Take the Mystery out of SBA Loans

1. 1 Take the Mystery out of SBA Loans Michael Foutch Business Development Specialist Nebraska District Office Michael.foutch@sba.gov

2. How do we help entrepreneurs? • Financing • Technical assistance and counseling • Government contracting • Advocacy • Disaster assistance So, why small business? 2 Nebraska District Office

3. Over the past 20 years, Nebraska has seen a decided shift toward small business growth, and away from job growth in bigger businesses. • From 1992 to 2001, Nebraska saw a jump of nearly a quarter of a million jobs. • But from 2002 to 2008, we saw a loss of nearly 84,000 jobs • 62,000 of those from businesses with greater than 500 employees. 3 Nebraska District Office

4. On the other hand: • From 1992 to 2001, Nebraska saw a growth of 78,000 jobs from small businesses (those less than 100 employees) • And from 2002 to 2008, we saw an increase of another 50,000 from small businesses (those less than 100 employees). Source: Nebraska Workforce Development 4 Nebraska District Office

5. Nebraska District Office In Fiscal Year 2011 to date, we helped our entrepreneurs to: Obtain $137 million in 423 SBA loans; Win millions in government contracts for 8(a) firms; As a result, companies created nearly 2,000 new jobs! 5 Nebraska District Office

6. Financing • What are banks looking for? • Payment history (35%) • Amounts owed (30%) • Length of credit history (15%) • New credit (10%) • Types of credit used (10%) 6 Nebraska District Office

7. Financing • SBA Loan Guarantee Program • Guarantees the loan for the bank • Helps start-ups and businesses with little collateral • SBA loans have been made through 90 banks alone this year. • Every bank in the state can do business with the SBA. 7 Nebraska District Office

8. Financing • Why are guarantee loans important? • Allows lenders to diversify lending portfolio • Guaranty amount doesn’t count against lending limits • Interest rate is negotiated between the borrower and lender, capped by the SBA. 8 Nebraska District Office

9. What does the SBA consider unreasonable terms in debt restructuring? • Term Debt with Demand Feature or Balloon Payment • Debt with Interest Rate Over SBA’s Maximum • Credit Card Debt • Over-collateralized Debt • Revolving Lines of Credit • Debt with an Inappropriate Maturity • Debt that No Longer Meet the Small Business’ Needs (Standard Guaranty Only) 9 Nebraska District Office

10. SBA Guaranteed Loans Express Programs • Small business owners meet with their lenders • Lender certifies it cannot provide funding on reasonable terms without SBA guaranty • Lender must be an SBA partner and meet certain portfolio standards • FEES • 2 to 3.75 percent on the guarantee amount (sliding scale) depending on the size of the loan. 10 Nebraska District Office

11. SBA Guaranteed Loans SBA Express Loans • 170 Express loans in Nebraska in FY 2011 • $22 million in loan volume • All sorts of industries • Electrical contractors • Architects • Chiropractors • Advertising agencies • Used car dealerships • Restaurants 11 Nebraska District Office

12. SBA Guaranteed Loans SBA Express Loans • $1 million loan amount through Sept. 27 • Previously, max amount was $350,000 • SBA guaranty is 50 percent • Interest rates can be fixed or variable • Capped at 6.5% over the base rate (LIBOR) for loans less than $50K • 4.5% above base rate for loans above $50K • Line of credit up to seven years 12 Nebraska District Office

13. SBA Guaranteed Loans SBA Express Loans • Turnaround time for application is 36 hours • Can be as quick as 20 minutes if lender files application electronically • Lender uses own forms and procedures • Not required to take collateral for loans up to $25K • May use own collateral policy for loans up to $350K; some lenders still require a large amount of collateral even with an SBA guarantee. 13 Nebraska District Office

14. SBA Guaranteed Loans THIS IS THE ONLY LOAN PROGRAM FOR VETERANS Patriot Express Loans • Up to $500,000 with a 85% guarantee for loans below $150K, 75% for loans above • Who is eligible? • Veterans with a DD-214 in hand • Active duty eligible for TAP • Reservists and National Guard • Current spouses of the above • Widows of a service member who died during service or of a service-connected disability 14 Nebraska District Office

15. SBA Guaranteed Loans Patriot Express Loans • What can you use it for? • Start-up costs • Purchase equipment • Business-occupied real estate purchase • Inventory • Setting up to sell products and services to the government • Preparing your business for possibility of your deployment 15 Nebraska District Office

16. SBA Guaranteed Loans Patriot Express Loans • John F. Carroll of law firm Watson & Carroll • Air Force veteran (medic) • Patriot Express line of credit • 19 Patriot Express Loans in Nebraska in FY 2011 • $3 million in loan volume 16 Nebraska District Office

17. SBA Guaranteed Loans Small Loan Advantage • Open to Preferred Lender Program banks and credit unions • Up to $250,000 -- same guarantee terms as 7(a) • Most applications approved within 5-10 days • Two-page application for borrowers Community Advantage • Also up to $250K with same terms as 7(a) • Non-profit lenders expected to maintain at least 60 percent of SBA portfolio in underserved markets 17 Nebraska District Office

18. SBA Guaranteed Loans • Rural/Small Lender Advantage: Streamlined process for $350,000 following the 7(a) program guidelines for the guaranty. 18 Nebraska District Office

19. SBA Guaranteed Loans 504 loans • Designed as an economic development program to support small business growth • Helping communities with: • Business expansion • Job creation  • Provides long-term, fixed-rate, subordinate mortgage financing for acquisition and/or renovation of capital assets. 19 Nebraska District Office

20. Microloans Omaha Small Business Network 24th and Lake, Omaha (402) 453-5336 x160 Rural Enterprise Assistance Project (REAP) Monica Braun (402) 643-2673 Community Development Resources Lincoln (402) 436-2386

21. Where do you start? • 402-221-3606 • One-on-one free mentorship • Basic startup assistance • Business plans • Advice on financial projects • Management and marketing 21 Nebraska District Office

22. Pre-Business Workshop • First Wednesday (6-10 p.m.) • and Thursday (6:30-10 p.m.) of each month • 10675 Bedford Avenue, Omaha • Planning and Business Plans • Business Insurance • Loans and Capital • Marketing and advertising • Taxes • Legal advice (such as incorporation) • Records and Accounting • Call 402-221-3606. • Pre-registration by credit card, check or cash is $50 per person. • Please make checks payable to “SCORE Chapter 40” 22

23. Government Contracting SBA programs assist specific groups in securing federal contracts: These certifications provide eligibility to receive special procurement opportunities: • Women-owned Small Business • Service-Disabled Veteran-owned Small Business • Veteran-owned Small Business (for Veteran’s Administration procurements and subcontracts). Begin your registration here, at www.ccr.gov

24. Procurement Technical Assistance Centers • Work with federal agencies to identify prime contracting opportunities. • Recommend reserving procurement for competition among small businesses. • Provide small business sources to federal buying agencies. Identifying Contracting Opportunities • Announces available business opportunities • Identifies contracts over $25,000 • Government uses simplified procedures for purchases between $3,000 and $100,000. • These purchases are generally reserved for small businesses. • Go to: www.fbo.gov

25. Outreach events • Procurement workshops • Third Thursday of each month • 10675 Bedford Avenue • 8-10 a.m. • Omaha Empowerment Breakfasts Second Friday of each month • Regency Lodge, 107th & Pacific • 7:15 to 8:30 a.m. • Veterans in Business Forum breakfast • First Friday of every month, Mammel Hall • 7:45 to 9:15 a.m. 25

26. www.sba.gov/NE Michael.foutch@sba.gov (402) 221-7211 26