ARA presentation042909

							    American Recovery Act
Resources for Small Businesses

            Presented by:

     Mark Quinn, District Director
  U.S. Small Business Administration
     San Francisco District Office


                                       1
        Recovery Act Overview
•   Temporary elimination of loan fees
•   Higher loan guaranty
•   Secondary market liquidity
•   Expanded limits on 504
•   ARC Stabilization loans
•   Increase in micro loans
•   Surety Bond program expansion
•   SBA support for government contracts


                                           2
SBA Role in Bank Financing for
     Small Businesses
•   SBA is not a direct lender
•   SBA partners with banks and lenders
•   SBA guarantees bank loans (75%-85%) 90%
•   Bank’s risk is offset by the SBA guaranty
•   Applicants apply directly to the bank/lender
•   Bank decides when to use the SBA
•   Bank gets paid if business fails
•   Business remains liable for the debt


                                                   3
7(a) Guaranty Loan Terms
• SBA does not set actual terms, but does set
  parameters
  – Terms are negotiated between bank & borrower
• Maximum Loan Amount: $2,000,000
• Maximum SBA Guaranty **Now 90%**
  – 75% to 85% of the loan, up to $1.5 million maximum
• Term (maturity) based on use of proceeds
  – Generally 7-10 years for non-real estate



                                                         4
7(a) Guaranty loan Terms                                (continued)

• SBA Guaranty fee: **Fees Eliminated**
  – 2% to 3½% of SBA-Guaranteed amount
  – For $100,000 loan, fee = $1,700
  – For $500,000 loan, fee = $11,250
  – Guaranty fee may be financed as part of loan
• Interest Rate
  – Usually variable rate loan
  – Generally Prime plus up to 2.75%
     • Rate can be higher for loans under $50k or for
       SBAExpress Loans




                                                                 5
        SBA Guaranty Loan
     Eligible Use of Proceeds
• All Legitimate Business Purposes
  – Inventory
  – Machinery & Equipment
  – Working Capital
  – Real Estate (owner-occupied only)
  – Debt repayment (business debts only)
  – Business Acquisitions
  – Franchises (must be an eligible franchisor)


                                                  6
    SBA Loan – Eligibility Issues

• Must be a for-profit business
• Must qualify as a small business concern
• Must be an eligible type of business
• Must meet personal financial resources test
• Must be at least 51% owned by U.S. Citizens or
  Legal Permanent Residents
• Cannot be on probation or parole


                                                   7
    Benefits of the SBA Loan

• Reduces lender’s risk, making it more likely
  to approve a small business loan application
• Provides a longer loan term, or maturity
• All SBA loans are fully amortizing, i.e.,
  no balloon payment



                                                 8
How to Apply for an SBA Loan
• Gather up your business & personal financial
  information
  – Personal financial statement
  – Personal income tax returns for the last 3 years
  – Business financial statements & tax returns for 3 years if
    already in business
• Decide on a Lender – factors to consider:
  – Your experience with the lender
  – Type of lender – National, regional, community bank



                                                           9
SBA Guaranty Loan Process
                   1.
                                                 2.

 Applicant
                            Lender/Banker

     $$
                                                  SBA
                 4.                                 3.
    1.   Business Owner applies to Lender
    2.   Lender contacts SBA if lender requests SBA guaranty
    3.   If approved, SBA guarantees lender’s loan
    4.   Lender then can disburse loan to Business Owner



                                                               10
      Other SBA Loan Programs
• SBAExpress
  –   Maximum Loan amount: $350,000
  –   Loans can be term loans, or lines of credit
  –   Lender may use its own forms
  –   Maximum SBA guarantee is 50% of the loan
  –   Interest Rate: Prime plus up to 6.5%
• SBA 504 Loan **Fees Eliminated**
  – Only for Purchase/Improvement of long-term fixed assets
    such as real estate
  – Apply through a lender, or an SBA-approved Certified
    Development Company (CDC)


                                                          11
   Other SBA Loan Programs

• SBA Microloan Program **Increased funding**
  – SBA lends money to non-profit intermediaries who re-
    lend to businesses
  – Maximum loan amount: $35,000
  – Intermediary packages, underwrites, and disburses the
    loan
  – SBA is not involved with the individual loan decision
  – Apply through a SBA Microloan Intermediary




                                                            12
ARC Stabilization Loan Program

• New SBA loan program to help firms make
  existing payments on existing small
  business debt or leases but not SBA loans.
• Loan amounts up to $35,000 with 100%
  guarantee
• Repayment deferred up to 12 months
• Program launch date June 2009

                                               13
   Surety Bond Guaranty Fund
• SBA Guarantees surety bonds issued by private insurance
  companies
• Bonds available for eligible contractors for Federal
  Contracts
• Limits increased from $2 million to $5 million
• http://www.sba.gov/services/financialassistance/suretybond
  /index.html
• Supervisory Surety Bond Specialist
  Thomas Ewbank
  Phone: 206/553-0961




                                                           14
     Government Contracting

• ARA includes significant increases in federal
  contracting opportunities
• www.recovery.gov
• www.fedbizopps.gov
• www.ccr.gov
• www.acteva.com/go/sba


                                              15
            SBA Websites
• SBA Home Page:
    www.sba.gov

• SBA Loan Programs:
    www.sba.gov/financing

• SBA San Francisco District Office:
    www.sba.gov/ca/sf

• Information about federal regulations:
    www.business.gov


                                           16