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SMALL BUSINESS ADMINISTRATION FINANCIAL ASSISTANCE PROGRAMS

SMALL BUSINESS ADMINISTRATION FINANCIAL ASSISTANCE PROGRAMS. Neida M. Heusinkvelt (816) 426-4906. SBA FINANCIAL ASSISTANCE PROGRAMS. 7(a) Loan Guaranty Program - 75-85% Guarantees Made by private lenders

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SMALL BUSINESS ADMINISTRATION FINANCIAL ASSISTANCE PROGRAMS

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  1. SMALL BUSINESS ADMINISTRATION FINANCIAL ASSISTANCE PROGRAMS Neida M. Heusinkvelt (816) 426-4906

  2. SBA FINANCIAL ASSISTANCE PROGRAMS • 7(a) Loan Guaranty Program - 75-85% Guarantees • Made by private lenders • SBA guarantees up to 85% of the loan amount • Maximum loan amount can be up to $2,000,000 • 7(a) program requirements: • Good credit history • demonstrated record for success • good character • sufficient funds to operate the business at a profit • collateral the loan as fully as possible

  3. SBA FINANCIAL ASSISTANCE PROGRAMS • Flexible Maturities: • Up to 10 Years for working capital • Up to 25 years for fixed assets • real estate, construction, equipment • Interest Rates: • Negotiated between borrower and lender • Typically cannot exceed prime rate plus 2.75% except with SBAExpress loans which can go higher

  4. SBA FINANCIAL ASSISTANCE PROGRAMS 7(a) Program Guaranty Fees: MaturitySBA PortionGuaranty Fee 1 Yr or less Any $$ 0.25% Over 1 yr $127,500 or less 1.0% (lender keeps 25% of fee) Over 1 yr More than $127,500 2.5-3.5%

  5. SBA FINANCIAL ASSISTANCE PROGRAMS • 7(a) SBAExpress - Up to $350,000 and under • with 50% guaranty - this program is expanding • lender uses its own documentation • can be used for a variety of purposes, including funding working capital lines of credit • Over 65% of SBA lending is now done thru this SBAExpress program!

  6. Smartway Financing Initiative • EPA/SBA have partnered to promote to the trucking industry an Upgrade Kit. Its technology will save fuel and money, while reducing pollution. • Kit includes: • Idle-reduction technology such as auxiliary power units, generator sets, battery HVAC or direct fired heater units • Low rolling resistance tires, • And tractor and trailer areodynamics

  7. Smartway Financing Initiative • Eligibility targets small & medium sized trucking companies (>$23.5 Million) • Not a grant program – loan must be repaid with interest to lender. • Loan amounts range from $5,000 to $25,000. Interest rates are prime plus 4-6%. Loan terms range 3 – 10 years. Lenders may change a processing fee.

  8. Smartway Financing Initiative • Can finance entire Upgrade kit or individual components only. • Uses existing SBAExpress program with 50% guaranty to lender. • Lender has option to not require collateral. • Business owners must personally guaranty the loan. • Lender will most likely use credit scoring for approval or decline decision-making.

  9. Smartway Financing Initiative • For more info on Smartway Financing or for a list of participating lenders to go: • www.epa.gov/otaq/smartway/index.htm.

  10. CAPLINES Loans Used to meet short-term and cyclical working capital needs Can be a one project type deal or can be on a revolving basis Three Types: Seasonal, Contract, Small Builder Also, Two Types of Asset Based Loans Are Available: Standard Asset Based Small Asset Based SBA FINANCIAL ASSISTANCE PROGRAMS

  11. SBA FINANCIAL ASSISTANCE PROGRAMS • Export Working Capital Loan 90%Guaranty • Pre-Export and Post-Export Transactions can be Financed • Paid back from proceeds of the export sales • International Trade Loan • Used for producing goods or services within the U.S. to export elsewhere • Can help firms adversely affected by import competition

  12. SBA FINANCIAL ASSISTANCE PROGRAMS • 504 Fixed Asset Loan • Long-Term financing for major fixed assets (not rolling stock). • Up to $1.3 million in SBA-backed debentures • Loan must create or retain one job for every $35,000 of debenture proceeds provided by the SBA. • Available throughout Kansas and Missouri from CDCs in specific areas • Typical Expansion project is 50%/40%/10%

  13. SBA FINANCIAL ASSISTANCE PROGRAMS • MICROLOAN - $35,000 or less • Pool of Funds available thru microloan intermediary • RMI in out state MO • - Go Connection – KC metro Area plus the Kansas Counties of Douglas & Shawnee • Other states have microlenders available! • SURETY BOND GUARANTEES - processed in Denver CO

  14. LOGICAL BUSINESS ADVICE • Get an explanation on various sources of financing • Traditional and non-traditional • Get a realistic understanding of the strengths and weaknesses of the deal • Don’t be afraid to “shop” for a lender that fits your needs • Make credit requests both for the short-term and long-term benefit

  15. HOW DOES AN APPLICANT APPROACH A LENDER ABOUT SBA LOANS? • Make advance appointment with commercial officer that handles business loans. • Be prepared with a written business plan that includes total cost of project with a breakout of what $$ are expected to be borrowed and what $$ are expected to be injected by business owner!

  16. WHAT SHOULD AN APPLICANT EXPECT FROM A LENDER? • A commitment from the lender to review the business plan by a specified date or an up-front explanation of why that lender does not want to do that type of loan. • Expect the lender to ask for applicant’s SSN information so they can authorize a credit report .

  17. NEGOTIATION ITEMS & LENDER DISCLOSURE • Interest rate • Term of loan • Who will personally guaranty loan • What fees will be charged • Time frame range in expecting an answer “YES or NO” and time frame to expect on disbursement of funds • Other services lender can provide

  18. WHY DOES A LENDER SAY “YES”? • Likes balance of credit factors – strengths outweigh weaknesses • Lender’s institution has favorable experience with that industry • Your credit risk fits in with lender’s target portfolio • Lending officer is willing and able to be your advocate in loan committee

  19. WHY DOES A LENDER SAY “NO”? • Weaknesses of individual deal outweigh strengths in areas such as: • Sales volume is optimistic or expenses are underestimated or industry in turmoil • Management has no direct experience • Lender risk too high in loan amount compared to applicant’s injection – D/E • Credit or character history is marginal or poor • Collateral offered doesn’t offset other risks • Lender’s institution has unfavorable experience with that industry

  20. TIPS FOR FINANCIAL PREPARATION • FIRST be prepared- • Asking for $$ before plan is in place is likely to create poor first impression with lender - you only get one chance to make a good first impression! • Understand the loan process and consider how their application will be compared to their peers! • You need to establish time frame for decision making that is realistic and decide if lender can meet those needs.

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