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Financing for Veterans the SBA Way

Financing for Veterans the SBA Way . Presented by David Tiller-Veterans Business Development Officer U.S. Small Business Administration TN District Office David.Tiller@sba.gov – 615-736-7176. Getting Started. Why do you want to go into business? List your reasons, e.g. freedom & dogs

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Financing for Veterans the SBA Way

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  1. Financing for Veterans the SBA Way Presented by David Tiller-Veterans Business Development Officer U.S. Small Business Administration TN District Office David.Tiller@sba.gov – 615-736-7176

  2. Getting Started • Why do you want to go into business? • List your reasons, e.g. freedom & dogs • What business is “right for you”? • Identify the niche your business will ‘fill’ • Before you start: see the SBDC or SCORE • WHEN will you “really start” ?

  3. PreBusiness Checklist • Details on the business you are starting: • What services or products will I sell? • Where will I be located? • What skills and experience do I bring to the business? • What will be my legal structure?

  4. PreBusinessContinued • What will I name my business? • What equipment or supplies will I need? • What financing will I need? • What are my resources? • How will I compensate myself?

  5. Types of Business Structures • Sole Proprietorship • General Partnership • Limited Partnership • Corporation • Limited Liability Company (LLC)

  6. Financing a Business • Personal Savings. • Friends and relatives. • Banks/SBA and Credit Unions.

  7. Borrowing Money$$$ • Small business people have a difficult time borrowing money. True or False? • Banks make money by lending money. You must show them their investment in you will pay • Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: HIGH RISK!

  8. BorrowingMoney$$$ Continued To be successful in obtaining a loan, you must be prepared and organized. You must know exactly how much money you need, why you need it and how you will pay it back. Your business plan must convince your lender that you are a good credit risk.

  9. Business Plan & Loan Proposal • What is the opportunity your business presents? • Business Description • Management Profile • Market Information • Financial Information

  10. What to Taketo the Bank • Purpose of the Loan: Sources and Uses of Capital • History of the business • Financial statements for 3 years. (existing business) • Aging of accounts receivable and payable. (existing business) • Projected opening-day balance sheet. (new business) • Lease details – copy of the lease or contract for sale • Amount of investment in the business by the owner. • Projections of income, expenses and cash flow. • Signed personal financial statements. • Personal resume – bio may be best

  11. What SBA Looks for • Good Character • Management Expertise and Commitment • Sufficient Funds (including loan) to operate • Feasible business plan • Adequate equity investment in the business • Sufficient collateral • Ability to repay the loan

  12. Your Credit Report What is considered: 1. Credit Score – 700 or above - good 2. Delinquent Accounts - Judgments 3. Payments over 30 days past due Free Credit Report: www.annualcreditreport.com

  13. How Your LoanRequest is ViewedThe Five “C’s” of Credit • Character • Cash Flow • Collateral • Capitalization • Conditions

  14. SBA Financial Programs • MicroLoan Program • Micro Loans—up to $50,000 • Patriot Express Loan Initiative • SBA Community Advantage & Small Loan Advantage • 504 Loan Program • 7(a) Loan Guaranty Program • SBAExpress Loan Program

  15. SBA Serves a Wide Variety of Capital Needs $5.0 million $5.5million If mfg. 504 Loans $5.0 million 7(a) Loans Growth in Business & Changes in Capital Needs $350,000 SBAExpress $500,000 Patriot Express $50,000 Microloans

  16. MICROLOANS One Micro Lender in TN—Pathway Lending (formerly SE Community Capital) Finan

  17. MicroLoans • Direct loans through nonprofit intermediaries • Loans of up to $50,000 • Fast turnaround • Up to six years to repay • Used for — • Machinery, equipment, fixtures • Leasehold improvements • Inventory • Working capital • Technical and management assistance available

  18. SBAExpress • Underwriter uses own forms -- not SBA’s • Use bank’s lending policies -- not SBA’s • Loans or revolving lines of credit to $350,000 • SBA guaranty is 50% • Interest rate maximums apply Financial Assistance

  19. Patriot Express Loan Initiative*Begun June 2007-Now $3.1B in loans since*Loans to $500k—Vets, Spouses, Widows,*Guardsmen, Reservists—interest rate adv.*Loans under $25K-No Collateral Required*SBA TN Success Stories: Dents-R-Us*VOSBs are Veteran Owned Small Businesses—Get used to acronyms

  20. Loans for Fixed AssetsSBA 504 Program • 504 Certified Development Co. Program • Long-term, fixed-rate financing • Up to $5 million in SBA-backed debentures • SBA debenture guaranty of up to 40% of total loan • Must create or retain one job for every $50,000 of SBA debenture proceeds Financial Assistance

  21. 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

  22. To Qualify for a 504 Loan* • Business must be operated for a profit • Tangible net worth of less than $7.5 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

  23. 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) • At least 10% equity from the business • Participating lender has first lien on assets Financial Assistance

  24. 7(a) Loan Guaranty All TN SBA 7(a) Lenders are listed at the TN District Office website: www.sba.gov/tn

  25. Basic 7(a) Loan Guaranty Program • You apply for a loan guaranty with an SBA participating lender • Interest rates are negotiable Lender submits application for SBA review and approval • Loans are centrally processed • After SBA approval, lender disburses funds • You pay the bank, not the SBA Financial Assistance Financial Assistance

  26. 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 Financial Assistance

  27. Small Loan AdvantageNew Loan Program June 2012 • Loans to $25k-prime +3.75%-no collateral • Loans $26k-50k-prime +3.75% + collateral • $26k-50k—may require UCC filing • DUNS number required-free to borrower • Loan payments come from business checking account • Loan is made in the business’ name

  28. Thank You! David Tiller-Vets Business Dev.Officer david.tiller@sba.gov 615-736-7176 • Questions

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