Capital Opportunities for Small Businesses - sbtdc

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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 funding that will enable a change of business ownership or a change that will not benefit the business; reimbursement of funds owed to any owner; repayment of delinquent state or federal withholding taxes or other funds that should be held in trust or escrow. Loan Maturities SBA loan programs are generally intended to encourage longer-term small business financing, but actual loan maturities are based on the ability to repay, the purpose of the loan proceeds, and the useful life of the assets financed. The maximum term depends on the purpose of the loan. Purpose of Loan Maximum Term Real estate 25 years Working capital 10 years Fixed assets (other than real estate) Economic life of asset (not to exceed 10 years) Interest Rates and Fees Interest rates are negotiated between the borrower and the lender but are subject to SBA maximums, which are generally pegged to the prime rate as published in the Wall Street Journal. Interest rates may be fixed or variable, but fixed-rate loans must not exceed the rate set by the SBA on the first business day of each month. Refer to www.colsonservices.com for current rates. SBA 7(a) Programs The Preferred Lenders Program (PLP) The Preferred Lenders Program (PLP) is part of SBA's effort to streamline the procedures necessary to provide financial assistance to the small business community. Under this program, SBA delegates the final credit decision and most servicing and liquidation authority and responsibility to carefully selected PLP lenders. SBA, however, will continue to check loan eligibility criteria. SBA loan requests processed by preferred lenders offer logistical advantages over those processed through other lenders. Preferred lenders are among the SBA’s best lenders and have full delegation of lending authority. This kind of lending authority and the lender’s portfolio is periodically reviewed and renewed by the SBA. Applicants should contact their local branch for more information. Lenders are considered for PLP status based on their record with SBA, and must have demonstrated a proficiency in processing and servicing SBA-guaranteed loans. In the event of payment default by the borrower and the need for enforced collections, the PLP lender agrees to liquidate all business assets before asking SBA to honor its guaranty. You may obtain a current list of preferred lenders by accessing the SBA’s North Carolina District Office website at www.sba.gov/about-offices-content/2/3127/news/16341# or by calling 800.827.5722. 36
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 In addition to commercial banks, there are also several non-bank lenders operating in North Carolina that serve the small business community by processing and servicing loans under the SBA (7a) Loan Guaranty Program. SBA Express Program The SBA Express Program is a program designed to increase the capital available to businesses seeking loans of up to $350,000. Under this pilot program, qualified lenders are authorized to use their existing documentation and loan decision criteria to make and service an SBA 7(a) guaranty loan. There are no additional forms and no waiting for SBA loans approval, since the SBA is not part of the approval process. The SBA guaranty is up to 50 percent of the total loan amount. The lender can charge the borrower up to 6.5 percent over prime for loans of $50,000 or less and up to 4.5% over prime for loans over $50,000. SBA Express loans can take the form of a term loan or a revolving line of credit. SBA Patriot Express Loan The Patriot Express loan is offered by SBA’s network of participating lenders nationwide and features fast turnaround time for loan approvals. Loans are available up to $500,000 and qualify for SBA’s maximum guaranty of up to 85 percent for loans of $150,000 or less and up to 75 percent for loans over $150,000 up to $500,000. The Patriot Express loan can be used for most business purposes, including start-up, expansion, equipment purchases, working capital, inventory or business-occupied real estate purchases. Patriot Express loans can take the form of a term loan or a revolving line of credit. The Patriot Express Pilot Loan Initiative allows lenders with Patriot Express authority to make offers similar to lenders with SBA Express authority, but the business owner is more limited. To be eligible to receive a Patriot Express Loan, the business must be owned and controlled (51 percent or more) by eligible veterans and members of the military community who want to establish or expand a small business. Eligible military community members include: • Veterans • Service-disabled veterans • Active-duty service members eligible for the military’s Transition Assistance Program • Reservists and National Guard members • Current spouses of any of the above, including any service member • Widowed spouses of service members or veterans who died during service or of a serviceconnected disability SBA Military Reservists Economic Injury Loans The Military Reservist Economic Injury Disaster Loan (MREIDL) provides funds to help an eligible small business meet its ordinary and necessary operating expenses that it could have met, but is unable to, because an essential employee was called-up to active duty in his or her role as a military reservist. The purpose of MREIDL loans is not to cover lost income or lost profits. MREIDL funds cannot be used in lieu of regular commercial debt, to refinance long-term debt, or to expand the business. 37
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