The AllBusiness.com Practical Guide to SBA Loans |
$49.00 |
Our 56-page Business Guide is available for immediate download. It contains information on SBA loan programs, the SBA application process, and key eligibility requirements, along with 16 useful sample forms.
Format: |
The AllBusiness.com Practical Guide to SBA Loans Table of Contents: |
||||
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |
||||
OVERVIEW | 1 | |||
SBA LOAN PROGRAMS | 2 | |||
Basic Section 7(a) Loan Guaranty Program | 2 | |||
Eligibility Criteria | 2 | |||
Size | 4 | |||
Type of Business | 4 | |||
Business Types and Applicants with Additional Considerations | 4 | |||
Ineligible Businesses | 4 | |||
Use of Proceeds/Ineligible Use of Proceeds | 5 | |||
Operate in the U.S. or its Possessions | 5 | |||
Repayment | 5 | |||
Additional Components of the Basic Section 7(a) Loan Guaranty Program | 6 | |||
Maturity of Basic 7(a) Loans | 6 | |||
Negotiation of Terms | 6 | |||
Maximum Loan Amount and Guaranty | 6 | |||
Fees Associated with SBA Loans | 6 | |||
Interest Rates | 7 | |||
Prepayment Penalties | 7 | |||
Special Section 7(a) Loan Guaranty Programs | 7 | |||
Export Working Capital Program (EWCP) | 8 | |||
Export Express | 8 | |||
International Trade Loan Program (ITL) | 9 | |||
Defense Loan and Technical Assistance (DELTA) Program | 9 | |||
Community Adjustment & Investment Program (CAIP) | 10 | |||
Pollution Control Loan Program | 10 | |||
CAPLines Loan Program | 11 | |||
Prequalification Program | 11 | |||
Section 504 Certified Development Company (CDC) Program | 12 | |||
Maximum Debenture | 12 | |||
Eligibility Requirements for 504 Loans | 12 | |||
Use of Proceeds for 504 Loans | 13 | |||
Loan Terms for 504 Loans | 13 | |||
Collateral for 504 Loans | 13 | |||
The MicroLoan Section 7(m) Program | 13 | |||
Eligibility Requirements for MicroLoansLoan Terms for MicroLoan | 14 | |||
Use of Proceeds for MicroLoan | 14 | |||
Collateral for MicroLoan | 14 | |||
Credit Requirements for MicroLoan | 14 | |||
Technical Assistance for MicroLoan | 15 | |||
Applying for a MicroLoan | 15 | |||
APPLYING FOR AN SBA LOAN | 15 | |||
Preparation for Meeting with Your Lender | 15 | |||
Checklist of Required Papers for SBA Loans | 16 | |||
THE SBA WEB SITE | 17 | |||
SBA KEY REQUIREMENTS | 18 | |||
FINDING AN SBA OFFICE AND SBA LENDERS NEAR YOU | 18 | |||
Business Information Centers (BICs) | 18 | |||
Small Business Development Centers (SBDCs) | 19 | |||
APPENDIX | 20 | |||
Form 1 | Checklist of Required Papers To Be Obtained From Applicants SBA/Bank Financing | |||
Form 2 | SBA Form 4 (8-01). SBA Application for Business Loan | |||
Form 3 | SBA Form 4, Schedule A (8-01) SBA Schedule of Collateral Exhibit A | |||
Form 4 | SBA Form 649 (3-83) SBA Listing Collateral Documents | |||
Form 5 | SBA Form 4-L (8-01) SBA Application for SBALowDoc Loan | |||
Form 6 | SBA Form 4 (8-01) Short Form SBA Application for Small Business Loan (Short Form) | |||
Form 7 | SBA Form 770 (1-87) SBA Financial Statement of Debtor | |||
Form 8 | SBA Form 912 SBA Statement of Personal History | |||
Form 9 | SBA Form 1244 (03-04) Application for Section 504 Loan | |||
Form 10 | SBA Form 793 (3-02) Notice to New SBA Borrowers | |||
Form 11 | Income Statement | |||
Form 12 | Comparative Income Statement | |||
Form 13 | Balance Sheet | |||
Form 14 | Comparative Balance Sheet | |||
Form 15 | Cash Flow Statement | |||
Form 16 | Sample Quarterly Budget |
The AllBusiness.com Practical Guide to SBA Loans
This Guide will provide you with valuable information regarding the Small Business Administration's Business Loan Programs, which is one of the significant areas of financial assistance provided by the SBA.
The SBA was established in 1953 and is an independent Agency of the Executive Branch of the Federal Government charged with the responsibility of providing four primary areas of assistance to American small business, which include: Advocacy, Management, Procurement, and Financial Assistance. Financial Assistance is delivered primarily through SBA's Investment Programs, Business Loan Programs, Disaster Loan Programs, and Bonding for Contractors.
The stated mission of the SBA is to "maintain and strengthen the nation's economy by aiding, counseling, assisting and protecting the interests of small businesses and by helping families and businesses recover from national disasters."
The SBA Web site (www.sba.gov) is an excellent resource for small businesses. It is very well organized, easy to navigate, and provides a wealth of information. The SBA Web site is referred to throughout this Guide, and is discussed below in a separate section.
The SBA offers a variety of loan programs to assist small businesses. It is important to note, however, that the SBA is primarily a guarantor of loans made by private lenders and other institutions, and not a lender itself. The SBA's several business loan programs supplement the ability of certain lenders to provide both long- and short-term financing to small businesses that might not otherwise qualify for loans through traditional lending sources.
The SBA may not guarantee a loan if a business can obtain funds on reasonable terms from a bank or other source.
There are three basic types of SBA Loan Programs, and several special purpose categories of Section 7(a) loans, including:
The different sections under which SBA loans may be obtained refer to sections of the Small Business Act.
The Basic Section 7(a) Loan Guaranty Program serves as the SBA's primary business loan program to help qualified small businesses obtain financing when the business might not be eligible for business loans through normal lending channels. It is the SBA's most flexible business loan program. The customers for this program are start-up and existing small businesses.
Loans under the 7(a) Program are provided by lenders who are called participants because they "participate" with the SBA in this program. Most American banks participate in this program, although not all lenders do. Loans under the 7(a) program are only available on a guaranty basis, which means that the loans are provided by lenders who have decided to structure their own loans according to the SBA's requirements, and who apply to and receive from the SBA a guaranty on a portion of the loan. This is not a guaranty for the full amount of the loan; the lender and the SBA both share the risk that a borrower will not be able to repay the loan in full. The guaranty is a guaranty against payment default.
Under this concept of guaranty lending, commercial lenders make and administer the loans and the business applies to a lender, not the Government, for the loan. The lender decides if it will make the loan itself or if the application has some weaknesses, which will require an SBA guaranty if the loan is to be made. A borrower must have been turned down for and be unable to obtain a traditional loan. The guaranty on the loan is only available to the lender, not the borrowing business. The guaranty assures the lender that if the borrower does not repay the obligation, the Government will reimburse the lender up to the percentage of the SBA's guaranty. Nevertheless, the borrower remains obligated for the full amount due.
Loans under this program must meet certain criteria. The business gets a loan from its lender with a 7(a) structure, and the lender gets an SBA guaranty on a percentage or portion of the loan.
For more information go to www.sba.gov/financing/sbaloan/7a.htm.
In order to obtain a loan under any of the SBA Loan Programs, the applicant must first be eligible. Unless otherwise specifically stated, most of the SBA Loan Programs use the Basic Section 7(a) eligibility criteria. The eligibility requirements are broad and designed to accommodate the most diverse number of small business financing needs.
All businesses must meet the following eligibility criteria in order to be considered for financing under the SBA's 7(a) Loan Program:
The maximum size of an eligible business is defined by size standards developed by the SBA. Under the Small Business Act, an eligible small business is defined as one that is "independently owned and operated and not dominant in its field of operation." The Act includes some room for flexibility in the definition, taking into consideration differences in size from industry-to-industry. If a potential borrower is close to, but doesn't quite meet size standards, this can be discussed with the local SBA office.
Meeting the employment or sales standards developed by the SBA and based on the North American Industry Classification System (NAICS) is also an eligibility requirement. The following criteria are used by the SBA to determine if a business qualifies as a small business that is eligible for SBA loan assistance:
For more information about size criteria, go to www.sba.gov/size.
The business must be a for-profit enterprise and be an eligible type of business. Certain types of businesses and applicants require additional considerations regarding eligibility for SBA loan programs. Additionally, although the majority of businesses will be eligible for financial assistance from the SBA, some types of businesses are completely ineligible.
Additional considerations are required for the following business types and applicants:
Specific types of ineligible businesses include:
The proceeds of a 7(a) loan may be used by a new or existing business to do the following:
The proceeds of a 7(a) loan may not be used for the following purposes:
The business must be engaged in or intend to do business in United States or its possessions.
The SBA Loan Program will not provide funds for businesses that are able to obtain or provide their own financing. Alternative resources for funding, if available, including personal assets, must be used first.
The borrowing small business must demonstrate its ability to repay the loan.
Additional components of the Basic Section 7(a) Loan Guaranty Program are discussed below, including: maturity of the loans; negotiation of terms; maximum loan amount and guaranty; fees associated with SBA loans; interest rates; and prepayment penalties.
Loan maturity under the Basic Section 7(a) Loan Program is based on several factors, including: the ability to repay, the purpose of the loan proceeds, and the useful life of the assets financed. Loans for working capital typically will not exceed seven years, except where a longer maturity rate is required to accomplish repayment. The maximum maturity of loans to finance fixed assets other than real estate is limited to the economic life of those assets, but in no instance will that be longer than 25 years. A twenty-five year maximum generally applies to the acquisition of land and buildings, or the refinancing of debt incurred in their acquisition.
The negotiation of the specific terms of a 7(a) loan is a matter between the lending institution and the borrower, subject to the requirements of the SBA.
The maximum amount of a loan available under the SBA's Basic 7(a) Program is $2 million, with the SBA's maximum exposure at $1.5 million. For example, if a business receives an SBA guaranteed loan in the amount of $2 million, the maximum guaranty to the lender is $1.5 million, or 75 percent. These amounts are subject to change.
Small loans have a maximum guaranty of 85 percent. A loan is considered small if the gross loan amount is $150,00 or less. For loans greater than $150,000, the maximum guaranty is 75 percent. The Export Working Capital Loan Program allows a maximum of a 90 percent guaranty, up to a guaranteed amount of $1.5 million.
For more information go to www.sba.gov/financing/sbaloan/7a.htm.
The SBA charges lenders a guaranty and a servicing fee for each loan approved. This is to offset the costs of the SBA Loan Programs to the taxpayers. Once these fees have been paid by the lender they may be passed to the borrower. The amount of these fees is determined by the amount of the loan guaranty.
For more information on fees, go to http://www.sba.gov/financing/subfiles/sba_7a_fees.html.
Certain fees typically associated with loans are prohibited from being charged to SBA Loan applicants, including processing fees, origination fees, application fees, points, brokerage fees, and bonus points. Under the Export Working Capital Loan Program, a commitment fee may be charged.
Interest rates are negotiated between the borrower and the lender, subject to SBA maximums, which are pegged to the Prime Rate. The interest rate may be fixed or variable, and will be based upon the amount of the loan and the length of the loan.
For more information on interest rates for Section 7(a) Loans, go to http://www.sba.gov/financing/subfiles/7a_interest_rates.html.
A prepayment charge paid by the borrower to the SBA applies to those loans that meet the following criteria:
The calculation for the prepayment fee is:
The SBA also has programs for special needs under its 7(a) Loan Guaranty Program. In most cases, the guidelines for the Basic Program governs these programs, including the rules, regulations, interest rate, and fees.
The Special Programs include...
This is only a partial view of this document. The AllBusiness.com Practical Guide to SBA Loans is just $49.00 and can be immediately downloaded after purchase. |