SBA Loans

Overview of SBA 7(a) and SBA 504 Loans

	SBA 7(a)	SBA 504
Benefits	For-profit businesses Lower down payment to conserve working capital Longer term than conventional financing Fully amortized loans	Existing and start-up for-profit businesses Lower down payment to conserve working capital Longer term than conventional financing Fully amortized loans Up to 90% combined loan-to-value on real estate purchase Higher size standards than the SBA 7A program allows
Eligibility	Small business qualifications by SBA guidelines Small business qualification by SBA guidelines-subject to SOP changes and lender guidelines -Size varies by industry type	Net worth $6MM or less Net profits after taxes $2MM or Less 1 job created for every $50,000 in SBA loan funds
Loan Size	SBA loan guarantee cannot exceed $3.75 million; maximum loan amount is $5 million	$5 million – If small manufacturer, 10% reduction in borrower’s energy consumption or generates renewable energy or renewable fuels than maximum is increased to $5.5 million
Use of Proceeds	Purchasing, constructing, or renovating commercial real estate (for owner-users – 51% occupancy) Purchasing of equipment Working capital and inventory Business acquisition and start-ups Refinancing of existing business debt	Purchasing, constructing, or renovating commercial real estate (for owner-users—51 % occupancy) Purchase of equipment with a useful life of 15 years or greater
Terms	Real Estate Loans up to 25 years Business Acquisitions up to 10 years Machinery and equipment: up to 10 years Working capital and inventory: up to 7 years	Bank loan up to 25 years SBA/CDC loan is 20 years for real estate and 10 years for equipment
Financing	Provided by chosen lender, and SBA provides an 85% guarantee to the lender on loan amounts of $150,000 or less, 75% guarantee on loan amounts of $150,000 or more. Usual 20% borrower injection; may be 10% if seller will subsidize down-payment with seller SBA provides an 85% guarantee to Lender	Provided by Lender , and SBA provides a 50% guarantee 50% financed by Lender 40% SBA loan through Certified Development Co. 10% borrower injection (increased injection required on new businesses or special-purpose real estate) financing
Collateral	SBA requires Lender to take a secured interest in business assets and/or a mortgage on real estate Collateral requirements vary with SBA SOP changes and lender’s own underwriting requirements SBA requires the lender to take all available collateral at the time the loan is made – secured interest on business assets and/or a DOT on real estate	Lender holds the first mortgage on real estate, and/or secured interest in equipment and machinery SBA holds second mortgage on real estate, or second secured interest in equipment and machinery
Underwriting Requirements	Personal guarantees by all owners of 20% or more Adequate business collateral, or Personal assets securing personal guaranty example: mortgage on a home Hazard Insurance, usually Life Insurance	Personal guarantees by all owners of 20% or more Life insurance on business principals in the amount of SBA loan Hazard Insurance Loan Terms Working Capital — up to 7 years Equipment — up to 10 years (or useful life) Real Estate – up to 25 years (same as 7(a) Term Loan) Revolving line of credit – up to 3 years Term loan – up to 5 years Lender’s loan – minimum 10 years on Real Estate 7 years on Machinery & Equipment SBA/CDC loan – 20 years
Interest Rates	Rates can be fixed or variable: common NY Prime + 2.25% for term less than 7 years common NY Prime + 2.75% for term greater than 7 years	NY Prime + 6.5% for loans of $50,000 or less NY Prime + 4.5% for loans over $50,000 Lender’s loan– negotiated rate between borrower and Bank (fixed or variable) SBA/CDC loan – below market fixed interest payment, loan rate set when debenture is sold.

Programs and terms are subject to change. Ask us about SBA qualified Lenders to meet your financing requirements.

The following is a summary of the key changes made to the new version of the SOP Effective 10/1/09: * If a transaction includes $500,000 or less of intangible assets (including, but not limited to, goodwill, client/customer lists, patents, copyrights, trademarks and agreements not to compete), a lender may process the loan using its delegated authority. * If the application includes more than $500,000 of intangible assets and the borrower and/or seller have contributed a total of at least 25% equity, the loan also may be processed using a Lender’s delegated authority. (Seller equity is defined as seller take-back financing that is on full standby (principal and interest) for a minimum of 2 years.) * If the loan amount includes more than $500,000 in intangible assets and the borrower and/or seller are not providing at least 25% equity, then the application must be sent to the Standard 7(a) Loan Guaranty Processing Center in Citrus Heights for review and approval by SBA. * Business valuations must be requested by and prepared for lender.

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SBA Loans

Overview of SBA 7(a) and SBA 504 Loans

Benefits

Eligibility

Loan Size

Use of Proceeds

Terms

Financing

Collateral

Underwriting Requirements

Interest Rates

Programs and terms are subject to change. Ask us about SBA qualified Lenders to meet your financing requirements.

Take This Information To Go

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