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SBA’s Financing Programs

SBA’s Financing Programs. Rachel Baranick Deputy Director Santa Ana District Office, U.S. Small Business Administration. SBA’s Role in Small Business Lending. SBA is not a direct lender SBA sets guidelines for loan programs and recruits lenders to participate

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SBA’s Financing Programs

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  1. SBA’s Financing Programs Rachel Baranick Deputy Director Santa Ana District Office, U.S. Small Business Administration

  2. SBA’s Role in Small Business Lending • SBA is not a direct lender • SBA sets guidelines for loan programs and recruits lenders to participate • SBA guarantees loans from 50% to 90% depending on program • SBA relies on lenders and CDCs to process loans • Participating lenders set up their own credit criteria following SBA guidelines • In most cases, the lender makes the credit determination, not SBA • SBA lending benefits borrowers who are generally creditworthy but need additional support

  3. SBA’s Capital Access Programs • Lending • 7(a) Loans – max $5 million, most common SBA loan, can be used for a variety of purposes • 504 Loans – max $12 million project size, used for commercial real estate & fixed assets • Microloans – max $50,000 • SBIC • SBIR/STTR

  4. General Requirements The Small Business Applicant must: Be an operating business (any form or corporation) Be organized for profit Be located in the United States Be small (NAICS code or Alternative Size Standard); affiliation Credit not available elsewhere

  5. Ineligible Businesses Lending Life insurance Individuals not lawfully in the U.S. Pyramid sales plans Gambling Restricted patronage Promoting religion Consumer marketing cooperatives Poor character Prurient sexual material Political or lobbying activities Speculation

  6. General Use of Proceeds Restrictions Funds must be used in the United States No investment in stock purchases No payment of delinquent taxes held in trust, e.g. FICA No distribution to associates or principals

  7. Basic Credit Requirements Profitability and Cash Flow Financial condition Management experience Commitment Credit history Business viability Character of principals Collateral

  8. Benefits of SBA Loans • 7(a) – short-term & long-term financing, improved cash flow, fixed maturity, no balloon payments, no prepayment penalty (under 15 years) • Express loans – faster turnaround, streamlined process, easy to use line of credit • 504 – long-term fixed rate, low down payment, full amortization/no balloon payments • Microloans – often require only a credit check

  9. 7 Tips for Landing an SBA Loan Provide details on exactly how much financing you need and how you will use it Provide information about company management Be prepared to offer collateral Detail your credit history and credit score Provide complete copies of tax returns, financial statements, and bank statements Explain how you’ll achieve your projections Expect questions and be patient

  10. Resources to Help You Visit www.sba.gov/ca/santa to view local lender rankings, participating lenders Find out about our partners offering free business counseling Contact me at rachel.baranick@sba.gov or call 714.560.7441

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