Friday 21 September 2012

SBA Loan Programs part 3


Special Loan Guaranty Programs 7(a) Program
There are a number of special loan guaranty programs under the 7(a) program that address specific needs of start-up or established businesses. They are governed, for the most part, by the same rules, regulations, fees, interest rates, etc., as the regular 7(a) loan guaranty. Your lender can advise you of any variations.

Low Documentation Loan (LowDoc)

LowDoc is one of SBA's most popular programs. Once you have met your lender's requirements for credit, LowDoc offers a simple, one-page SBA application form and rapid turnaround on approvals for loans up to $150,000 (for loans over $50,000, you must also provide a copy of U.S. Income Tax Schedule C or the front page of the corporate or partnership returns for the past three years). The SBA will guarantee up to 85 percent of the loan amount. Completed applications are processed quickly by the SBA, usually within two or three business days. Proceeds may not be used to repay certain types of existing debt. Business start-ups, as well as businesses with average annual sales for the past three years not exceeding $5 million and with 100 or fewer employees, including affiliates, are eligible.

SBAExpress (formerly FA$TRAK)

SBAExpress, formerly SBA's FA$TRAK, is available for loans up to $150,000. The program authorizes SBA preferred lenders to use mostly their own forms, analyses and procedures to process, service and liquidate SBA guaranteed loans. The SBA guarantees up to 50 percent of an SBAExpress loan. Loans under $25,000 to not require collateral. This is a change from the FA$TRAK requirements. Like most 7(a) loans, maturities are usually five to seven years for working capital and up to 25 years for real estate or equipment. Revolving lines of credit are allowed for a maximum of five years.

The Export Working Capital Loan

The Export Working Capital Program is a line of credit for financing foreign accounts receivable. It is a transaction-based program and can be revolving or non-revolving. The SBA provides a 90 percent guarantee to the lender. The business must have been in operation for at least 12 months prior to the application, and the proceeds can be used to finance materials and labor needed to manufacture or purchase goods and services for sale in foreign markets, including such items as consulting services, overseas travel to establish a market, and participation at trade shows. Funds cannot be used to refinance existing debt or purchase fixed assets. The maturity is generally 12 months or less but can be renewed up to a total of 36 months.

International Trade Loan

This program provides short-term and long-term financing to small businesses that are engaged in international trade, preparing to engage in international trade, or adversely affected by competition from imports. The SBA can guarantee up to $1.25 million for a combination of fixed-asset financing and permanent working capital.

Defense Loan and Technical Assistance (DELTA)

DELTA is a joint effort of the SBA and the Department of the Defense to provide financial and technical assistance to defense-dependent small firms affected by defense reductions. The goal is to help affected small firms diversify into the commercial market while remaining a part of the defense industrial base. Reductions affecting business may be the result of any number of actions, such as cuts in defense spending, termination of defense contracts or the closure or realignment of military installations. SBA may guarantee 75 percent of a loan up to $1.25 million under the 7(a) program, or $1 million under the 504 program. Technical assistance, including help in preparation of a business plan and loan application package, is available through Small Business Development Centers.

SBA 504 Loan Program

504 is the SBA's economic development instrument that supports American small business growth and helps communities through business expansion and job creation. The SBA 504 loan program provides long-term, fixed-rate, subordinate mortgage financing for acquisition and/or renovation of capital assets including land, buildings and equipment. Virtually all types of for-profit small businesses are eligible for this program.

The SBA 504 loan is distinguished from other SBA loan programs in these ways:
·         Lower down payment; allows a business to conserve valuable operating capital by injecting just 10% of total project cost.
·         Fixed interest rate; borrower knows cost of occupancy for the next 20 years. Rate is usually below market rate.
·         All project costs can be financed, including acquisition (land and building, land and construction of building, renovations, machinery and equipment) and soft costs such as title insurance, legal, appraisal, environmental and bridge loan fees.

Closing costs may be financed.
·         Collateral is typically assets financed; allows other assets to be free of liens and available to secure other needed financing.
·         Long-term: real estate loans are 20-year term, heavy equipment 10- or 20-year terms and are self-amortizing.
·         504 program encourages banks and other lenders to make loans in first position on reasonable terms, helps them retain growing customers, and provides CRA credit.
·         504 program benefits the borrower's community through job creation and retention.

Businesses that receive 504 loans are:
1.    Small - net worth under $6 million, net profit after taxes under $2 million, or meet other SBA size standards.
2.    Organized as for-profit.
3.    Any type of business - retail, service, wholesale or manufacturing.



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