U.S. Small Business Administration
/*
Americaº Gmail Business Resource
LENDER &
EQUITY INVESTOR'S
GUIDE
3rd Edition
CHMGAN
Cº-ºº:
East Y OFM,
UNW LBRARIES
SEP 15 2003
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DeposſED P A
|\UNITED STATES 9 AMERIC
Financial Assistance

“Wealth is created by Americans — by
creativity and enterprise and risk-taking. But
government can create an environment where
businesses and entrepreneurs and families can
dream and flourish.”
George W. Bush
President of the United States
Published by the Office of
Marketing & Customer Service
All program descriptions, including the dollar amounts and percentages,
are accurate as of the time of printing.
Legislative and administrative changes may occur that could affect these programs.
SBA offices can provide up-to-date information.
All of the SBA’s programs and services are provided to the public
on a nondiscriminatory basis.

LENDER'S & EQUITY INVESTOR'S GUIDE
Dear Small Business Lender/
Equity Investor:
I hope you will find this Lenders &
Equity Investors Guide, 3rd Edition, to
be a useful tool in locating appropriate
U.S. Small Business Administration
financing programs for your cus-
tonnerS. ether you are ready to
help launch a small business, or take
an existing one to the next level, the
SBA's dedicated employees and resource partners are eager
to help.
As you read through this Guide please consider the many
ways we can help you help small businesses succeed
through our loan-guaranty, and equity-investment pro-
grams. Our programs can help you acquire new customers,
increase your profit margin, meet requirements under the
Community Reinvestment Act, and achieve higher yields
through an active secondary market. The SBA-guaranteed
ortion of your loan is not included when ... a
|. legal limit to individual or affiliated borrowers and
can be used to collateralize Treasury tax and loan accounts,
Federal Reserve advances and municipal deposits.
We also offer a number of business counseling and
training, and federal government contracting programs
that can assist your customers. And in the event of a
natural disaster, the SBA also assists small businesses and
homeowners through our Disaster Loan Program. The
program can help you get your customers up and running
again |. should the need ever arise. A brief descrip-
tion of all those services is also explained in this Guide.
At the SBA, we take great pride in our mission to help
American entrepreneurs start and grow their businesses
and to help American homeowners and small businesses
recover from disasters.
I invite you to read this Guide and work with us to help the
economy grow. We can meet with you in your office to
explain how our programs can benefit you and your cus-
tomers. Our offices are listed on the inside back cover of
this Guide, and their telephone numbers can be found
under "U.S. Government" in your telephone directory, at
our Web site – www.sba.gov, or at our toll-free number
1-800-U ASK SBA.
We look forward to a rewarding partnership with you.
Sincerely,
º/ º
Hector V. Barreto
Administrator

TABLE OF Contents
SBA Financial Assistance Programs. . . . . . . . . . . . . . . . . . . 1
The 7(a) Loan Guaranty Program. . . . . . . . . . . . . . . . . . . . . . . . 1
Lender Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Standard Application Process . . . . . . . . . . . . . . . . . . . . . 6
Certified Lenders Program . . . . . . . . . . . . . . . . . . . . . . . 7
Preferred Lenders Program . . . . . . . . . . . . . . . . . . . . . . . 7
SBALowDoc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SBAExpress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SBA ExportExpress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
CommunityExpress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SBA Loan Prequalification . . . . . . . . . . . . . . . . . . . . . . 11
The Secondary Market . . . . . . . . . . . . . . . . . . . . . . . . . 12
Guaranteed Portion of the Loan . . . . . . . . . . . . . . . . 12
Unguaranteed Portion of the Loan . . . . . . . . . . . . . . 13
Special Programs for the Borrower. . . . . . . . . . . . . . . . . . . . 13
CAPLines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DELTA: Defense Loan & Technical
Assistance Program . . . . . . . . . . . . . . . . . . . . . . . . . . 15
CAIP: Community Adjustment & Investment Program . 17
Export Working Capital Loan. . . . . . . . . . . . . . . . . . . . . 18
International Trade Loan . . . . . . . . . . . . . . . . . . . . . . . . 19
Energy & Conservation Loan . . . . . . . . . . . . . . . . . . . . . 20
Pollution Control Loan. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Employee Stock Ownership Plan . . . . . . . . . . . . . . . . . . 21
Loan Servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7(m) Microloan Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
504 Certified Development Company Program . . . . . . . . . . . . 23
SBA Franchise Registry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Equity Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Small Business Investment Company Program . . . . . . . . . . . . . 26
New Markets Venture Capital Program . . . . . . . . . . . . . . . . . . 27
Surety Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Counseling & Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Small Business Development Centers . . . . . . . . . . . . . . . . . . . . 28
Business Information Centers . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Women's Business Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
U.S. Export Assistance Centers. . . . . . . . . . . . . . . . . . . . . . . . . 29
Service Corps of Retired Executives . . . . . . . . . . . . . . . . . . . . . 29
Program for Investment in Microentrepreneurs . . . . . . . . . . . . 30
The SBA's Home Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Businesslaw.gov . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
The U.S. Business Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Quick Reference to Lender Options. . . . . . . . . . . . . . . . . . 32
Quick Reference to Programs for Borrowers. . . . . . . . . 35
For More Information. . . . . . . . . . e e s s a e s e e s e s = e e s • e e s • 42
Did You Know? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SBA FINANCIAL
ASSISTANCE PROGRAMS
The SBA is dedicated to assisting the nation's
small businesses in meeting their financing
needs. We join with you — our lending/invest-
ing partner — to reduce your risk and enhance
your ability to provide both long- and short-
term loans to small businesses through our SBA
finance programs. SBA-guaranteed financing
helps you provide loans to customers who might
not qualify for business loans through your
normal lending channels.
There are four basic types of SBA lending
and equity investment programs available to
borrowers:
• the 7(a) Loan Guaranty Program,
• the 7(m) Microloan Program,
• the 504 Certified Development Company
Loan Program, and
• the Small Business Investment Company
Program.
For more information, visit the Web site at
www.sba.gov/financing.
THE 7(A) LOAN
GUARANTY PROGRAM -
The SBA offers a number of loan programs for
specific business purposes. But the 7(a) Loan
Guaranty Program is the most flexible because it
can be used for a variety of small business needs.
The key concept of the 7(a) Loan Guaranty
Program is that the loan comes from a com-
mercial lender, and the guaranty comes from the
SBA. A business applies for a loan from you,
the lender, and you decide whether to make (or
reject) the loan internally, or if the application
needs to be bolstered with an SBA guaranty (see
Lender Options, page 6).
Lender's & Equity Investor's Guide • 1
Since the SBA's guaranty is available only to
lenders, applicants need to know your criteria
and requirements along with those of the SBA.
To be considered for an SBA-guaranteed
loan, the applicant must be both eligible
and creditworthy.
For all 7(a) loans, the lender closes the loan and
disburses the funds. The borrower generally
makes monthly loan payments directly to the
lender. Payment plans may be tailored to the
needs of the individual business. This may
include the reduction or deferment of payment
to accommodate the business's ability to repay.
Balloon payments, application fees and points
are not permitted.
7(a) loans are provided by lenders who choose to
structure their loans by the SBA's requirements,
and who apply for and receive a guaranty from
the SBA on a portion of these loans. The total
amount of financing that can be provided to
any one business (which includes affiliates) is
limited to $2 million.
Under 7(a), the SBA may guarantee up to
$1 million of a loan made by a private-sector
lender as long as the total loan amount does not
exceed $2 million. However, the SBA will not
guarantee 100 percent of any loan. The agency
may guarantee up to 85 percent of a loan
for $150,000 or less and up to 75 percent of a
loan greater than $150,000.
A borrower may have more than one SBA guar-
anteed loan at a time, as long as the total SBA
portion does not exceed the agency's guaranty
cap of $1 million. An exception is when an
Export Working Capital Loan and an
International Trade Loan are provided in tan-
dem to the same business (See pages 18 and 19).
For more information, visit the Web site at
www.sba.gov/financing/frſ/aloan.html.
2 * U.S. Small Business Administration
USE OF PROCEEDS
A start-up or existing business may use the
proceeds of a 7(a) guaranteed loan to —
• expand or renovate facilities;
• purchase machinery, equipment, fixtures
and leasehold improvements;
• finance receivables and augment working
capital;
• refinance existing debt (under some circum-
stances);
• provide seasonal lines of credit;
• construct commercial buildings; and/or
• purchase land or buildings.
TERMS, INTEREST RATES & FEES
The loan repayment schedule depends on both
the use of the proceeds and the ability of the
business to repay. The general terms are —
• five to 10 years for working capital; and
• generally up to 25 years for fixed assets,
such as the purchase or major renovation
of real estate or the purchase of equip-
ment (not to exceed the useful life of the
equipment).
Both fixed and variable interest rates are avail-
able. The maximum rate is 2.25 percent over
the lowest prime rate for a loan with a maturity
of less than seven years, and 2.75 percent over
prime for a loan of seven years or longer.
If the loan is over $25,000 but not more than
$50,000, the maximum interest rates are
3.25 percent and 3.75 percent over prime
respectively. For loans under $25,000, the max-
imum interest rates are 4.25 percent and
4.75 percent over prime respectively.
(SBAExpress and CommunityExpress interest
rates may be slightly higher.)
The SBA charges the lender a guaranty fee,
which you may pass on to the borrower after
you have paid the fee to the agency and
Lender's & Equity Investor's Guide • 3
disbursed the loan to the borrower. The fee is
based on the maturity of the loan, the total
amount of the loan, and the amount of the SBA-
guaranteed portion of the loan. For a loan with a
maturity of one year or less, the guaranty fee is
one-fourth of 1 percent (0.25 percent) of the
guaranteed portion. On a loan with a maturity of
more than one year, the fee increases as the total
loan amount increases. If the loan amount is
$150,000 or less, the guaranty fee is 2 percent of
the guaranteed portion. You may keep one fourth
of the 2-percent guaranty fee (0.50 percent).
For loans of more than $150,000 but not
exceeding $700,000, the guaranty fee is 3 percent
of the guaranteed amount. For this category
there is no difference between the amount the
SBA charges the lender and the amount the
lender can be reimbursed by the borrower.
Loans greater than $700,000 have a guaranty fee
of 3.5 percent of the guaranteed amount.
There is an ongoing annual fee of 0.5 percent of
the guaranteed portion of the loan balance. This
fee is payable to the SBA monthly and may not
be passed through to the borrower. As the
lender, you are permitted to charge a late fee of
up to 5 percent of the payment amount for
payments more than 10 days overdue. With the
SBA’s approval, you may collect an extraordinary
servicing fee of up to 2 percent of the out-
standing balance in cases involving construction
or lines of credit with accounts receivable or
inventory as collateral.
Note: All references in the brochure to the prime
rate refer to the lowest prime rate in effect on the
day the SBA receives the loan application. This
rate is printed in The Wall Street journal on the
next business day.
Collateral
Borrowers must pledge sufficient assets, to
the extent they are reasonably available, to
Secure the loan. Personal guaranties generally
4 • U.S. Small Business Administration
are required from all principals owning 20 per-
cent or more of the business. Liens on personal
assets of the principals also may be required. No
loan will be declined for insufficient collateral
alone as long as all available and worthwhile
collateral (both business and personal) is
pledged as security for the loan.
Eligibility
To be eligible, the business must be operated for
profit and not exceed the SBA's size standards.
Some types of businesses are not eligible, such
as businesses engaged in lending, real estate
development, pyramid schemes, gambling, ille-
gal operations, speculation or investment. All
loans must be used for sound business purposes.
Maximum Size Standards
The SBA determines if the business meets the
agency's size standards based either on the aver-
age number of employees for each pay period
during the preceding 12 months or on sales
averaged over the previous three years.
• Manufacturing – from 500 to 1,500
employees, depending on the industry
• Wholesaling – 100 employees for financial-
assistance programs; 500 for contracting-
assistance programs
• Services – from $4 million to $29 million in
average annual receipts, depending on the
service (e.g., North American Industrial
Classification Systems Code 541710 is from
500 to 1,500 employees)
• Retailing — from $6 million to $24.5 million,
depending on the nature of the business
• General and heavy construction – from
$17 million to $28.5 million
• Special trade construction – average annual
receipts not to exceed $12 million
• Agriculture—from $750,000 to $10.5 million
Lender's & Equity investor's Guide - 5
What the SBA Looks for
• Good character
• Management expertise and commitment
necessary for success
• Reasonable personal contribution and/or
business equity, which along with the loan
proceeds enable the borrower to operate
the business on a sound financial basis (for
new businesses, this includes the resources
to withstand start-up expenses and the ini-
tial operating phase)
• Feasible business plan
• Adequate equity or investment in the business
• Sufficient collateral
• Demonstration that the loan can reasonably
be repaid from the earnings of the business
LENDER OPTIONS
The small business borrower submits a loan
application to you for your review. You may
approve the loan internally, approve it subject to
an SBA guaranty, or decline the loan entirely. If
you choose the SBA guaranty option, you must
certify that you will only make the loan under
the proposed terms and conditions if the SBA
provides its guaranty.
The SBA can process your request for a
guaranty under a variety of methods. Your
institution can choose the method, subject to eli-
gibility. In addition to Standard processing, the
Certified, Preferred, SBALowDoc, SBAExpress,
SBA ExportExpress and CommunityExpress pro-
cedures offer expedited processing. Over 80 per-
cent of all recent applications have qualified for at
least one of those expedited procedures.
STANDARD APPLICATION PROCESS
As the lender, you submit a completed loan
application, including your credit analysis, to
the SBA field office that covers the territory
6 • U.S. Small Business Administration
where the applicant business is located.
The SBA analyzes the entire application and
generally makes its decision within 10 days of
receiving all the necessary documentation.
CERTIFIED LENDERS PROGRAM
The CLP provides more expeditious service on
loan applications received from lenders with
successful SBA track records and a thorough
understanding of SBA lending policies and pro-
cedures. CLP lenders receive a partial delega-
tion of authority, which must be renewed at least
every two years. Under this program, the SBA
reviews the lender's credit analysis rather than
conducting a complete second analysis. This
reduces the SBA's targeted response time to
three days. Certified lenders may submit appli-
cations under standard processing if they wish.
PREFERRED LENDERS PROGRAM
The PLP maximizes the use of qualified,
private lenders in the agency's financial assis-
tance delivery system. Under this program, the
SBA delegates loan underwriting, closing, and
most servicing and liquidation authority and
responsibility to carefully selected lenders. Such
authority must be renewed every two years. The
SBA reviews the lender's portfolio periodically.
The PLP is designed only for the strongest
credits, those for which the SBA can justify
giving the lender the unilateral right to risk
government funds. SBA loan approval is con-
ducted at the SBA's PLP center in Sacramento,
Calif. Turnaround usually takes less than one
day. Preferred lenders receive the same 75 per-
cent guaranty rate (85 percent on loans of
$150,000 or less) on PLP loans as is provided
on regular and certified SBA-backed loans.
Preferred lenders may use certified or standard
processing if they wish. For a list of SBA Certi-
fied and Preferred lenders, visit the Web site
www.sba.gov/financing/lender.html.
Lender's & Equity Investor's Guide • 7
SBALOWDoc
SBALowLoc allows the lender to complete less
paperwork when applying for a guaranty on
small business loans of $150,000 or less. Once a
borrower completes your application and meets
your requirements for credit, you may request an
SBALowLoc guaranty for up to 85 percent of the
loan amount. Ask the applicant to complete the
front of a one-page SBA application, and you
complete the back. At SBALowLoc servicing cen-
ters, the agency will process completed applica-
tions within 36 hours.
The repayment terms for LowLoc are the same as
for any other 7(a) guaranteed loan. Eligibility is
basically the same, except —
• proceeds may not be used to repay certain
types of existing debt, and
• the program cannot accommodate loans
requiring unique or complex structures.
For more information, visit the Web site at
www.sba.gov/financing/frlowdoc.html.
SBAExPRESS
SBAExpress provides selected lenders with a
50 percent guaranty on their loans in exchange
for the ability to use primarily their own applica-
tion and documentation forms. This method
makes it easier and faster for lenders to provide
small business loans of $250,000 or less. The
SBA provides a rapid response — within 36
hours of receiving your complete application
package. You use your existing procedures to
approve and service the loan. You also use your
own procedures for loan liquidation. The SBA
will immediately process purchase requests of al.
SBAExpress defaults of $50,000 or less, as well as
all defaults facing extended liquidation step,
prior to liquidation.
Terms
Like most 7(a) loans, the maturity of an
SBAExpress term loan is usually five to seven
8 • U.S. Small Business Administration
years for working capital and up to 25 years
for real estate or equipment (subject to the
useful economic life of the equipment). The ter-
mination date for revolving credits must be no
later than seven years after the first disbursement
unless a workout becomes necessary. For more
information on participating in SBAExpress, con-
tact your SBA district office. Visit the Web site at
www.sba.gov/financing/frfastrak.html.
SBA ExPORTEXPRESS
A subprogram of SBAExpress, SBA Export-
Express provides lenders with a guaranty on their
small business export loans up to a maximum
loan amount of $250,000. The guaranty is 85
percent for loans up to $150,000 and 75 percent
for loans between $150,000 and $250,000. Any
lender approved to participate in SBAExpress is
automatically granted authority to participate in
SBA ExportExpress. Lenders use the same
streamlined and expedited loan review and
approval procedures for SBA ExportExpress as
they do for SBAExpress.
SBA ExportExpress loan proceeds may be used
for most export-related business purposes. This
includes foreign market-development activities
such as trade-show participation and product-
literature translation. SBA ExportExpress loans
may support: standby letters of credit used for
either bid or performance bonds; revolving lines
of credit for export purposes; term loans; and
other financing to enable small businesses,
including small business export trading com-
panies and small business export management
companies, to develop foreign markets. To be
eligible for SBA ExportExpress assistance, appli-
cants must have been in business operation,
though not necessarily in exporting, for at
least one year.
SBA ExportExpress combines the SBA's small
business lending assistance with its technical
assistance programs to help small businesses
Lender's & Equity Investor's Guide • 9
obtain export financing. The U.S. Export
Assistance Centers provide technical assistance
in cooperation with the SBA's network of
resource partners. On approval of an SBA
ExportExpress loan, the SBA representative
in the nearest USEAC contacts the borrower
to offer appropriate assistance. Please visit
www.sba.gov/financing/frexportexpress.html
for more information.
CoMMUNITYExPRESS
The CommunityExpress pilot program is designed
to spur economic development and job creation in
untapped rural and inner-city areas by providing
loans and technical assistance to businesses. Loan
proceeds may be used for most business pur-
poses, including start-up, expansion, equipmen
purchases, working capital, inventory and real.
estate acquisitions.
While CommunityExpress is similar to
SBAExpress (described on page 8), there are
some differences.
• CommunityExpress focuses on predesig-
nated geographic areas, generally low- and
moderate-income areas.
• The SBA’s guaranty is 85 percent for loans
up to $150,000 and 75 percent for loans
between $150,000 and $250,000.
• CommunityExpress lenders, together with
the National Community Reinvestment
Coalition, provide hands-on technical
training and support, both before and after
loan closings, through community-based,
nonprofit NCRC member organizations.
For more information, visit the Web site at
www.sba.gov/financing/frcomexp.html.
SBA LOAN PREQUALIFICATION
With this program, the loan applicant comes
to you pre-approved by the SBA for an SBA loan
10 * U.S. Small Business Administration
guaranty. The SBA created this program to
assist segments of the small business community
that traditionally may have been underserved
by the lending community. Local SBA district
offices identify markets for the program, and
select, train and monitor intermediaries that do
the prequalification.
In the loan prequalification process an SBA-
designated intermediary assists the prospective
borrower in developing a viable loan application
package (and may charge a reasonable fee for
this service). Once the package is completed, the
intermediary submits it to the SBA for consider-
ation. The agency usually makes a decision on
the application within three days.
If the application is approved, the SBA issues a
letter of prequalification stating the agency's
intent to guarantee the loan on the stated terms
and conditions. The maximum loan amount is
$250,000. The SBA will guarantee up to 75 per-
cent of the loan amount (85 percent on loans of
$150,000 or less). The intermediary helps the
borrower locate a lender that offers the most
competitive rates and terms.
Eligibility Factors in Addition to the
Basic 7(a) Program Requirements
• Businesses must be at least 51 percent
owned, operated and managed by members
of one of the groups designated as eligible
to participate.
• Businesses, including their affiliated compa-
nies, must employ fewer than 100 workers.
Visit www.sba.gov/financing/frprequal.html
for more information.
THE SECONDARY MARKET
GUARANTEED PORTION OF THE LOAN
About $3.2 billion in new loans enter the second-
ary market each year, while another $561 million
Lender's & Equity Investor's Guide • 11
of previously sold loans are traded. The investor
receives the full faith and credit of the United
States government, which supports the SBA guar-
anty. If you make business loans guaranteed by the
SBA, you may profit by selling the guaranteed
portions of the loans in this active secondary
market. Selling the guaranteed portion of a loan
improves your liquidity position. Banks, savings
and loan associations, credit unions, pension funds
and insurance companies are frequent buyers.
The SBA-guaranteed portion can be sold in
as little as two weeks. You and the buyer sign
an agreement — SBA Form 1086, Secondary
Participation Guaranty Agreement — describing
the rights and responsibilities of both parties.
A Fiscal Transfer Agent reviews the documen-
tation and arranges a settlement. On the settle-
ment date, the buyer wires funds to the FTA, and
the FTA issues a certificate to the buyer and
wires the funds to you.
Profits from using the secondary market come
from —
• the premium, if any, at the time of the sale;
• the float on the borrower's loan payment; and
• the servicing fee required to be retained
during the life of the loan.
Variable-rate SBA-guaranteed portions usually
sell at a premium, which varies with market con-
ditions. The payment flow from the borrower to
the investor allows you to earn float income on
the loan payment until it must be sent to the
FTA. The FTA manages transactions among
lenders, investors and borrowers by keeping
track of payments made, distributing funds and
forwarding servicing requests and responses. Yol
need make only one payment to the FTA to
cover all the guaranteed portions you have sold
UNGUARANTEED PORTION OF THE LOAN
Securitization may be another option for you to
explore. For SBA purposes, securitization is the
12 ° U.S. Small Business Administration
pooling and sale of the unguaranteed portions of
a lender's 7(a) loans, usually to a trust or special-
purpose vehicle. These securities, backed by the
unguaranteed portions of the loans, are issued to
investors in either a private placement or public
offering. Each investor generally receives an
undivided ownership interest in the right to
receive the principal and a part of the interest of
the unguaranteed portion of the pooled loans.
Visit www.sba.gov/financing/second.html for
more information.
SPECIAL PROGRAMS
FOR THE BORROWER
In addition to the standard 7(a) loan guaranty,
the SBA has programs under 7(a) designed to
meet special financing needs of your small
business customers. Unless otherwise indicated,
these programs are governed by the rules,
regulations, interest rates, fees and other guide-
lines of regular 7(a) loan guaranties.
CAPLINES
CAPLines is the program under which the SBA
helps small businesses meet their short-term
and cyclical working-capital needs. A CAPLines
loan can be up to $2 million (except for the
Small Asset-Based Line). The SBA will guaran-
tee up to $1 million (85 percent on loans of
$150,000 or less; 75 percent on loans greater
than $150,000).
There are five short-term working-capital loan
programs for small businesses under the
CAPLines umbrella:
* Seasonal Line: This line advances funds
against anticipated inventory and accounts
receivable for peak seasons and seasonal
Sales fluctuations. It can be revolving or
nonrevolving.
* Contract Line: This line finances the
direct labor and material costs associated
Lender's & Equity Investor's Guide • 13
with performing assignable construction,
service or supply contracts. It can be revolv-
ing or nonrevolving.
• Builders Line: This line finances the direct
labor and material costs for small general
contractors and builders who are construct-
ing or renovating commercial or residential
buildings for resale. The building project
serves as the collateral, and the loan can be
revolving or nonrevolving.
• Standard Asset-Based Line: This program
guarantees asset-based revolving lines of
credit structured under SBA rules and pro-
vided by lenders. These loans let businesses
borrow against their existing inventories and
accounts receivable as long as such assets
have value and the line is repaid when the
business collects the cash from the sale of
these assets. These loans are continually dis-
bursed and repaid, and borrowers are
required to provide a report on the status of
their inventories and/or accounts receivable
with each disbursement. Such a line is
generally used by businesses that pro-
vide credit to other businesses. Since these
loans require continual monitoring of
collateral, the lender is allowed to charge
additional fees.
• Small Asset-Based Line: This program is
an asset-based revolving line of credit up to
$200,000. It operates basically like a stan-
dard asset-based line. Some of the stricter
servicing requirements are waived, however,
if the business can consistently show repay-
ment ability from its cash flow.
Terms, Interest Routes & Fees
Each of the five lines of credit has a maturity o
up to five years, but, because each is tailored
to the needs of the applicant, a shorter initia
maturity may be established. CAPLines fund
14 • U.S. Small Business Administration
may be used as needed throughout the term of
the loan to purchase assets, as long as sufficient
time is allowed to convert the assets into cash
by maturity.
The interest rate to be charged on CAPLines is
negotiated between you and the borrower, up to
2.25 percent over the prime rate. The guaranty
fee is the same as for any standard 7(a) loan.
There are no servicing-fee restrictions on you
for the Standard Asset-Based Line, but the
SBA requires full disclosure to ensure that the
fees are reasonable. On all other CAPLines,
the additional fee is limited to 2 percent of
the average outstanding balance. Visit the Web
site at www.sba.gov/financing/frcaplines.html
for more information.
DELTA: DEFENSE LOAN & TECHNICAL
ASSISTANCE PROGRAM
The DELTA Program provides both financial
and technical assistance to defense-dependent
small businesses either affected adversely by
defense cuts or located in defense-impacted
communities. It is designed to help these busi-
nesses diversify into the commercial market.
DELTA is a joint effort of the SBA and the
Department of Defense. The SBA processes,
guarantees and services DELTA loans, which
may be provided under the agency's 7(a) Loan
Guaranty Program or 504 Certified Devel-
opment Company Program (see page 23).
DELTA generally uses the forms, and follows
the regulations and operating criteria of these
two programs.
Eligibility
To be eligible, a business must meet 7(a) or 504
criteria and have derived at least 25 percent of its
total revenue during any one of the previous five
operating years from DoD contracts,
Department of Energy defense-related con-
Lender's & Equity Investor's Guide • 15
tracts, or subcontracts in support of defense
prime contracts.
The business must also –
• use the loan to modernize or expand facili-
ties in order to diversify operations, while
remaining in the national technical and
industrial base, or
• be adversely impacted by reductions in
defense spending and use the loan to retain
the jobs of defense workers, or
• be located in an adversely impacted com-
munity and use the loan to create new
economic activity or jobs in that community.
Maximum Loon & Guaranty Amounts
The maximum gross amount for a DELTA loan
under 7(a) is $1.25 million. The maximum SBA
guaranty under 7(a) or 504 is $1 million.
Credit Analysis
DELTA loans may require special handling
because of complicated credit analyses. Even
with significant capital, an applicant may be
unable, due to the transitional state of the busi-
ness, to demonstrate repayment ability based on
past operations. Revisions to the law allow the
SBA to resolve reasonable doubts in favor of the
applicant.
Technical Assistance
To make the transition to the commercial mar-
ket, a DELTA client may also require technical
assistance. This assistance is provided through
the SBA's small business development centers,
the Service Corps of Retired Executives, other
federal agencies and other technical and man-
agement assistance providers, including federal
research laboratories. Such assistance further
reduces your risk on a DELTA loan. Further
information on the program as well as a
directory of DELTA technical assistance
providers are available through the Web page:
www.sba.gov/financing/frielta.html.
16 • U.S. Small Business Administration
CAIP: CoMMUNITY ADJUSTMENT
& INVESTMENT PROGRAM
Established in response to changed trade patterns
with Canada and Mexico resulting from the
North American Free Trade Agreement, CAIP
creates new, sustainable jobs and preserves
existing jobs. The program is a partnership
between the federal government (primarily the
U.S. Department of the Treasury, the SBA and
the U.S. Department of Agriculture) and the
North American Development Bank.
Under CAIP, credit is available primarily through
loan guaranties provided either under the 7(a)
Loan Guaranty Program or the USDA Business
and Industry Loan Guaranty Program. The SBA’s
7(a) program can provide a guaranty of up to
75 percent ($1 million SBA share) on a loan of
up to $2 million.
Eligibility
To be eligible, a business applicant must —
• be located in a CAIP-eligible community.
Community eligibility is based upon an
analysis of NAFTA-related job losses within
the context of local unemployment rates.
• be able to demonstrate that within 24 months
and as a result of the loan, the business will
create or preserve at least one job per
$70,000 of federally guaranteed funds (the
SBA portion) received.
Fees
For eligible applicants, NADBank pays the bor-
rower's loan guaranty fee or participates as a
direct lender. If you would like more informa-
tion, call the NADBank Los Angeles office at
562–908–2100, visit the NADBank Web site at
www.nadbank-caip.org, or visit the SBA Web
site at www.sba.gov/financial/frcaip.html.
EXPORT WORKING CAPITAL LOAN
The Export Working Capital Loan was devel-
oped to help you meet the transactional financ-
Lender's & Equity Investor's Guide • 17
ing needs of exporters seeking short-term work-
ing capital. The loan funds may be used to
finance the manufacturing costs of goods for
export, the purchase of goods or services,
foreign accounts receivable and standby letters
of credit (used for performance bonds, bid
bonds or payment guaranties to foreign buyers).
The SBA guarantees up to 90 percent of the
amount or $1 million, whichever is lower. The
EWCL uses streamlined documentation.
Turnaround time on loan applications is usually
less than 10 business days. Lenders accepted by
the SBA as Preferred Lenders under the EWCL
make the credit decisions themselves, and the
SBA provides eligibility reviews that take one
day. Borrowers may also apply to the USEAC's
SBA representative for a letter of preliminary
commitment (see SBA Loan Prequalification,
page 11).
EWCL borrowers may have other SBA guar-
anties as long as the SBA’s exposure for working-
capital loans does not exceed $1 million. When
an EWCL is combined with an International
Trade Loan (see page 19), the SBA's combined
exposure can go up to $1.25 million.
Terms, Interest Routes & Fees
The maturity of an EWCL typically matches
a single transaction cycle or supports a line of
credit, generally with a maximum term of
12 months. With annual reissuances, however, it
is possible to have a loan maturity of up to three
years. The guaranty fee is 0.25 percent of the
guaranteed portion of the loan. The EWCL
places greater authority and profitability in your
hands by lifting the interest-rate and lender-fee
caps that apply to the SBA's other business loans.
You and the borrower negotiate interest rates
and fees.
For more information, visit the Web site at
www.sba.gov/financing/frexport.html.
18 e U.S. Small Business Administration
, INTERNATIONAL TRADE LoAN
The SBA’s International Trade Loan helps
small businesses engaged in international trade,
prepared to engage in international trade or
adversely affected by competition from imports.
Loan proceeds are to be used for the acquisition,
construction, renovation, modernization,
improvement or expansion of production facili-
ties or equipment that will be used in the United
States to produce goods and/or services for
export. In addition, a separate working-capital
loan under either the regular 7(a) Loan
Guaranty Program or Export Working Capital
Loan rules may be provided to a business that
qualifies for an International Trade Loan.
For the fixed-asset and permanent working-
capital portion of the International Trade Loan,
the SBA can guarantee up to 85 percent for
loans up to $150,000, and up to 75 percent for
loans above $150,000. Under this loan, the
working-capital portion of the SBA’s guaranty is
limited to $1 million, the guaranty for fixed
assets is limited to $1 million, and the combined
working-capital and facilities and equipment
guaranties cannot exceed $1.25 million.
Eligibility
To be eligible, a business must establish that the
loan proceeds will significantly expand existing
markets or develop new export markets, or that
the business is adversely affected by import
competition. For fixed-asset loans, a business
must also establish that upgrading its facilities
or equipment will improve its competitive
position.
Terms, Interest Routes & Fees
Terms and interest rates are negotiated between
the applicant and the lender. The SBA charges a
guarantee fee of 0.25 percent for a loan with
a maturity of 12 months or less. For terms
longer than 12 months, the SBA guaranty fee is
the same as for any standard 7(a) loan.
Lender's & Equity Investor's Guide • 19
Maturity
A loan for facilities or equipment may have a
maximum maturity of 25 years. The working-
capital portion of the loan can be made according
to the provisions of the Export Working Capital
Loan. The maturity is typically 12 months or less
if the financing is for a revolving line. The matu-
rity for a permanent working-capital loan can be
up to 10 years.
Collateral
As the lender, you must take a first-lien (or first-
mortgage) position on your and the SBA's behalf
on fixed assets financed under this program.
Only collateral located in the United States, its
territories and possessions is acceptable.
Additional collateral may be required, such as
personal guaranties, subordinate liens or items
that are not financed by the loan proceeds.
For more information, visit the Web site at
www.sba.gov/financing/frinternational.html.
ENERGY & CONSERVATION LOAN
An eligible business may use the loan to buy land
for plant construction; convert or expand exist-
ing facilities; purchase machinery, equipment,
furniture, fixtures, supplies and materials; or
provide working capital for entry or expansion
into eligible conservation project areas. The loan
may not be used for acquiring an energy business
or for purchasing energy devices for the busi-
ness's own use.
This program permits up to 30 percent of the
loan proceeds to be used for research and devel-
opment, which is not permitted in any other
7(a) program.
Eligibility
To be eligible, applicants must be engaged in the
following: engineering, manufacturing, distrib-
uting, marketing, and installing or servicing
products or services designed to conserve the
nation's energy resources.
20 * U.S. Small Business Administration
POLLUTION CONTROL LOAN
This program assists small businesses that are
planning, designing or installing a “pollution
control facility.” This includes most real or
personal property that will reduce pollution.
Unlike the Energy & Conservation Loan, the
Pollution Control Loan is for the end-user
of the pollution control facility. Visit
www.sba.gov/financing/frpollute.html
for more information.
EMPLOYEE STOCK OWNERSHIP PLAN
& GUALIFIED EMPLOYEE TRUSTS
The SBA can guarantee 7(a) loans to eligible
employee trusts that meet the SBA's size and pol-
icy requirements, are part of a plan sponsored by
their employer and qualify under the Internal
Revenue Code (as an Employee Stock Owner-
ship Plan) or the Department of Labor (under
the Employee Retirement Income Security Act).
Loan proceeds may be used by an employee trust
for a growth and development loan, whereby the
trust relends the loan proceeds to the employer
by purchasing qualifying securities (not neces-
sarily voting stock) in the employer's business;
or change of ownership loans, whereby
employees acquire controlling interest in the
employer's business. Collateral for the loan
includes the assets of the employer's business.
Visit www.sba.gov/financing/fraet.html for
more information.
LOAN SERVICING
If a small business encounters difficulty with its
SBA-guaranteed loan, the SBA and its participat-
ing lenders are ready to help with expert business
counseling and assistance. In the event that a
borrower is unable to meet the obligations of an
SBA loan, the SBA works closely with the lender
and/or borrower to negotiate a feasible solution.
If a loan workout is not possible, the SBA or the
Lender's & Equity Investor's Guide • 21
participating lender will work to liquidate the
assets securing the loan. In recent years the
agency has placed a greater emphasis on liquida-
tion improvement resulting in increased dollar
recoveries, streamlined procedures and more
timely completion of liquidation cases.
7(M) MICROLOAN
The SBA makes loan and grant funds available
to community-based nonprofit organizations
(intermediary lenders) under the 7(m) Micro-
loan Program. The intermediary lenders use the
loan capital to provide very small loans
(microloans) in amounts of $35,000 or less. The
average microloan is about $10,500. Grant
funds to intermediaries are used to provide tech-
nical assistance to microborrowers and potential
microborrowers.
A small business or not-for-profit child-care
center in need of an SBA microloan must apply
directly to the agency's local intermediary
lender. Each local SBA office can advise whether
there is an intermediary lender in the area.
USE OF PROCEEDS
Microloans may be used to finance furniture,
fixtures, equipment, inventory, materials and
supplies. They may also be used for working
capital. Funds may not be used to purchase real
estate. There are certain restrictions when
microloans and non-government funds finance
the same assets.
TERMS & INTEREST RATES
The maximum term for a microloan is six years.
Interest rates can be up to 8.5 percent over
the intermediary’s cost of borrowing from the
SBA. Microloans are direct loans from the
intermediary lender and are not guaranteed by
the SBA.
22 * U.S. Small Business Administration
COLLATERAL -
Each intermediary lender will have its own
requirements regarding collateral and personal
guaranties.
ELIGIBILITY
Virtually all types of for-profit businesses and
not-for-profit child-care centers that meet the
SBA's size and type-of-business standards for the
7(a) Loan Guaranty Program may apply for a
microloan.
For more information, visit the Web site at
www.sba.gov/financing/frmicro.html.
504 CERTIFIED DEVELOPMENT
COMPANY PROGRAM
Through certified development companies, the
504 Certified Development Company Program
provides growing businesses with long-term,
fixed-rate financing for fixed assets, such as land
and buildings. Approximately 270 CDCs nation-
wide work with the SBA and private-sector
lenders in a public-private partnership to provide
financing to small businesses.
Generally, CDCs are nonprofit corporations set
up to contribute to economic development in
their local communities. The 504 CDC Program
is designed to enable small businesses to create
and retain jobs; the CDC’s portfolio must create
or retain at least one job for every $35,000 of
debenture proceeds provided by the SBA.
Typically, a 504 project includes —
* a third-party loan secured with a senior lien
on the financed asset made by a private-
sector lender (covering 50 percent of the
fixed financing);
• a 504 loan secured with a junior lien made by
a CDC (funded by a 100 percent SBA
guaranteed debenture), covering up to
40 percent of the financing; and
Lender's & Equity Investor's Guide • 23
• a contribution of at least 10 percent equity
from the borrower.
The SBA-guaranteed debentures are pooled
monthly and sold to private investors. The maxi-
mum debenture is generally $1 million (and up to
$1.3 million if the financing satisfies certain public
policy goals).
USE OF PROCEEDS
Proceeds from 504 loans must be used for fixed-
asset projects such as —
• purchasing land and improvements, including
existing buildings, grading, street improve-
ments, utilities, parking lots and landscaping;
• constructing, modernizing, renovating or
converting existing facilities; and
• purchasing machinery and equipment.
The 504 Program cannot be used for working cap-
ital or inventory, consolidating or repaying debt,
or refinancing.
TERMS, INTEREST RATES & FEES
Interest rates on 504 loans are fixed at the time
of the debenture sale. The interest rates approx-
imate the current market rate for five-year and
10-year U.S. Treasury issues, plus a small incre-
ment. Maturities of 10 and 20 years are available.
Fees total approximately 3.5 percent of the
debenture and may be financed with the loan.
These fees include a CDC processing fee of
1.5 percent, a guaranty fee, a funding fee and an
underwriting fee.
COLLATERAL
Generally, guaranties of the owners of 20 per-
cent or more of the business are also required.
ELIGIBILITY
To be eligible, a business, with its affiliates, must
be operated for profit and fall within the size
standards set by the SBA. The business must
also have a tangible net worth of $6 million or
less and an average net income of $2 million or
24 • U.S. Small Business Administration
less after taxes for the preceding two years.
Loans cannot be made to businesses engaged in
speculation or investment. Visit the Web site at
www.sba.gov/financing/frcd.c504.html for
more information.
SBA FRANCHISE REGISTRY
The SBA Franchise Registry is a national
registry of franchises. The SBA reviews the
franchise agreements of the franchisors listed on
the Registry. The benefit of being listed on the
SBA Franchise Registry is that whenever a busi-
ness operating under a franchise agreement of a
listed franchise applies for a loan, the SBA’s
eligibility review process is expedited because
the complex issues of control have already been
satisfied. However, the business still must
meet additional eligibility issues associated
with an SBA loan such as size, use of proceeds,
nondiscrimination, repayment ability and so on.
Franchises not listed on the registry are not nec-
essarily ineligible for SBA financial assistance.
The applications of such franchises take longer
to process, however, because first a determi-
nation must be made that no affiliation between
franchisee and franchisor exits. For further
information, visit the Franchise Registry at
www.franchiseregistry.com.
EQUITY INVESTMENT
SMALL BUSINESS
INVESTMENT COMPANY PROGRAM
The Small Business Investment Company
Program fills the gap between the availability of
venture capital and the needs of small start-up
or growing businesses. Licensed and regulated
by the SBA, SBICs are privately owned and
managed investment companies that make
capital available to small businesses through
investments or loans. They use their own funds
Lender's & Equity Investor's Guide • 25
plus funds obtained at favorable rates with
SBA guaranties.
SBICs are for-profit companies whose incentive
is to share in the success of small businesses. In
addition to equity capital and long-term loans,
SBICs provide debt-equity investments and
management assistance.
The SBIC Program provides funding to all types
of manufacturing and service industries. Some
investment companies specialize in certain fields;
others seek out small businesses with new
products or services because of their strong
growth potential. Most, however, consider a
wide variety of investment opportunities.
Providing the same services as SBICs, special-
ized small business investment companies invest
in socially or economically disadvantaged small
companies; typically, however, they invest in
businesses during their growth stages and make
smaller investments. The Small Business
Improvement Act of 1996 repealed Section
301(d), and as a result no new specialized SBIC
licenses are being issued. However, existing
301(d) licensees were “grandfathered” and are
still in operation. For more information, visit
the Web site at www.sba.gov/inv/.
NEW MARKETS
VENTURE CAPITAL PROGRAM
The New Markets Venture Capital Program,
modeled after the Small Business Investment
Company Program, combines the use of equity
investing and hands-on technical assistance to
foster new business growth and job creation in
rural and inner-city low-income areas.
Selected by the SBA through a competitive
process, NMVC companies are privately owned
and managed for-profit entities that offer equity
financing and intensive operational assistance to
small businesses located primarily within targeted
low-income areas.
26 • U.S. Small Business Administration
NMVC companies use their own private capital
plus debentures obtained at favorable rates with
SBA guaranties for investing. They also provide
technical assistance to the small businesses in
which they invest. For this they use their own
funds plus resources provided by the SBA in the
form of matching operational assistance grants.
The grants are designed to help remove the
financial barriers to specific, intensive technical
assistance that might otherwise not be available
in low-income areas. for more information, visit
the Web site at www.sba.gov/inv/venture.html.
SURETY BONDS
SURETY BOND GUARANTEE PROGRAM
By law, prime contractors to the federal
government must post surety bonds on federal
construction projects valued at $100,000 or
more. Many state, county, city and private-
sector projects require bonding as well. The
SBA can guarantee bid, performance and
payment bonds for contracts up to $2 million
for small businesses that cannot obtain bonds
through regular commercial channels. The SBA
issues guaranteed bonds in two ways:
• Prior Approval Sureties – The SBA must
approve each bond guarantee before the
surety issues the bond.
• Preferred Sureties — The SBA authorizes
preferred sureties to issue, monitor and
service bonds without prior SBA approval.
Construction and service contractors may qual-
ify if their average annual receipts do not exceed
$5 million. Manufacturing companies may qual-
ify depending on their number of employees.
For more information, visit the Web site at
www.sba.gov/osg.
Lender's & Equity Investor's Guide • 27
BUSINESS CounSELING & TRAINING
The SBA offers a variety of information, educa-
tion and training services to your customers —
current and prospective small business owners.
The SBA can also help your customers find new
opportunities through its federal government
contracting-assistance programs. Many of these
services are free of charge. Contact your local
SBA office to find your closest counseling and
training resources.
SMALL BUSINESS
DEVELOPMENT CENTERS
SBDCs provide management and technical
assistance to current and prospective small
business owners through more than 1,000 loca-
tions throughout the nation and in the U.S.
territories. SBDCs offer a broad spectrum of
business information and guidance, along with
assistance in preparing loan applications. The
program is a cooperative effort of the private
sector, the educational community, and federal,
state and local governments. Visit the Web
site at www.sba.gov/sbdc/index.html for
more information.
BUSINESS INFORMATION CENTERS
BICs provide the latest in high-tech hardware,
software and telecommunications to help
small businesses get started and grow. Co-
sponsored by local SBA offices, BICs also offer
expert counseling by SCORE volunteers (see
page 30). For more information, visit the Web
site at www.sba.gov/bi/bics/index.html.
WOMEN'S BUSINESS CENTERS
The SBA has women's business centers in nearly
every state, the District of Columbia and Puerto
28 ° U.S. Small Business Administration
Rico. The centers provide women with training
and counseling in all aspects of owning or man-
aging a business. Each center tailors its services to
the needs of the local business community. To
find the women's business center nearest you,
contact your closest SBA field office.
There is also an interactive Online Women's
Business Center. The numerous features of the
online center include information in Spanish
and several other languages, training, inter-
active mentoring, a message board and a
calendar of events. You can access the center
at www.onlinewbc.gov.
U.S. EXPORT ASSISTANCE CENTERS
The SBA delivers its international programs,
services and loans primarily through U.S. export
assistance centers. These centers offer a full
range of federal export programs and services
from the SBA, the U.S. Department of
Commerce, the Export-Import Bank of the
United States, and other public and private
organizations. Located in 19 cities nationwide,
USEACs use the latest technology to provide
export marketing and trade finance assistance,
customized counseling for companies com-
mitted to exporting, and customer service. For
more information or to find the USEAC nearest
you, visit the Web site at www.sba.gov/oit.
SERVICE CORPS
OF RETIRED EXECUTIVES
The collective business experience of more than
11,500 SCORE counselors nationwide spans
the full range of business enterprise. These
volunteers provide free management and tech-
nical expertise at SBA district offices, business
information centers and other SBA locations.
SCORE's Web site is www.score.org.
Lender's & Equity Investor's Guide • 29
PROGRAM FOR INVESTMENT
IN MICROENTREPRENEURS
Under PRIME, the SBA provides federal
funds to community-based regional and
national organizations to offer or enhance the
availability of training and technical assistance
to low-income and very low-income entrepre-
neurs with small businesses of five employees or
fewer. The major focus of the PRIME program
is to provide training in basic business skills
to low-income and very low-income entre-
preneurs. For more information, visit
www.sba.gov/financing/frprime.html.
THE SBA HOME PAGE
The SBA home page – www.sba.gov —
contains a wealth of information on SBA
programs and services as well as SBA publi-
cations on starting and building a small business.
It also provides access to the SBA Class-
room, an online vehicle for reading articles,
taking courses and researching small business
development issues.
30 ° U.S. Small Business Administration
BUSINESSLAW.GOV
This Web site — www.BusinessLaw.gov —
provides information on legal and regulatory
issues affecting small businesses. The site offers
access to critical information on topics from
advertising to zoning as well as state and local
laws, including laws on hiring and managing
employees. Business owners can also apply for
licenses or permits, e-file tax returns and confer
with other business owners.
THE U.S. BUSINESS ADVISOR
The U.S. Business Advisor provides interactive
access to all federal business information and
services at www.business.gov.
Lender's & Equity Investor's Guide • 31
GUICK REFERENCE TO LENDER OPTIONS
Required Documents Lender's SBA Time God!
Deliver Lender Submitted Processing SBA's Processing for Screening Additional
Metho Documents to SBA Responsibilities Responsibilities and Processing Comments
Regular Lender's SBA Form 4 Anglyze application; Re-andlyze the 3 days for screening Used for
application application, and make determination lender's eligibility plus 10 days for specialized loan
package j required on need for SBA and credit decisions; processing programs, the
exhibits and guaranty; explain make independent most complex
attachments; rationale for credit determination Coses, or new
lender's Application and eligibility decision; on providing lenders
for Guaranty propose loan structure, G guardnty
(Form 4-I) terms and conditions;
Submit to SBA
Certified Lender's SBA Form 4 Same as above Review lender's 3 days for screening Certified lender
application application plus draft andlysis of and processing authority given to
package ackage; authorization eligibility and lenders with
orm 4-I and credit existing SBA
lender's draft
authorization
experience and
commitment to
SBA lending
;;
Preferred
SBALowLoc
SBAExpress
Lender's
application
package
Lender's
application
package
Lender's
application
package
SBA Forms 4
and 4-I; PLP
Eligibility Checklist
SBALowDoc
application
SBAExpress Eligibility
Checklist; sºld
Information Form
and Form 1919
for each principal/
guarantor
Make credit determination
(SBA reviews
eligibility); submit
. documents
including eligibility
checklist to SBA
To request guaranty,
complete front of
one-page application
and have applicant com-
plete back; propose loan
structure, terms and
conditions; include eligibility,
checklist; submit to SBA
Make credit determination
(SBA reviews
º send
required documents
including eligibility
checklist to SBA
Review eligibility
and delegate
credit decision
to lender
Review lender's
analysis of
jī,
and credit
Review eligibility
checklist and
delegate credit
decision to lender
1-day processing
36-hour screening
and processing
1-day processing
Preferred lender
authority given to
experienced SBA
lenders with
dedicated SBA
lending staff
LowLoc loans
limited to a
maximum of
$150,000
SBAExpress
Loans limited to
$250,000;
moximum SBA
guaranty is 50%
Required Documents Lender's SBA Time Goal
Deliver Lender Submitted Processing SBA's Processing for Screening Additional
º Documents to SBA Responsibilities Responsibilities and Processing Comments
Community Lender's Some ds Same as SBAExpress Some ds Same as SBAExpress loan limit to
Express application SBAExpress except borrower must SBAExpress $250,000.
package be from Specially Lender or
Designated Ared intermediary
provides technical
dssistance;
moximum
guaranty is 85%.
ExportExpress Lender's Same as Same as SBAExpress Same as Same as SBAExpress loan limit to
application SBAExpress plus loan proceeds SBAExpress $250,000,
package must be used to Maximum
foster or promote Uardnty is 85%;
exporting § 150,000-
$250,000
moximum
guaranty is 75%
GUICK REFERENCE TO PROGRAMS FOR BORROWERS
Maximum Percent of Maximum Guaranty and
Program Amount Guaranteed Guaranty (Max.) Use of Proceeds Maturity Interest Rotes Other Fees Eligibility
7(A) Loon $l million in most coses; 75% (85% if total Expand or renovate; Depends On USe Negotiable with Guaranty fee paid by Operate for profit;
Guaranty $2 million total loan loan is $150,000 Construct d new of proceeds and lender; loans Under lender (usually passed meet SBA size
Program or less) facility; purchase land ability to repay, 5- 7 years, max. prime to borrower). Based on standards; show
The SBA's or buildings; purchase 10 years for work # 2.25%; 7 years or maturity and amount of good character,
g | fixtures, equipment ing capital; up to more, max. 2.75% SBA exposure; 1 year management expertise
primary loan ,-- f 25 f : ime: Und less, 0.25%; over and commitment; and
program leasehold improve- years (not to over prime; Under Oſ , V. A. J AO, f
ments; working
capital; refinance
debt for compelling
reasons; seasonal line
of credit; inventory
acquisition
exceed life of
equipment
for machinery/
equipment, real
estate, construction
$50,000, rates may
be 1 or 2% higher
(SBAExpress and
CommunityExpress
interest rates may be
slightly higher)
1 year and $150,000
or less, 2%; over
$150,000 and up to
$700,000, 3%; over
$700,000, 3.5%;
annual fee of 0.5%
to lender only on
remaining guaranteed
portion
able to repay; may
not be involved in
speculation, invest.
ment, or other types
of businesses specified
by the SBA
Maximum Percent of Maximum Guaranty and
Program Amount Guaranteed Guaranty (Max.) Use of Proceeds Maturity Interest Rotes Other Fees Eligibility
SBA Loon $250,000 (total loan Standard guaranty See 7(a) See 7(a) See 7(a) See 7(d); Relies on a lending
Prequalification amount intermediaries also intermediary to work
Program may charge a fee with applicants and
Infermediaries submit applications to
assist with the SBA before a
loan applica- lender reviews them.
tion; upon For new markets
approval including businesses
SBA issues owned by women,
prequalification veterans and
leffer; check minorities, plus
district office businesses operating
for availability in rural areas. Can
be customized to
local areas.
CAPLines
ShorHerm
and RLCs;
Seasonal,
Contract,
Builders,
Standard
Asset-Based,
Small Asseſ.
Based
DELIA
Provides
financial and
technical
assistance fo
help defense-
dependent
firms diversity
info commer-
cial market;
effort of SBA
and DoD
$1 million (for Small Asset. Standard guaranty
Based Line, maximum total
loan amount is $200,000)
7(a) or combined with 504: Depends on whether
$1.25 million (total loan done under 7(a) or
amount). 504; see both
504: $1 million SBA share
(up to 40% of project)
Finance seasonal Up to 5 years Prime + 2.25%
working-capital
needs; costs to
perform; construction
costs; advances
against existing
inventory and
receivables; consoli-
dation of short-term
debts possible
Defense conversion; See 7(a), 504 See 7(a), 504
see 7(d), 504
See 7(d); Under Existing businesses;
Standard Asset-Based, see 7(a)
no restrictions on
servicing fees
See 7(a), 504 Defense-dependent
small companies
adversely affected by
defense cuts; see
7(d), 504 for other
qualifications; can not
be CLP or PLP loans
Maximum Percent of Maximum Guaranty and
Program Amount Guaranteed Guaranty (Max.) Use of Proceeds Maturity Interest Rates Other Fees Eligibility
CAIP $1 million Standard guaranty Creole or preserve See 7(d) See 7(a) See 7(a) Existing businesses
Credies jobs
and sustains
jobs at risk
due to
changed trade
pafferns with
Canada and
Mexico; U.S.
Dept. of
Treasury, SBA,
U.S. Dept. of
Agriculture
and NADBank
one job for every
$70,000 of federally
guaranteed funds
received
located in CAIP-
eligible communities
Export $1 million (may be
Working combined with International
Capital loan Trade Loan)
Provides short.
term working
capital;
borrower may
apply for SBA
preliminary
commitment
leffer
90%; see 7(a)
International $1.25 million
Trade Loan
Program
Short and
long-term
financing
75%, see 7(a)
Short-term working-
capital loans to
finance export trans-
octions
Working capital;
acquisition, construc-
fion, renovation, mod-
ernization, improve-
ment or expansion of
productive facilities or
equipment to be used
in the U.S. to produce
goods and/or servic-
es for export; may not
be used for refinanc-
ing existing debt.
Matches single No cap
transaction cycle or
generally 1 year for
line of credit
Up to 25 years See 7(a)
See 7(d);
no restrictions on
servicing fees
See 7(a)
Small business
exporters; see 7(a) for
other qualifications;
must have been in
business at least 1 year
Small businesses
engaged or preparing
to engage in
international trade or
adversely affected by
competition from
imports; see 7(a) for
other qualifications
Maximum Percent of Maximum Guaranty and
Program Amount Guaranteed Guaranty (Max.) Use of Proceeds Maturity Interest Rotes Other Fees Eligibility
Small $1 million (total loan 75%; see 7(a) Engineering, manufac- See 7(a) Prime + 2.75% See 7(a) Small businesses
Business amount turing, distributing, engaged in specified
Energy & marketing, and energy production or
Conserviction installing or servicing conservation dctivities
Loan; products or services
For energy designed to conserve
production or the nation's energy
conservation TeSOUTCeS
activities
Pollution $1 million See 7(d) Pollution control See 7(a) See 7(d) See 7(a) Businesses planning,
Control loan
For activities
connected
with the
installation of
a pollution
control facility
designing or installing
a pollution control
facility
NA
Purchase of furniture,
fixtures, equipment,
inventory, materials
and supplies, receiv-
ables and working
capital
Shortest term possi-
ble, not to exceed
6 years
8.5% over the interme-
diary's cost to borrow
from the SBA for loans
Under $7,500; 7.75%
for loans over $7,500
504 Certified
Development
Company
Program
long-term, fixed.
asset loans
generally
through non-
profit certified
development
companies;
must Creaſe Or
retain at least
one job per
$35,000 of
debenſure
proceeds
7(m) Microloan $35,000 (total loan
Program amount)
loans made
through non-
profit lending
organizations;
technical assis-
tance also
provided;
numerous sites
40% of project
(100% SBA backed
debenture); private
lender unlimited
Limit on SBA portion of
project is $1 million to
$1.3 million
Purchase of fixed
assets such as
land, buildings,
improvements,
long-term equipment,
construction and
renovation
10 or 20 years
only
Based on current
market rate for
5- and 10 year
Treasury issues, plus
a small increment
Total fee approximately For-profit businesses
3% of the debenture that have $6 million or
less in tangible net
worth and an average
net income of $2 .
lion or less for the past
2 years
Direct loan from Some as 7(a)
intermediary lender-not
guaranteed by the SBA
FOR MORE INFORMATION
• SBA offices are located in all 50 states, the
District of Columbia, Puerto Rico, the U.S.
Virgin Islands and Guam. For the office
nearest you, look under “U.S. Government”
in your telephone directory, or contact:
• Home page: www.sba.gov
• Phone: 1-800-U ASK SBA
• TDD: 704–344–6640
• Fax: 202–481–6190
• E-mail: answerdeskøsba.gov
SBA RESOURCE PARTNERS
Inquire at your local SBA office for the
location nearest you.
• Business Information Centers (BICs)
• Service Corps of Retired Executives (SCORE)
• Small Business Development Centers (SBDCs)
U.S. Export Assistance Centers (USEACs)
Veterans Business Outreach Centers (VBOCs)
Women's Business Centers (WBCs)
42 ° U.S. Small Business Administration
THE SBA – AMERICA’s SMALL
BUSINESS RESOURCE
DID YOU KNOW THAT IN FISCAL 2001
THE SBA —
• backed more than $16.5 billion in financing
to America's small businesses?
• approved more than 50,000 small business
loans totaling almost $12.2 billion?
• invested $4.5 billion in small businesses
through its venture-capital program?
• provided more than 48,000 loans totaling
more than $1 billion to disaster victims for
residential, personal-property and business
loans?
• gave management and technical assistance
to an estimated 1.3 million entrepreneurs
through its grant programs and resource
partners?
• responded to almost a quarter million
telephone and e-mail inquiries at the SBA
Answer Desk?
DID YOU KNOW THAT AMERICA'S MORE
THAN 22 MILLION SMALL BUSINESSES —
• employ more than 51 percent of the private
work force?
• generate more than 51 percent of the
nation's gross domestic product?
* are the principal source of new jobs?
Lender's & Equity Investor's Guide • 43
NOTES
44 • U.S. Small Business Administration
NOTES
Lender's & Equity Investor's Guide • 45
NOTES
46 ° U.S. Small Business Administration
SBA FIELD OFFICES
NM ........ Albuquerque
NV ......... Las Vegas
NY ......... Buffalo
Elmira
Melville
New York City
Rochester
Syracuse
OH ......... Cincinnati
Cleveland
Columbus
OK......... Oklahoma City
OR.......... Portland
PA .......... Harrisburg
Philadelphia
Pittsburgh
Wilkes-Barre
PR........... Hato Rey
R!............ Providence
SC.......... Columbia
SD.......... Sioux Falls
TN.......... Nashville
TX........... Corpus Christi
El Paso
Fort Worth
Harlingen
Houston
Lubbock
San Antonio
UT .......... Salt Lake City
WA.......... Richmond
Vl........... St. Croix
VT........... Montpelier
WA......... Seattle
Spokane
W!.......... Milwaukee
WV......... Charleston
Clarksburg
WY......... Casper
Disaster Area Offices:
CA.......... Socramento
GA ......... Atlanta
NY ......... Niagara Falls
TX........... Fort Worth
AK.......... Anchorage
Al........... Birmingham
AR.......... Little Rock
AZ.......... Phoenix
CA.......... Fresno
Glendale
Socramento
San Diego
Sqn Francisco
Santa And
CO......... Denver
CT .......... Hartford
DC.......... Washington, D.C.
DE .......... Wilmington
Fl........... Midmi
Jacksonville
GA......... Atlanta
GU ......... Mongmong
Hl........... Honolulu
A........... Cedar Rapids
Des Moines
|D........... Boise
ll............ Chicago
Springfield
IN........... Indianapolis
KS.......... Wichita
KY.......... Louisville
LA........... New Orleans
MA......... Boston
Springfield
MD ......... Baltimore
ME ......... Augusta
M! .......... Detroit
Marquette
MN ........ Minneapolis
MO ........ Kansas City
St. Louis
Springfield
MS ......... Gulfport
Jackson
MT.......... Helena
NC......... Charlotte
ND......... Forgo
NE.......... Omaha
In addition to SBA field offices, there are approximately
1,000 small business development center locations
and 389 SCORE chapters to help small businesses
start and/or grow.
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