Capital Opportunities for Small Businesses - sbtdc

More documents

Recommendations

Info

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
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 important considerations. All owners having 20 percent or more ownership in the company are required to personally guarantee SBA loans. Restrictions on Eligibility of Businesses The vast majority of businesses are eligible for financial assistance from the SBA. However, applicant businesses must operate for profit, have reasonable owner equity to invest, and use alternative financial resources (including personal assets). Also, the business must be engaged in, or propose to do business in, the United States or its possessions. Specific types of businesses not eligible include: Real estate investment and other speculative activities Lending activities Pyramid sales plans Illegal activities Gambling activities Charitable, religious, or certain other non-profit institutions Life insurance companies Businesses located in a foreign country Businesses primarily engaged in political or lobbying activities Speculative business (such as oil exploration) The Small Business Act defines an eligible small business as one that is independently owned and operated and not dominant in its field of operation. The SBA has developed size standards that define the maximum size of an eligible small business. These, however, represent general industry guidelines and depend on NAICS classification applicable to the business. Industry Size Limitations: Not to Exceed: Retail Service Construction Agriculture Wholesale Manufacturing $7.0 to $35.5 million in revenues $2 to $35.5 million in revenues $7.0 to $33.5 million in revenues $0.75 to $17.5 million in revenues fewer than 100 employees 500 to 1,500 employees 7(a) loans have a maximum loan amount of $5 million. SBA does not set a minimum loan amount. The proceeds of SBA loans can be used for most business purposes. These may include the purchase of real estate to house the business operations; construction, renovation, or leasehold improvements; acquisition of furniture, fixtures, machinery, and equipment; purchase of inventory; and working capital. The proceeds of SBA loans cannot go towards the following: refinancing existing debt where the lender is in a position to sustain a loss and the SBA would take over that loss through refinancing; providing 35
Page 1 and 2: C A P I T A L O P P O R T U N I T I
Page 33: C A P I T A L O P P O R T U N I T I
Page 63 and 64: APPENDIX A: QUICK REFERENCE TO SBA
Page 65 and 66: PROGRAM AMOUNT % GUARANTEE (MAX) US
Page 85 and 86:
C A P I T A L O P P O R T U N I T I
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
PROFILES: VENTURE CAPITAL FUNDS ACT
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149:
show all

Capital Opportunities for Small Businesses - sbtdc

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?