loan amount
- Credit history
- Character
- Size standards

**Financial Assistance**

**Notes:**
Prior to submitting the loan application to the LowDoc Center each lender should check to determine whether or not the loan request is eligible for LowDoc. Make sure the loan amount plus any other outstanding SBA loans is $150,000 or less. The applicant’s credit history must be clear, and there cannot be any negative character issues such as arrests or convictions; otherwise the application will be declined and referred to the District Office. The maximum size standards for LowDoc are $5,000,000 in revenues and 100 employees, slightly different from the regular 7(a) program size standards.

## Character Issues inSBALowDoc Program

- Prior criminal record by any owner, principal, partner or authorized official of the business may disqualify applicant or require submission under regular 7(a) loan program

**Financial Assistance**

**Notes:**
Aside from minor traffic violations, if a prospective borrower, has a prior arrest and/or criminal conviction the lender should submit a regular 7(a) application to the District Office. No loan can be processed at either LowDoc Centers or the District Office if an owner of applicant business is incarcerated, on parole or probation. LowDoc was originally conceived in the mid-1990s as a character-based lending program. Both the SBA and lenders rely greatly on the character of the prospective borrower.  

## Use of Proceeds for SBALowDoc

*Debt Refinancing*
- May refinance debt
- To participating lender using not more than 25% of proceeds of the requested New SBA*LowDoc* loan
- To other lenders using entire proceeds of the requested New SBA*LowDoc* loan
- Refinancing must result in 20% cash-flow improvement for borrower

**Financial Assistance**

**Notes:**
Debt refinancing is eligible under LowDoc if it meets the same benefit requirements to the applicant as in the regular 7(a) program. The one exception is that any applications requesting more than 25% of proceeds to refinance the participating lender’s debt is ineligible for LowDoc. As in regular 7(a) loans, debt other than that financed by the lender submitting the application can be refinanced as long as the borrower’s cash flow is improved by 20% with the new loan. As an example if $100,000 is being borrowed to pay off existing debt and the payment is $1,000 a month, that payment would have to be reduced to $800 or less for the loan to be eligible. 

## Ineligible Loans UnderSBALowDoc Program

- Export Working Capital Loan Program
- International Trade
- CAPLines
- Defense Loan and Technical Assistance (DELTA)

**Financial Assistance**

**Notes:**
All typical term loans are eligible for participation in the LowDoc Loan Program. However, loan programs such as Export Working Capital Loans, International Trade Loans, CAPLines, Delta Loans and other special purpose loan programs are to be processed through the District Office or the appropriate office for a particular program. These specialized loan programs are operated under different rules and guidelines than the regular 7(a) and LowDoc programs. To keep the LowDoc application brief and easy for both lenders and borrowers to use the program deals only with relatively uncomplicated loan requests.

## Other Ineligible Loans inSBALowDoc Program

- Pollution and Environmental Control Loans
- Employee Stock Ownership Plans (ESOP
- 	or ERISA)
- Community Adjustment & Investment Program (CAIP)

**Financial Assistance**

**Notes:**
Another example of loans that are considered to require analysis beyond that provided for in the LowDoc review process include any applications that involve Employee Stock Ownership Plans, as an example. Also, SBA’s specialized Pollution and Environmental Control Loans and the Community Adjustment and Investment Program (CAIP) loans also can not be processed as LowDoc loans.  All of these type loans should be submitted to the District Office for processing.

## Guaranty Fee forSBALowDoc Program

**Loan Total**
- $150,000 or less
- Maturity of 12 months or less

**Fee**
- 2%
- 1/4%

**Financial Assistance**

**Notes:**
The Guaranty Fee for the LowDoc Program is calculated just like any other SBA 7(a) loan. On loans of $150,000 or less the guaranty fee would be 2% of the guaranteed portion. A loan with a maturity of 12 months or less has a guaranty fee is 1/4% of the guaranteed portion. The maximum fee that an applicant would pay on a $150,000 LowDoc loan would be 2% of the $127,500 guaranteed portion or $2,550. Again, as an incentive to make smaller loans, the lender is allowed to retain one-fourth of the fees on LowDoc loans.

## Environmental Investigationon SBALowDoc

- Required on commercial real estate collateral for any loan in excess of $25,000
- Questionnaire consistent with American Society for Testing and Materials (ASTM) minimums
- Addresses environmental issues of real estate within one mile radius or more
- Additional guidance in SOP 50-10(4), Subpart “A”, Chapter 5, paragraph 7

**Financial Assistance**

**Notes:**
On a LowDoc loan over $25,000 for which collateral consists of commercial real estate, the Loan Authorization will require a minimum of an Environment Questionnaire and possibly an EPA Phase One or EPA Phase investigation. Environmental issues always should be resolved on the front end of the lending process and this ultimately saves the applicant, the lender and the taxpayers a lot of money in the long run. Problems of an environmental nature that are detected after the loan has closed put everyone’s investment in time and money at peril.

## Enhanced SBAExpress

**An enhanced guaranty program your lending institution will not want to miss!**

_**Enhanced SBA**__***Express***_

**Notes:**
More than 2,400 lenders, nationwide, are now eligible to apply for the Enhanced SBAExpress Loan Program. SBAExpress is proving to be one of the most successful loan guaranty program ever introduced by the U.S. Small Business Administration. Until now, SBAExpress was limited only to our best and highest volume loan producers. Those lenders have used this program to make nearly 34% of all SBA loans during the fiscal year that ended September 30. We hope after  listening to this short presentation, your institution will make application to become an SBAExpress lender. The other items on the menu will guide you to the SBAExpress Program Guide and other important tools available to you in your SBA Loan Guaranty Program.

## Program Designed to:

- Increase Lender Participation

- Minimize SBA Forms/Procedures
- Expedite SBA Loan Processing
- Standardize Processing of Routine Loans
- Attain Efficiency of Centralization

_**Program Designed to:**_

**Notes:**
In addition to our efforts to reduce lender costs and attain more efficiencies for our agency, we find that the SBAExpress Program is dramatically increasing the number of Smaller SBA loans, thus reaching a higher percentage of applicants our agency is striving to serve. Additionally, we find that the program is increasing lender participation because it dramatically minimizes the use of SBA forms and procedures and greatly expedites loan processing. Other benefits to you include standardization of routine loans and the efficiency of centralization. No longer do SBA loans have to be isolated from your conventional commercial portfolio. 

## Key Features:

**Extended As Pilot Through 9/30/05**
**Available to SBA Lenders with 85% Currency**
**Available to Non-SBA Lenders Processing Significant Number of Business Loans of $50,000 or Less**
**Lenders Use Mostly Own Documents & Procedures**

_**Key Features:**_

**Notes:**
Perhaps the key feature of the enhanced SBAExpress is increasing the loan amount to $250,000. Also, we have extended this successful pilot program through September 30, 2005. Lenders with an 85% currency rate in their SBA portfolio on loans made during the most current three years are eligible to apply. The program is also available to non-SBA lenders who maintain a significant portfolio of business loans of $50,000 or less. Now here’s the thing that really draws lenders to SBAExpress. You use mostly your own documents and procedures in the loan process. Think about it. Your application. Your closing documents.

## Key Features (continued):

**Loans Processed in Sacramento**
**May Be Faxed - Soon Via Internet**
**Usually Instant SBA Response - **
**       ****24 Hours Assured**
**Purchases -Little Rock & Fresno Loan Servicing Centers**

_**Key Features**_** **(continued)**:**

**Notes:**
And, you can use your bank’s legally enforceable notes. All SBAExpress  loans are processed in Sacramento and may be faxed. In the near future applications can be sent via the internet. Usually, there will be an instant SBA response with a loan number and a maximum 24 hours response is assured. Guaranty purchases will be handled by SBA offices in Little Rock and Fresno servicing centers.

## Other Features:

**Lenders May Charge Interest Rates up to:**
**6.5% over Prime for Loans of $50,000 or less**
**4.5% over Prime for Loans above $50,000**

**  ****Standard Guaranty Fees Apply**

_**Other Features:**_

**Notes:**
Here is another very important feature. SBA’s interest rate limits may have resulted in some applicants, especially for smaller loans, not getting access to capital because it was not profitable for the lender. In the SBAExpress Program, lenders may charge rates up to 6 and one-half percent over Prime for loans of $50,000 or less and 4 and one-half percent over prime for loans above $50,000. The standard guaranty fees paid by the applicant apply on all loans.

## Other Features (continued):

**  ****Total May Not Exceed $250,000**

**No Collateral - Loans of $25,000 or Less**
**Lender Follows Own Collateral Policy Over $25,000**

**Multiple Loans May Be Made but:**

_**Other Features**_** **(continued)**:**

**Notes:**
It is possible to make multiple SBAExpress loans to the same borrower but it can not be for the purpose of circumventing fees or to exceed the $250,000 limit for this program. For loans under $25,000 lenders are not required to take collateral. For loans over $25,000, the lender must follow the financial institution’s collateral policy. This policy, particularly on smaller loans, greatly simplifies the loan-making process and makes smaller loans more feasible for lenders.

## Other Features (continued):

**  ****Maximum - Seven Years**
**  ****Termouts - Available at Outset**

**May Be Sold on Secondary Market**
**May Be Accessed by Credit Card**
**Applicant Commits to Business Purposes - Lender Not Required to Monitor Each Disbursement**

_**Other Features**_** **(continued)**:**

**Notes:**
Revolving lines of credit are eligible under SBAExpress. Terms cannot exceed seven years and termouts are available at the outset. SBAExpress loans can be sold in the secondary market and may be accessed by credit card. While the applicant must commit to using the loan proceeds only for business purposes, the lender is not required to monitor each disbursement.

## Lenders Use Mostly Own Documentation, Including:

**  ****Internal Credit Memoranda**
**  ****Loan Notes (Legally Enforceable)**
**  ****Collateral Documents**
**  ****Liquidation Documents**

_**Lenders Use Mostly Own Documentation, Including:**_

**Notes:**
Here’s something that has really excited those lenders that have been participating in the early stages of this pilot program. You use mostly your own documentation including your application, your internal credit memoranda, your legally enforceable loan notes, your collateral documents and your liquidation documents. Everything about SBAExpress is designed to help your guaranty program loans blend seamlessly with your conventional commercial portfolio. 

## Basic Borrower Information Sheet

** ****SBA Form 1919**
**Eligibility Checklist ****(Lenders with Authority to Determine Eligibility do Not Submit Checklist)**

_**Basic Borrower Information Sheet**_

**Notes:**
Generally, the forms submitted to SBA by the lender include SBAExpress Borrower Information Form 1919 and the eligibility checklist. In fact, lenders with authority to determine eligibility do not even submit the checklist. How much simplier could it get? There are instances, such as when the applicant utilizes the services of a packager for a fee, that other forms might be required. Those instances are clearly spelled out in the SBAExpress Program Guide that can be accessed from the menu on this CD. 

## Lender Uses Mostly Own Procedures:

**Lender - Does Credit Analysis**
**Qualified Lenders do Eligibility Determination**

_**Lender Uses Mostly Own Procedures:**_

**Notes:**
As a general rule-of-thumb, you use your financial institution’s policies and procedures in analyzing, processing, closing, servicing and liquidating your SBAExpress loan portfolio. The important thing to remember is that you apply the same standards to your guaranteed portfolio that you apply to your conventional commercial portfolio. Lenders do all the credit analysis and qualified lenders make all eligibility determinations. 

## Ineligible Businesses

- Types of businesses not allowed
- Agriculture
- Fishing
- Medical Facilities
- Mining
- Firms in business in other countries
- Teaching, indoctrinating of religion
- Sex related
- Gambling

**Notes:**
Loans to certain types of businesses cannot be processed under this program.  These include agriculture and farm businesses, fishing and shore operations, medical facilities (including residential care), mines, companies doing business in foreign countries, businesses engaged in teaching, counseling or indoctrinating religion and those providing products or services of a prurient sexual nature. 

## Refinancing Rules

- SBA debt may not be refinanced
- Non-SBA borrower debt
- No longer meets needs
- Meets SBA’s minimum cash flow improvement requirement
- Current last three years
- No conflict of interest

**Notes:**
SBA debt cannot be refinanced by SBAExpress.  Non-SBA guaranteed debt may be refinanced if it no longer meets the need of the applicant, it meets SBA’s 20% increase in cash flow requirement and the debt has not been more than 29 days past due during the last three years.  This applies to debt owed either the requesting lender or another lender.  Care should be taken to avoid circumstances that could create a possible conflict of interest.  

## Not Eligible 

- Piggy-back loans
- 90% start-up or real estate financing
- Previous government loss
- Any yes response on Form 1919
- Application previously submitted
- Violation of ethical requirements
- Environmental problems

**Notes:**
 SBAExpress loans cannot be piggy-backs, cannot fund more than 90% of the actual cost of real estate or the capital needs of a  new business. Also, an application will not be considered when the Government has already sustained a loss on this business or any of its owners.  If a student loan owed by a principal of the business is delinquent, the loan is not eligible.  Other ineligible situations are when there are positive answers to questions on SBA Form 1919, if the application has previously been submitted to SBA, if there might be a violation of our ethical requirements or collateral that will not meet SBA’s environmental requirements.  Some loans that are not eligible for SBA Express may be eligible under other programs however.

## Lender Authorization

- Responsible for completeness of loan authorization
- Lender signs on behalf of SBA
- Closes and disburses loan using own procedures
- Sends signed copy of authorization to SBA

**Notes:**
When the loan number is received, the lender drafts the Authorization, signs it on behalf of SBA, and uses its normal closing and disbursement procedures.  SBA’s general requirements, such as a no adverse change determination, insurance, and construction and environmental policies apply, so familiarity with Standard Operating Policies and SBA legislation are of utmost importance.  You will notice that this menu has links that will direct you to SOP’s or Standard Operating Procedures that are used in the loan origination, servicing and liquidation activities. The only item to be forwarded at closing is an executed copy of the authorization.

## Short-term financing for small exporters
SBA guaranty — up to 90% of the loan or $1 million
One-page application; answer usually 10 days or less
Maturity —
Matches a single transaction cycle up to 18 months, or
Supports a line of credit, generally 12 months
Repaid from the proceeds of the export sales
May be used for both —
Pre-shipment working capital
Post-shipment exposure

- SBA guaranty — up to 90% of the loan or $1 million
- One-page application; answer usually 10 days or less
- Maturity —
- Matches a single transaction cycle up to 18 months, or
- Supports a line of credit, generally 12 months
- Repaid from the proceeds of the export sales
- May be used for both —
- Pre-shipment working capital
- Post-shipment exposure

**EWCP**** ***(Export Working Capital Program)*

**Financial Assistance**

**Notes:**
SBA’s EWCP or Export Working Capital Program  provides short-term financing for small business exporters. The SBA guaranty percentage is 90% for this loan program, however the total guaranty is still limited to $1 million. The EWCP has an abbreviated, one-page application form and processing is usually completed in 10 days or less. EWCP loans have a maturity cycle of generally 12 to 18 months and are repaid from the proceeds of export sales. The EWCP may be used for both pre-shipment working capital or post-shipment exposure. EWCP loans can now be sold in the secondary market.

## ITL(International Trade Loan)

**ITL***(International Trade Loan)*

- Long- and short-term financing
- Guaranty amounts up to $1.25 million
- For businesses that are —
- Engaged or preparing to engage in international trade
- Adversely affected by import competition
- May be used for —
- Working capital and/or
- To purchase facilities or equipment that will be used within the U.S. for producing goods or services

**Financial Assistance**

**Notes:**
Our International Trade Loan Program provides long and short-term financing for businesses engaged in international trade or those contemplating international trade, as well as those businesses adversely affected by import competition. Guaranties can be as much as $1.25 million under this program and proceeds may be used for working capital and/or purchasing facilities or equipment that will be used within the United States for producing goods or services.

## Loans for Fixed Assets 504 Certified Development Company Program 

**Loans for Fixed Assets**** ***504 Certified Development Company Program*

- Long-term, fixed-rate financing
- Up to $1.3 million in SBA-backed debentures
- SBA debenture guaranty of up to 40% of total loan
- Must create or retain one job for every $35,000of SBA debenture proceeds
- DELTA funding also available under this program

**Financial Assistance**

**Notes:**
Our very successful fixed asset product, the 504 Certified Development Company Program provides long-term, fixed rate financing at or below New York prime rate. The 504 program is operated by Certified Development Companies licensed by the SBA. Private lenders approve a loan for 50% of a 504 project and get a first lien on all of the available assets of the company. The SBA issues a debenture guaranty that can be as much as $1.3 million, not to exceed 40% of the project cost and SBA takes a second lien position. The project must create or retain one job for every $35,000 of the debenture.

## Benefits of a SBA 504 Loan

- High-leveraged financing for fixed-asset purchases
- Long-term pay back - 10 or 20 years
- Lower interest rate

**Financial Assistance**

**Notes:**
In most cases borrowers can get 90% financing for the purchase of fixed assets, much higher than the 50% to 75% offered by traditional lending markets. This product also  benefits the borrowers by greatly increasing the terms. SBA’s share of the loan can be financed for either 10 or 20 years, while the bank portion can be financed over at least 10 years. More importantly, it is the only product we offer where a blended rate is at or below New York Prime Rate. The longer terms and lower interest provides increased cash flow to meet current operating needs. This is a great program and, again, we would welcome the opportunity to share more information with you about the 504 program. Just contact an SBA representative if you would like more information. When you are financing real property and improvements or purchasing long-lived machinery and equipment, the 504 Program should be given primary consideration. 

## To Qualify for a 504 Loan*

**To Qualify for a 504 Loan***

- Business must be operated for a profit
- Tangible net worth of less than $7 million
- Average net income of less than $2.5 million for the preceding two years
- 	          * Business cannot be involved in speculation             or rental real estate investment

**Financial Assistance**

**Notes:**
The business seeking a 504 loan must be operated for profit and have a tangible net worth of less than $7 million. Also, the average net income of the business for the preceding two years must be less than $2.5 million. Most of the eligibility rules that relate to the 7(a) program also apply for the 504 loan program. 

## A Typical 504 Project

**A Typical 504 Project**

- A private sector loan covering up to 50%
- A loan from the CDC covering up to 40%(100% SBA-guaranteed debenture) and
- At least 10% equity from the small business
- Participating lender  has first lien on assets

**Financial Assistance**

**Notes:**
The typical SBA 504 project includes a loan from a private sector lender covering 50% of the project. A loan covering up to 40% of the project is advanced by the CDC, with 100% of that backed by an SBA-guaranteed debenture. At least 10% equity must come from the small business or the applicants. If the proposed building is deemed to be a special-purpose facility, or the business is a start-up, an equity injection of as much as 20% may be required.