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					 SBA Loan Programs for
Financing Small Business
    American Institute of
 Certified Public Accountants
            (AICPA)

                                1
         CAPITAL ACCESS

• COMMITTED TO SUSTAINING
  CONTINUOUS SOURCES OF
  CAPITAL FOR SMALL BUSINESS
• OPERATES AS A GUARANTOR OF
  SMALL BUSINESS LOANS MADE BY
  LENDER PARTICIPANTS



                               2
            CREDIT POLICY

PROMOTE SMALL BUSINESS FINANCING
WHEN IT IS NOT OTHERWISE AVAILABLE
ON REASONABLE TERMS

PRIMACY OF CASH FLOW LENDING

LOANS NOT DENIED STRICTLY FOR LACK
OF COLLATERAL


                                     3
           IMPACT FOR SMALL BUSINESS


•   Loans not meeting lender’s
    conventional credit policies may be
    SBA eligible.
    – Term to maturity
    – Start-up business
    – Outside lender’s credit “box”
•   $63 Billion outstanding

                                          4
          PORTFOLIO ATTRIBUTES
• HIGH CONCENTRATION OF START-UP SMALL
  CONCERNS

• MOST LOANS ISSUED TO UNDERSERVED
  BORROWERS INCLUDING WOMEN, MINORITIES,
  VETERANS AND RURAL CONCERNS

• TYPICALLY RISKY INDUSTRIES

• REASONABLY WELL-COLLATERIZED

• LOANS RANGE IN SIZE FROM $5,000 TO $3.5
  MILLION.


                                            5
          7(A) LOAN PROGRAM

GOVERNED BY:
• SMALL BUSINESS ACT
• TITLE 13 CODE OF FEDERAL
  REGULATIONS (13 CFR)
• STANDARD OPERATING PROCEDURES
  (SOP)
• ALL PARTICIPANTS EXECUTE MASTER
  FORM OF GUARANTY AGREEMENT

                                    6
                      LOAN TERMS
• GUARANTY PERCENTAGE – 50%, 75- 80%

• GUARANTY AMOUNT - MAX. $1.5 million to one
  borrower (including affiliates)

• GUARANTY FEE - 2% TO 3.75%

• LOAN AMOUNT - $2 million

• MATURITY - UP TO 25 YEARS

• INTEREST - UP TO PRIME + 2 3/4%

  (higher rates for SBAExpress and Community Express)



                                                        7
                     ELIGIBILITY

• BASIC PURPOSE / USE OF PROCEEDS
  – Working Capital, Machinery & Equipment, Real
    Estate, Inventory, and Furniture & Fixtures

• SIZE
  – # Employees or $ Receipts

• TYPE OF BUSINESS
  – For Profit, For General Public (Not
    Discriminating), etc.
                                               8
        PROCESS FOR APPROVAL

• BUSINESS PLAN, MARKET
  ANALYSIS & STRATEGY

• CASH FLOW FORECASTS -
  MONTHLY

• BANK APPLICATION

• SBA GUARANTY REQUEST

                               9
        SBA DELIVERY PROGRAMS

• REGULAR 7(a) - 1958

• CERTIFIED LENDERS PROGRAM (CLP) -
  1979

• PREFERRED LENDERS PROGRAM (PLP) -
  1981

• SBAEXPRESS - 1995


                                  10
            REGULAR 7(a)

• BASIC LOAN DELIVERY
• APPLICATION WITH SUPPORTING
  DOCUMENTS SENT TO CENTRAL
  PROCESSING UNIT
• SBA REVIEWS CREDIT ANALYSIS
• THIS DELIVERY FORM CAN BE
  USED FOR ALL ELIGIBLE 7(a)
  LOANS
                                11
         PREFERRED LENDERS PROGRAM (PLP)


• LENDER DEMONSTRATES COMMITMENT TO
  EXCELLENCE IN:
  – PROCESSING
  – SERVICING &
  – LIQUIDATION OF SBA LOANS

• RESULTS IN QUICKER PROCESSING OF
  LOAN APPROVAL

• SBA DOES NOT REVIEW CREDIT

• PROCESSING CENTER IN SACRAMENTO
                                       12
               SBAEXPRESS

• BANK HAS CREDIT AUTHORITY

• BANK GENERALLY USES ITS OWN FORMS

• CENTER DETERMINES ELIGIBILITY

• 24 HOUR RESPONSE TIME AT PROCESSING
  CENTER

• LOANS PROVIDED WITH 50% GUARANTEE



                                        13
                DEVELOPMENT COMPANY
      CERTIFIED 504 Loan Program




• Project financing vehicle for long-term,
  fixed-rate financing for purchasing or
  constructing facilities or for purchasing
  machinery & equipment
• Maximize public/private sector financing
• Fulfill community/public policy goals
• Source of job creation

                                              14
              Typical 504 Project
• Use of proceeds     • First mortgage
  to purchase land      lender provides 50
  and building for      percent of
  expanding             financing (no SBA
  business              guaranty)

• Borrower            • SBA provides
  provides at least     balance of
  10 percent            financing secured
  equity                by second
                        mortgage
                                            15
            MECHANICS OF PROJECT FINANCING


• Borrower obtains first mortgage loan from 3rd
  party lender.

• Borrower is approved for subordinate note from
  CDC.

• CDC sells subordinate note to public debenture
  vehicle and issues proceeds to borrower.

• Debenture is sold to investors with full faith and
  credit provision.

• Borrower has two separate fixed-rate note
  payments.

                                                   16
          Certified Development Companies (CDCs)



• CDCs are nonprofit organizations
  established to promote economic
  development

• SBA certifies and regulates CDCs

• There are approximately 270 CDCs
  nationwide

                                                   17
                      Debentures

• Maturities of 504        • The loan rate is
  loans are for 10 or 20     established at the
  years                      time the debenture is
                             sold and is fixed for
• Funds to the small         the term
  businesses come from
  investors who buy        • There is a declining
  shares in the pooled       prepayment penalty
  debentures for that        extending for 1/2 the
  month                      maturity of the
                             debenture


                                                 18
         Maximum Debenture Size

• Public Policy Goal Loans - $4.0
  million for manufacturers.
  Otherwise, $2.0 million

• Other Goals - $1.5 million

• $20 billion outstanding



                                    19
Office of Entrepreneurial
      Development
    AICPA Web Forum
      May 13, 2008


                            20
     Office of Entrepreneurial
           Development
• The OED oversees a network of programs and
  services that support the training and counseling
  needs of small businesses. It is SBA’s technical
  assistance arm with resource partners located
  throughout the country.
• Provide services to 1.4 million business clients
  annually and information and training to an
  additional million through SBA’s website.

                    Anoop Prakash
               Associate Administrator
        Office of Entrepreneurial Development


                                                     21
  Small Business Development
        Centers (SBDCs)
• The U.S Small Business Administration (SBA) administers
  the Small Business Development Center Program to
  provide management assistance to current and
  prospective small business owners. SBDCs offer one-stop
  assistance to individuals and small businesses by providing
  a wide variety of information and guidance in 63 networks
  with over 950 locations.
• The program is a cooperative effort of the private sector,
  the educational community and federal, state and local
  governments. It enhances economic development by
  providing small businesses with management and
  technical assistance through counseling and training.
• Emphasis on long-term counseling.
• http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.
  html
                                                           22
            Women’s Business Centers
• The Office of Women Business Ownership
  provides oversight of the WBC program. OWBO
  promotes the growth of women-owned
  businesses through programs that address
  business training and technical assistance, and
  provide access to credit and capital, federal
  contracts, and international trade opportunities.
• There are 113 WBCs across the country in 44
  states and 2 US territories providing community-
  based services tailored to local needs.
• Special target: socially and economically
  disadvantaged women.
• Provide counseling and training in finance,
  management, marketing, procurement, and the
  Internet.
• www.sba.gov/women                                23
                   SCORE
• Representing “Counselors to America’s Small
  Business,” SCORE is a nonprofit association
  dedicated to providing entrepreneurs with free,
  confidential face-to-face and email business
  counseling from its 10,500 volunteers.
• The national SCORE program provides
  workshops and free business counseling through
  389 chapters at over 800 service delivery
  locations across the country.
• Provides 24/7 online counseling.
• Emphasis on core coaching for nascent and
  start-up businesses.
• www.score.org
                                                    24
                               ED Initiatives
•   Emerging 200:
    E200 has also been launched in eleven participating cities: Boston, Philadelphia, Baltimore,
    Atlanta, Memphis, Chicago, New Orleans, Albuquerque, Des Moines, Milwaukee, and Oakland.
    E200 is a training initiative targeted to inner city companies showing promise for growth. The
    companies that will most benefit from the training are those that have been in business for at
    least three years and have revenues of at least $400,000
•   ED Annual Report:
    OED will be issuing a first-ever annual report by June 1, 2008. This report gives transparency to
    the process and lays out new effectiveness metrics used to evaluate the performance of our
    resource partners; provide independent customer service validation, and set forth strategic issues
    for the future
•   ED Impact Study
     –    The ED Impact Study was designed to target OED programs over a period of years measuring
          all appropriated partner resources in a consistent and simultaneous manner. The study
          examines three key indicators:
             • Client Value-Added Measures measuring the client’s perception of service provide.
             • Managerial, Marketing Operations, Implementation measuring the extent the client
                implemented changes to their managerial and marketing operations.
             • Economic Impact measuring the change in the client’s business revenue, employment
                based on the face to face counseling received and new business starts.
      – Results of the survey show that OED resources served a broad spectrum of clients; and that
          those clients reported, albeit a small sample, positive economic impacts.
•   International Visitors:
    International Visitors’ Service provides general briefings on the American free-enterprise system
     and SBA’s unique role in entrepreneurship. In 2007 ---134 countries; 1106 visitors.
•   Co sponsorships:
    Junior Achievement co sponsorship for young entrepreneurs online at www.mindyourownbiz.org.
•   Online library: http://www.sba.gov/tools/resourcelibrary/publications/index.html
                                                                                                     25
      Small Business Training
             Network
• This online training network is a virtual campus
  providing quality and targeted online training to meet
  the information needs of prospective and existing small
  business owners.
• It is an E-Government initiative, powering a
  comprehensive menu of business courses, designed to
  serve more customers, more efficiently. The Training
  Network operates like an electronic umbrella under
  which many SBA and agency resource training
  programs are captured, aggregated, sorted by content
  and made available in multiple formats.
• Over 1000 persons a day are taking courses.
• http://www.sba.gov/services/training/index.html        26
 Helping Your Clients
Succeed in the Federal
 Procurement Market
     Tony Robinson
  Office of Government
       Contracting
   U.S. Small Business
     Administration
                         27
       Government Prime
       Contracting Market
• $340 Billion in Fiscal Year 2006
• $77 Billion Awarded to Small
  Businesses




                                     28
        Government Prime
        Contracting Goals
• 23% Prime Contracts
• 5% Small & Disadvantaged
• 3 percent Hubzones
• 5% Women-Owned Small Businesses
• 3% Service Disabled Veteran Owned
  Small Busineses



                                      29
    Government Subcontracting
•   40% ofContracting Goals
          all Subcontract Dollars (est.)
• 5% Small & Disadvantaged
• 3 percent Hubzones
• 5% Women-Owned Small Businesses
• 3% Service Disabled Veteran Owned
  Small Businesses



                                           30
    SBA Tools and Resources

• Contract Set Asides
• Procurement Center Representatives
  (PCRs)




                                   31
               New Trends
• Best Value
  – “greatest overall benefit” means greater
    contracting officer discretion; Lowest price is
    not necessarily determinative
• Past Performance is key
  – To be successful small businesses need to
    perform according to contract specifications.
  – Customer Satisfaction is essential for success.


                                                      32
Small firms face new challenges in
• Acquisition Reform
        the acquisition arena
 – Fewer acquisition personnel
 – New Acquisition Vehicles
 New paradigms
 – Internet
 – E-commerce



                                 33
         New Opportunities
• Hubzones
• Service Disabled Veteran Owned
  Small Businesses
• Teaming Arrangements
• SBIR
• http:/www.sba.gov/gc
                                   34
             Best Practices
• Get Tech
  – Web page, credit card, e-mail (mandatory)
• Get Registered
  – http://www.ccr.gov/
  – https://www.fbo.gov/
  – Get Scheduled
  – GSA schedules are large & growing very
    rapidly
  – http://wwwGSA.gov
                                                35
             Best Practices
• Get Real
  – federal market may not be right, try local first
• Get Personal
  – Know your buyer, personal relationships count
• Get Commercial
  – Recognize the new commercial emphasis
• Get Specific
  – Target your market
                                                   36
          8(a) Business
          Development
“promote the business development of small
 business concerns owned and controlled by
 socially and economically disadvantaged
 individuals…”
“promote the competitive viability of such
 concerns…”
“clarify and expand the program for
 procurement by the United States…”

                                              37
                  8(a) Business
                  Development
• Initial Eligibility Determination
• Annual Program Review
• Management & Technical assistance
• Mentor Protégé
• Joint Venture
• Surplus Property
• Contract Assistance
   – Sole Source ($5.5 million for manufacturing and $3.5
     million for all other contracts)
   – Limited Competition



                                                            38
8(a) Business Development
 During FY 2006:

 •   9,000 firms

 •   More then 1,600 training sessions

 •   $12.4 billion in contracts

 Since 8(a) Inception:

 •   More Than $120 billion in contract support

                                                  39
    8(a) Contracting
• FY 1999 - $6.3 B (3.39%)
• FY 2000 - $5.7 B (2.88%)
• FY 2001 - $6.3 B (2.86%)
• FY 2002 - $5.7 B (2.39%)
• FY 2003 - $10.1 B (3.64%)
• FY 2004 - $8.4 B (2.81%)
• FY 2005 - $11.7 B (3.68%)
• FY 2006 - $12.4 B (3.67%)
                              40
      Small Disadvantaged
      Business Certification

• Initial Eligibility Determination


• Re-certification Determination




                                      41
            SDB Contracting
• FY 1999 Goal - 5% Actual - $6.2 B (3.31%)
• FY 2000 Goal – 5% Actual - $7.2 B (3.61%)
• FY 2001 Goal – 5% Actual - $15.6 B (7.12%)
• FY 2002 Goal – 5% Actual - $15.9 B (6.75%)
• FY 2003 Goal – 5% Actual - $19.5 B (7.01%)
• FY 2004 Goal – 5% Actual - $18.5 B (6.18%)
• FY 2005 Goal – 5% Actual - $20.9 B (6.55%)
• FY 2006 Goal – 5% Actual - $22.9 B (6.76%)
                                              42
      U. S. Small Business Administration


       DISASTER ASSISTANCE
         Federal Disaster Loans for
Homeowners, Renters and Businesses of All Sizes



                                                  43
U. S.   S m a l l   B u s i n e s s   A d m i n i s t r a t i o n


                        SBA’s role in disaster
                               recovery


    • After hurricanes, floods, earthquakes,
      wildfires and other disasters, SBA
      disaster loans are the primary form of
      Federal disaster assistance for the
      owners of private property.



                                                             44
U. S.   S m a l l   B u s i n e s s   A d m i n i s t r a t i o n




                          SBA’s role in disaster
                                 recovery
          Not Just for Small Businesses
• SBA disaster loans for property damages are
  available to homeowners, renters, businesses
  of all sizes, and private, non-profit
  organizations.



                                                             45
U. S.   S m a l l   B u s i n e s s   A d m i n i s t r a t i o n




                          SBA’s role in disaster
                                 recovery
         Disaster Loans Help Recovery
• Disaster losses are unexpected and create
  financial hardships for most disaster victims.
• SBA disaster loans with low interest rates and
  long terms make recovery affordable.


                                                             46
U. S.   S m a l l   B u s i n e s s   A d m i n i s t r a t i o n




                          SBA’s role in disaster
                                 recovery

• SBA’s disaster loans are a critical source of
  economic stimulation in disaster-ravaged
  communities.
• They help spur employment and stabilize tax
  bases by protecting jobs.


                                                             47
U. S.   S m a l l   B u s i n e s s   A d m i n i s t r a t i o n




                           SBA’s role in disaster
                                  recovery
          Making Recovery Affordable
 The law gives SBA several powerful tools
 to make disaster loans affordable:
• low interest rates (about 3-4%)
• long terms (up to 30 years)
• refinancing of prior debts (in some cases)
                                                             48
    U. S.   S m a l l   B u s i n e s s   A d m i n i s t r a t i o n




                  SBA’s role in disaster recovery
            Types of Disaster Declarations
•      When the President
       declares a Major Disaster
       Declaration for
       Individual Assistance,
       SBA’s disaster loan
       program is automatically
       activated.                                 President
                                                George W. Bush   49
         SBA’s role in disaster recovery
      Types of Disaster Declarations
•   For smaller disasters,
    SBA’s Administrator may
    issue an SBA-only
    declaration (called an
    Agency or Administrative
    declaration).

                               SBA Administrator
                                 Steve Preston     50
              Loan Limits
      Home Repair/Replace:
Real Estate                 $200,000
Personal Property           $ 40,000
Refinancing (in some cases) $200,000
Mitigation (up to 20%)      $ 48,000

                                   51
             Loan Limits
       Business Repair/Replace:
Real Estate/Machinery/Equip./
Furniture and Fixtures        $1.5 Mil
Economic Injury (EIDL)          $1.5 Mil
    (Combined loan limit is $1.5 Mil)

                                        52
               Loan Limits
• The $1.5 million statutory limit applies to
  the total of all loans to a single borrower
  and its affiliates.
• If a business is a Major Source of
  Employment, SBA may waive the
  statutory limit.
                                           53
                Current Interest rates
                 Home         Business       Non-Profit EIDL
No Credit Avail. 2.687%       4.00%          4.000%     4.000%
Credit Avail. *  5.375%       8.00%          5.250%     N/A

*Credit available elsewhere means that the disaster victim can provide for
their own recovery through private sector borrowing on reasonable rates
and terms without causing financial hardship .

SBA makes the majority of disaster loans at the lower interest rates
                                                                   54
               Loan Terms

• SBA determines the loan term in accordance
 with each borrower’s ability to repay.

• The maximum term is 30 years.


                                               55
             Credit Requirements

• Credit History
  – Applicant’s must have a credit history
    acceptable to SBA.
• Repayment
  – Applicants must show the ability to
    repay all loans.
                                          56
                  Refinancing
• In cases with substantial damage (generally 40%)
  SBA may refinance recorded liens on real estate or
  machinery and equipment.
• Liens eligible for refinancing:
  – Home loans - real estate liens only
  – Business loans - real estate and chattel (UCC
    filings) liens
 Note: Existing Federal loans are not eligible for
                                                     57
 refinancing.
                Collateral Requirements
• Physical loans over $10,000 require collateral.
• EIDLs over $5,000 require collateral.
• SBA takes real estate as collateral when it is
  available.
• SBA will not decline a loan for lack of collateral,
  but requires you to pledge what is
  available.


                                                58
       Loan Eligibility Restrictions
• Only disaster losses not fully compensated by
  insurance or other recoveries are eligible.

• Applicant’s who have not complied with terms
  of previous SBA loan agreements (e.g. failure to
  maintain required insurance) are not eligible.

• Hobby businesses are not eligible.
                                              59
       Loan Eligibility Restrictions
 The types of businesses ineligible
 for EIDLs include:
• Speculative businesses
• Nonprofit organizations
• Multi-level sales organizations (pyramids)
                                        60
              Relocation
Relocation occurs any time the victim
either elects to move, or is required to
move, from the damaged property to
any other location.



                                      61
              Relocation
• Applicants arerequired to provide
details regarding their relocation plans,
if known. SBA must approve the plan.
- Address
- Cost breakdown of property to
be acquired or leased


                                        62
 Insurance Requirements
SBA requires borrowers to obtain
and maintain appropriate insurance as a
condition of most loans.
Hazard insurance - Required on all
secured loans.
Flood insurance - Required for
property located in a Special Flood
Hazard Area (SFHA) & flood disasters.
                                      63
       Application/Appeal Process

• Original request
• Reconsideration - 6 months
  deadline to seek reconsideration
• Appeal - 30 days to request a final
  appeal
                                        64
            Filing Deadlines
Physical: 60-days from date of declaration
EIDL: 9-months from date of declaration
For Presidential declarations FEMA may extend
the filing deadline for all Federal programs,
including SBA.

                                                65
     FOR MORE INFORMATION
    U. S. Small Business Administration
Disaster Assistance Customer Service Center
             (800) 659-2955
           TTY (800) 877-8339
                        or
          Visit our website at
   www.sba.gov/services/disasterassistance
                 Federal Regulations: 13 CFR 123



                                                                           66
                                                   U. S. Small Business Administration

				
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