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SBA Lending Update Burton D. Morgan Series Hudson Public Library

SBA Lending Update Burton D. Morgan Series Hudson Public Library. Mark Hansel, Cleveland SBA mark.hansel@sba.gov 216-522-4191. Entrepreneurship & SBA. The three “Cs” Credit, counseling and contracting Start-ups, purchases, franchises Venture capital Tech transfer. About SBA.

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SBA Lending Update Burton D. Morgan Series Hudson Public Library

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  1. SBA Lending UpdateBurton D. Morgan SeriesHudson Public Library Mark Hansel, Cleveland SBA mark.hansel@sba.gov 216-522-4191 SBA Cleveland District Office

  2. Entrepreneurship & SBA • The three “Cs” • Credit, counseling and contracting • Start-ups, purchases, franchises • Venture capital • Tech transfer SBA Cleveland District Office

  3. About SBA • Guaranty loans for banks and CDCs • Over 60K and over $30B for FY’11 • 1,400 and $360M for Cleveland District • Two loan programs: 7(a) and 504 • About 90% of volume under 7(a) SBA Cleveland District Office

  4. SBA Loan Limits • $5 M for 7(a) • $350 K for Express • $500 K for Patriot Express • $5-$5.5 M for 504 SBA Cleveland District Office

  5. Types of 7(a) Loans • Regular • SBA approves • Preferred (PLP) and Express • Bank approves with nod from SBA • About 80% of volume for ‘11 SBA Cleveland District Office

  6. Loan Uses • Working capital • Equipment • Real estate and leaseholds • Refinance • Buy-outs SBA Cleveland District Office

  7. Eligible Businesses • For profit • Based in US • Active, not passive • Some types not eligible • Like gambling or banking SBA Cleveland District Office

  8. Eligible Owners • Good character • Satisfactory credit • US or LPR status SBA Cleveland District Office

  9. Eligible Transactions • Arm’s length • No partial buy-outs • No payment to an “associate” • No “passive” investments SBA Cleveland District Office

  10. Eligible Transactions • Can refinance debt • Can buy used equipment • Can do eligible franchises • Can do change of ownerships SBA Cleveland District Office

  11. Franchises • Franchise registry • www.franchiseregistry.com • Clear or “repaired” • May not be on registry • But still eligible SBA Cleveland District Office

  12. SBA Usual Limits • 7 years usually for working capital • 10 years or more for equipment • 25 years for real estate • No balloons on SBA notes SBA Cleveland District Office

  13. SBA Interest Rates • Base rates of Prime or LIBOR+3 • Usually 2.25 or 2.75 over base rates • Fixed or floating • Fixed rate price choice on Colson site • May be higher under Express SBA Cleveland District Office

  14. Collateral Issues • “Principals” must guaranty • Joint PFS’s required • Personal assets may be required • May be short on collateral SBA Cleveland District Office

  15. Collateral Issues • Defer to bank on Express • Bank’s usual policy • Some CRE requires Phase I • Assignments of life insurance SBA Cleveland District Office

  16. Guaranty Fees • Based on guaranteed amount • 2% to $150K • 3% over $150K to $700K • 3.5% over $700K • .25% surcharge over $1M SBA Cleveland District Office

  17. Fees in General • No “origination” fees • Banks may charge “packaging” fee • “Extraordinary servicing” fee • Permitted for DFP and CAPLines SBA Cleveland District Office

  18. Revised CAPLines • Full guaranty up to $5 M • Easier for bank to manage • Different programs (1) Working Cap (2) Seasonal (3) Contract (4) Builders SBA Cleveland District Office

  19. 504 and Refinance • Regular 504: Bank, CDC and Borrower • 504 Refinance • New revisions • Up to 90% of appraised value SBA Cleveland District Office

  20. Floor Planning • Cars, boats, etc. • Line of credit • $500K to $5M SBA Cleveland District Office

  21. More Information • www.sba.gov • Cleveland District Office • 216-522-4180 SBA Cleveland District Office

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