SBA Loan Programs part 12

INELIGIBLE USE OF PROCEEDS

There are certain restrictions for the use of SBA loans. The following is a list of purposes

which SBA loans cannot finance:

1. To refinance existing debt where the lender is in a position to sustain a loss and SBA would take over that loss through refinancing;

2. To effect a partial change of business ownership or a change that will not benefit the business;

3. To permit the reimbursements of funds owed to any owner. This includes any equity injection, or injection of capital for the purposes of the businesses continuance until the loan supported by SBA is disbursed;

4. To repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow; and

5. For a non sound business purpose.

AVAILABILITY OF FUNDS FROM OTHER SOURCES:

The Federal Government does not extend credit to businesses where the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing. Therefore, the utilization of both the business and personal financial resources is reviewed as part of the eligibility criteria. If business and personal resources are found to be excessive, the business will be required to be use those resources in lieu of part or all of the requested loan proceeds.

SBA LowDoc

Further streamlines the making of small business loans.

·          The maximum loan-$150,000.

·         Calls for a response from the SBA within 36 hours of receiving a complete application.

·         Guaranty percent follows 7(a) policy

·         How it Works

·         Interest Rates

·                Collateral

·         Old vs. New

·         Eligibility

·         LowDoc Processing Centers

How It Works

Once a small business borrower meets the lender's requirements for credit, the lender may request a guaranty from the SBA through SBALowDoc procedures. It's a quick, two step process: The borrower completes the front of the SBA's one-page application, and the lender completes the back. The lender submits a complete application to the SBA and receives an answer within 36 hours.

Interest Rates

Interest rates can be negotiated between the borrower and lender, may be fixed or variable, are tied to the prime rate (as published in the Wall Street Journal), and may not exceed the following SBA maximums:

Follows 7(a) Interest Rate structure

Collateral

To secure the loan, the borrower must pledge available business and personally owned assets. Loans are not declined when inadequate collateral is the only unfavorable factor.

Personal guaranties of the principals are required.

·         Maturity

·         Length of time for repayment depends on

·         Ability to repay, and

·         The use of the loan proceeds.

·         Maturity is usually 5 to 10 years. For fixed-asset loans it can be up to 25 years.

SBA Loan Programs part 13

DYNAMAX BUSINESS CREDIT