Capital Opportunities for Small Businesses - sbtdc

C A P I T A L O P P O R T U N I T I E S F O R SMA L L B U S I N E S S E S
Select Bank & Trust 7 $731,000
Capital Bank NA 7 $448,000 3 $1,850,655
Sterling Savings Bank 6 $265,000
Truliant FCU 5 $5,045,500 2 $1,086,500
Bank of North Carolina 5 $2,856,300 5 $3,972,909
Four Oaks Bank & Trust 5 $2,120,900 1 $485,250
Square 1 Bank 4 $6,156,000
Macon Bank 4 $2,129,500
Home Loan Investment Bank FSB 4 $840,000
Hanmi Bank 3 $7,198,000
Community Reinvestment Small bus. 3 $3,868,500
Total of All 7(a) Loans 581 $287,660,500
Source: SBA
7(a) Loan Guaranty Program
The 7(a) Loan Guaranty Program is the SBA's primary lending program. Section 7(a) of the Small
Business Act authorizes the SBA to provide loan guaranties to small businesses that cannot obtain
financing on reasonable terms through normal lending channels. The program operates through
commercial lenders and some non-banker lenders who elect to participate in the 7(a) program.
7(a) loans are only available on a guaranty basis. They are provided by lenders who choose to structure
their own loans by SBA's requirements and who apply and receive a guaranty from SBA on a portion of
the loan. The SBA does not provide a guaranty for the entire loan amount. The lender and SBA share
the risk that a borrower will not be able to repay the loan in full. The guaranty is for payment default. It
does not cover imprudent decisions by the lender or misrepresentation by the borrower.
Under the guaranty concept, commercial lenders make and administer the loans. The business applies
to a lender for financing, not the SBA. The lender decides if they will make the loan internally or if the
application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to
be made. The guaranty that SBA provides is only available to the lender. It assures the lender that in
the event the borrower does not repay their obligation and a payment default occurs, the SBA will
reimburse the lender for its loss, up to the percentage of SBA's guaranty. Under this program, the
borrower remains obligated for the full amount due.
Loans are available for many business purposes, such as real estate, expansion, equipment, working
capital, or inventory. The SBA provides guarantees up to 85 percent of loans for $150,000 or less, and
up to 75 percent for loans above $150,000 up to $5 million. The maximum guaranty to a lender on a
$5 million loan is $3.75 million, or 75%. The total SBA guaranty portion of a loan or the aggregate
total of multiple loans, for any one borrower cannot exceed $3.75 million. However, there are some
exceptions as presented below in the discussion of specialized loan programs.
The repayment ability from the business’s cash flow is a primary consideration in the SBA loan decision
process. Good character, management capability, collateral, and owner's equity contribution are also
34