U.S. Small Business Administration Hancock Bank Plaza 2510 14 th Street Suite 103

1. U.S. Small Business Administration Hancock Bank Plaza 2510 14th Street Suite 103 Gulfport, MS. 39501 SBA Loan Programs Lance Foster lance.foster@sba.gov Your Small Business Resource Helping Small Business start, grow and succeed www.sba.gov

2. Our Mission • SBA’s Purpose • Assist Small Business • Counseling & Training Opportunities • Administer • SBA Guaranty Loan Programs • Facilitate • Government Contracting • Provide • Disaster Assistance

3. SBA Defines A Small Business As • A Business must be For Profit • One that is Located in the United States • Owned by U.S. Citizens or legal permanent residents • Net-worth less than $15,000,000 • Net-profit (after taxes) less than $5,000,000

4. What is an SBA Loan? Federal Loan Guaranty For Small Businesses Borrower Bank SBA

5. Who is the SBA Borrower? • A borrower who may be short on collateral • A borrower who doesn’t fit the lenders standards of lending • A start-up with no proven history • A borrower who currently has non-SBA financing under less than favorable terms

6. The SBA Loan Guaranty • The SBA promises to reimburse a lender for losses at an agreed percentage of loss • Up to 90% • As low as 50% • Lender Benefits • Reduced Risk • Increased Liquidity • Borrower Benefits • Access to business credit • Better terms and rates

7. Where Does the SBA Loan Fit? Factors that determine this range: • Business Profile • Most ViableLeast Viable • Experienced Management High Debt Service Cash flow Sterling Credit Fully Collateralized Growth/Mature Industry High Retained Earnings • Cash flows w/ longer terms Covers Reasonable Collateral Shortfall Quality Start-up Regulation/Liquidity Environment • No Management experience No potential chance of repayment Impractical business idea No financial reserves No equity investment • Lender Range • SBA Range • No Range

8. How the Guaranty Works • Borrower is approved a $1,000,000 loan • Lender disburses loan fully • SBA provides a guaranty on 75% of the loan • Borrower defaults • Lender liquidates assets & collateral • SBA pays lender for 75% of the loan that is charged off • Any payments after the loan is charged off are distributed pro rata to the lender and the SBA. $500,000 balance $100,000 recouped SBA pays $300,000 (75%) of the remaining balance back to the lender Borrower still owes $400,000

9. SBA’s Major Guaranty Loan Programs 7(a) Term Loan SBA Express Loan Patriot Express Loan CDC-504 Loan See loan comparison chart

10. 7(a) Term Loan Up to $5 Million • Refinance Business Debt • Change of Ownership • Lease Buildings • Working Capital 7 to 10 year maturity for Working Capital & Equipment 25 year maturity for real estate See Loan Chart For Interest Rates & Other Info See loan comparison chart • Start Up Costs • Inventory • Fixtures • Equipment & Real Estate/Buildings

11. SBA Express Up to $350,000 Typically Used as a revolving Line of Credit & Carries Higher Interest Rates See Loan Chart For Interest Rates • Business Debt Refinancing Change of Ownership • Leasing Building • Working Capital • Start Up Costs • Inventory • Fixtures • Equipment & Real Estate/Buildings

12. Patriot Express For Veterans Up to $500,000 Business Debt Refinancing Change of Ownership Leasing, Working Capital Start Up Costs Inventory Fixtures Equipment & Real Estate/Buildings Maturities for WC & RE same as Standard 7(a) See Loan Chart For Interest Rates

13. CDC-504 Loans • $25,000 to $5,000,000 ($5,500,000 for manufacturers) • Create 1 job / $65,000 (Vets/Women Owned Exempt) • For financing real estate and or equipment only • Loan-to-Value program • Three part loan • Commercial lender provides 50% (1st Lien) • 504-CDC portion is up to 40% (2nd Lien) • Owner/Borrower makes up the difference • 504-CDC part term • 20 year fixed rate for real-estate • 10 year fixed rate for equipment • Occupancy requirement • 51% of existing & 60% of new construction *Administered through Certified Development Companies*

14. Other SBA Loan Programs Exporting • International Trade Loan Program • Export Express Loan Program • Export WC Loan Program Self Liquidating Lines of Credit • Contractors • Seasonal Businesses • Business that sells on credit

15. Loan Programs Just to Make Sure You Know Depending on the program, proceeds can be used for: • Start up costs • Working Capital • Inventory • Equipment • Fixtures • Business Acquisition/Change of Ownership • Business Debt Refinancing • Purchase land and buildings • Leasing

16. Credit Criteria • Is Business Realistic/Eligible • If Refinancing Debt, does it improve the finances of the business? • Do You Have Management Ability • Repayment Ability • Adequate Cash Flows • Sufficient Down Payment • Collateral • Good Credit *The business must be able to meet all of it’s debt payments (Not Just the SBA Portion) when being considered for a loan*

17. Things You Should Know • SBA Does Not Have a Grant Program • Generally No 100% Financing • Financing can take extended periods of time so be patient • Denial for a loan does not preclude applying at another bank • Some business operations are not eligible for SBA financing i.e. Speculative Ventures

18. Things You Should Know Cont. • Prepare for your meeting with the lender like you would a job interview • Familiarize yourself with language of “Finance” • Create a network of people who can be of assistance as you pursue your business “The goal is to get the right people on the bus and in the right seat”. Jim Collins, Author “From Good to Great”

19. Preparing a Loan Package • Business Plan • Answers the who doing the what,where and when • Amount of a Loan & Uses • Answers how much and why its needed. • Collateral Offered to Secure Loan • Current Financial Statements for Business & Personal • 3 Years Business & Personal Income Tax Returns • 1 Year Projected Income & Expense • Projected Financials • Attorney & Accountant • Make a Appointment with Your Favorite Lender

20. Before you call/approach a Lender • Find out the rules for business loans • Is the lender active in your industry • Ask for a loan application ahead of time • Make an appointment • Rehearse • The lender is in essence your first customer • Never assume they understand the language of your industry. • Your presentation should empower them to seek more info regarding what you do

21. Meeting with the Lender • Dress appropriately • Have documents organized and presentable • Be positive and confident • Know your industry • Answer negatives with positives • Document your meeting with notes • Be open to various forms of financing offers depending on your lender • Nothing is personal unless you make it personal

22. Questions You May Want to Ask • What is the lender’s loan process like? Localized or Centralized? • What SBA lending authorities does the lender have? (not all SBA Lenders are created equal) • Inquire about the lender’s SBA loan volume via your local SBA office • What types of industries does this lender like to lend to? • What are the bank’s collateral guidelines?

23. Lender Questions • How much of a loan request? • How was this amount determined? • How will you use the loan proceeds? • What Collateral is available to secure the request? • How much are you able to investin the business?

24. What a Lender Looks For • Capacity to Repay • Capital • Skin in the Game AKA Equity • Collateral • Assets to secure the loan • Conditions • Business’s needs are justified • Character • Credit • Commitment • Cash Flow (Working Capital) 8 C’s

25. SBA Deal Breakers • Non-profit businesses • Businesses primarily engaged in lending / investment • Apartments, investment or rental property – landlords • Business or applicant that the Government has experienced a loss • Pyramid plans – Multi-level sales distribution plans • Speculation, R&D • Restricts patronage – i.e. men or women only health clubs • Gambling activities • On parole or probation

26. What if you are rejected? • Ask why and ask for it in writing • Are you “turned down” or can it be remedied? • Will other lenders have the same issues? • Will alternative financing sources mitigate the issues identified? • No matter what, remember that at this point you know more than you did before

27. Top Mistakes • No Equity Capital • Lack of skin in the game indicates you either cannot accept the risk or are unable to • Not Enough Projected Working Capital • The “Blood” of your small business • Entrepreneurs tend to underestimate their needs • Not Paying Yourself • A livable wage should be garnered from your business

28. Because Nothing is Free Guaranty Fee • Computed based on guaranteed amount • Up to $150,000 (7(a) Loan 85% guaranteed) • 2.0% of $127,500 amounts to $2,550 • $150,000 to $700,000 (7(a) Loan 75% guaranteed) • 3.0% of $525,000 amounts to $15,750 • $5,000,000 (7(a) Loan 75% guaranteed) • 3.5% of $3,750,000 amounts to $131,250 • 0.25% on > $2,750,000 amounts to $6,875 • Total of $138,125 Can be rolled into the loan

29. Methods of Financing • Commercial Term Loans • SBA Loan Guaranty Programs • Lines of Credit • Credit Cards • Home Equity Loans - Real Estate Loans • Leasing • Investors – Partners • Seller Financing • Friends and Family • Seed & Venture Capital • Equity Investors

30. Resources • Information to help you start and maintain your business • Financial Assistance • Federal Government Contracting Assistance • Business Training and Counseling • Disaster Assistance Visit www.sba.gov/ms for SBA Mississippi office/resource locations

31. Resources • SBA Free Online Training – www.sba.gov • Local SBA Workshops • Service Corps of Retired Executives (SCORE) • Small Business Development Center (SBDC) • The SBA’s Jackson District Office • The SBA’s Gulfport Branch Office • Your local PTAC Office

32. www.sba.gov

33. U.S. Small Business Administration Thank You www.sba.gov