LENDER'S GUIDE 2nd Edition U.S. Small Business Administration 10/96 Championing America's Entrepreneurs Attention Lenders: Discover new possibilities for Small Business Financing through the SBA Small business has the highest potential for growth of any sector of our economy. And if you are like most lenders, loans to small businesses are increasingly important to your portfolio. Yet small firms often don't have the credit history or collateral to qualify for a business loan through normal lending channels. That's where the SBA comes in. SBA loan programs reduce your risks, enabling you to provide both long- and short-term financing to small businesses. With SBA-guaranteed financing, you can -- * broaden your customer base, * provide better service to your customers, * increase profitability, * meet your requirement under the Community Reinvestment Act, and * achieve higher yields through an active secondary market. The SBA has programs and services to meet most of your small business customers' needs: * The 7(a) Loan Guaranty Program - Use specialized loans to satisfy the requirements of almost any small business. * The Certified and Preferred Lenders Program - Receive partial or full authority to approve SBA-guaranteed loans for faster, better and more profitable service to your best credits * The 504 Certified Development Company Program - Make larger, low-risk, long-term loans through the use of SBA-guaranteed debentures. * The Secondary Market Program - Improve your liquidity by selling the guaranteed portions of your loans. * The Small Business Investment Company Program - Share, as a venture capitalist licensed by the SBA, in the success of the small businesses you finance. Whether small businesses are a major or minor part of your market, the SBA can help you increase profitability and provide better service. An SBA representative will show you - in your office - how our programs and services work to benefit you and your small business customers. We'll even train your employees. And we are just a phone call away. For the district office nearest you, consult the list at the end of this brochure or call (800) 8-ASK-SBA. SBA Financial Assistance Programs The 7(a) Loan Guaranty Program The 7(a) Loan Guaranty Program is the SBA's primary business loan program. By reducing the risk to you, the lender, it expands your ability to make small business loans. And it enables you to fund the needs of your small business clients when financing is unavailable through your normal lending channels. The SBA guarantees up to $750,000 of a private-sector loan: as much as 80 percent on loans of $100,000 or less and 75 percent on loans of more than $100,000. A borrower may have more than one SBA loan at a time, as long as the total amount does not exceed the SBA's guaranty cap of $750,000. (The only exceptions are the International Trade, 504 and DELTA loan programs). How It Works The small business submits a loan application to you for initial review. If you approve the loan subject to an SBA guaranty, you forward a copy of the application and a credit analysis to the nearest SBA office. After SBA approval, you close the loan and disburse the funds. The borrower makes monthly loan payments directly to you. There are no balloon payments, prepayment penalties, application fees or points permitted. Payment plans may be tailored to the needs of the indi- vidual businesses, and may be delayed up to six months. Use of Proceeds Proceeds of 7(a) loans may be used by start-ups or existing businesses to -- * expand or renovate facilities; * purchase machinery, equipment, fixtures and leasehold improvements; * finance receivables and augment working capital; * refinance existing debt (for compelling credit reasons of benefit to the borrower); * provide seasonal lines of credit; * construct commercial buildings; and/or * purchase land or buildings. Terms, Interest Rates and Fees The length of time for repayment depends on the use of the proceeds and the ability of the business to repay: * usually five to 10 years for working capital; and * up to 25 years for fixed assets, such as the purchase or major renovation of real estate or the purchase of equipment (not to exceed the useful life of the equipment). Both fixed and variable interest rates are available. Rates are pegged at up to 2.25 percent over the lowest prime rate* for loans with maturities of less than seven years and up to 2.75 percent for seven years or longer. For loans under $50,000, rates may be slightly higher. The SBA charges you a guaranty fee, which may be passed on to the borrower. On loans with maturities of one year or less, the fee is 0.25 percent of the guaranteed portion. On loans with maturities of more than one year where the SBA's portion is $80,000 or less, the guaranty fee is 2 percent of the guaranteed portion. On loans with maturities of more than one year where the SBA's portion is more than $80,000, the guaranty fee is figured on an incre- mental scale between 3 percent and 3.875 percent of the guaranteed portion (75 percent). The fee equals 3 percent of the guaranteed portion up to $250,000; 3.5 percent of the next $250,000, and 3.875 percent of the remain- der. For example: Total Loan Guaranty Max. Guaranty Amount Rate Amount $800,000 x 75% $ 600,000 Fee Structure 1st $250,000 x 3% $ 7,500 2nd $250,000 x 3.5% $ 8,750 Remainder ($100,000) x 3.875% $ 3,875 Total Guaranty Fee $ 20,125 * All references to the prime rate refer to the lowest prime rate as published in the Wall Street Journal on the day the application is received by the SBA. In addition to the guaranty fee charged at the time of disbursement, there is an ongoing fee of 0.5 percent of the balance of the loan. This fee is collected monthly. As a lender, you are permitted to charge a late fee of up to 5 percent of the payment amount for payments more than 10 days over- due. An extraordinary servicing fee of up to 2 percent of the out-standing balance may be collected in cases involving construction or using accounts receivable or inventory for collateral. Application fees, commitment fees or prepayment fees are not permitted on term credits. You may use the same fee schedule for revolving credits approved by you without an SBA guarantee. Fees must be reasonable and are subject to review by the SBA. Collateral Borrowers must pledge sufficient assets, to the extent that they are reasonably available, to adequately secure the loan. Personal guaranties are required from all the principal owners of the business. Liens on personal assets of the principals also may be required. Eligibility To be eligible, the business generally must be operated for profit and fall within the size standards set by the SBA. Loans cannot be made to businesses engaged in speculation or investment. The SBA determines if the business qualifies as a small business based on the average number of employees dur- ing the preceding 12 months or on sales averaged over the previous three years. Maximum Size Standards * Manufacturing - from 500 to 1,500 employees * Wholesaling - 100 employees * Services - from $2.5 million to $21.5 million in annual receipts * Retailing - from $5 million to $21 million * General construction - from $13.5 million to $17 million * Special trade construction - average annual receipts not to exceed $9 million * Agriculture - from $0.5 million to $9 million What the SBA Looks For * Good character * Management expertise and commitment necessary for success * Sufficient funds, including the SBA-guaranteed loan, to operate the business on a sound financial basis (for new businesses, this includes the resources to withstand start-up expenses and the initial operating phase) * Feasible business plan * Adequate equity or investment in the business * Sufficient collateral * Ability to repay the loan on time from the projected operating cash flow Specialized Programs Under 7(a) In addition to the standard loan guaranty, the SBA has programs under 7(a) designed to meet specialized needs. Unless otherwise indicated, they are governed by the same rules, regulations, interest rates, fees, etc. as the regular 7(a) loan guaranty. Financing for Specific Needs The SBA has programs to help meet the specific financing needs of your small business customer. CAPLines CAPLines is the program under which the SBA helps small businesses meet their short-term and cyclical working-capital needs. A CAPLines loan can be for any dollar amount (except for the Small Asset-Based Line). The SBA will guarantee 75 percent up to $750,000 (80 percent on loans of $100,000 or less). There are five short-term working-capital loan programs for small businesses under the CAPLines umbrella: * Seasonal Line: This line advances funds against anticipated inventory and accounts receivable for peak seasons and seasonal sales fluctua- tions. It can be revolving or nonrevolving. * Contract Line: This line finances the direct labor and material costs associated with performing assignable contracts. It can be revolving or nonrevolving. * Builders Line: This line finances the direct labor and material costs for small general contractors and builders constructing or renovating commercial or residential buildings. The building project serves as the collateral, and the loan can be revolving or nonrevolving. * Standard Asset-Based Line: This is an asset-based revolving line of credit designed to assist businesses unable to meet credit standards associated with long-term credit. It provides financing for cyclical, growth, recurring and/or short-term needs. Repayment comes from converting short-term assets into cash, which is remitted to the lender. Businesses continually draw, based on existing assets, and repay as their cash cycle dictates. This line generally is used by businesses that provide credit to other businesses. These loans require continual servicing and monitoring of collateral, for which you may charge additional fees. * Small Asset-Based Line: This is an asset-based revolving line of credit up to $200,000. It operates like a standard asset-based line except that some of the stricter servicing requirements are waived, providing the business can consistently show repayment ability from cash flow for the full amount. Use of Proceeds CAPLines may be used to -- * finance seasonal working-capital needs; * finance direct costs needed to perform construction, service and supply contracts; * finance direct costs associated with commercial and residential build- ing construction without a firm commitment for purchase; * finance operating capital by obtaining advances against existing inventory and accounts receivable; or * consolidate short-term debt. Terms, Interest Rates and Fees Each of the five lines of credit has a maturity of up to five years, but, because each is tailored to the needs of the applicant, a shorter initial maturity may be established. CAPLines funds may be used as needed throughout the term of the loan to purchase assets, as long as sufficient time is allowed to convert the assets into cash at maturity. The interest rate to be charged on CAPLines is negotiated between you and the borrower, up to 2.25 percent over the prime rate. The guaranty fee is the same as for any standard 7(a) loan. The SBA places no servicing-fee restrictions on you for the Standard Asset-Based Line but requires full disclosure to ensure that the fees are reasonable. On all other CAPLines, the annual fee is limited to 2 percent based on the average outstanding balance. Collateral The primary collateral will be the short-term assets financed by the loan. International Trade Loan Program The International Trade Loan Program helps small businesses that are -- * engaged in international trade, * preparing to engage in international trade, or * adversely affected by competition from imports. The SBA can guarantee as much as $1.25 million in combined working-capital and facilities-and-equipment loans (including any other current SBA loan guaranties). The working-capital portion of the loan may be made according to the provisions of the Export Working Capital Program or other SBA working-capital programs. Use of Proceeds Proceeds may be used for -- * working capital; and/or * purchasing land and buildings, building new facilities; renovating, improving or expanding existing facilities; purchasing or reconditioning machinery, equipment and fixtures; and making other improvements that will be used within the United States for producing goods or services. * Proceeds may not be used to repay existing debt. Terms, Interest Rates and Fees Loans for facilities or equipment may have maturities of up to 25 years. The working capital portion of a loan under EWCP provisions has a maximum maturity of three years. As with other 7(a) loans, you may charge 2.25 percent over the lowest prime rate for loans of less than seven years and up to 2.75 percent for seven years or longer. For loans under $50,000, rates may be slightly higher. The interest rate on EWCP loans is not regulated. Fees are the same as for the general 7(a). Collateral As the lender, you take a first-lien position (or first mortgage) on items financed under an international trade loan. Only collateral located in the United States, its territories and possessions is acceptable as collateral under this program. Additional collateral may be required, including personal guaranties, subordinate liens or items that are not financed by the loan proceeds. Export Working Capital Program The Export Working Capital Program was developed to help you respond to the needs of exporters seeking short-term working capital. The SBA guarantees 90 percent of the principal and interest up to $750,000. The EWCP uses a one-page application form and streamlined documentation, and turnaround is usually within 10 days. Borrowers may also apply for a letter of prequalification from the SBA. Borrowers may have other SBA guaranties as long as the SBA's exposure does not exceed $750,000. When an EWCP loan is combined with an international trade loan, the SBA's exposure can go up to $1.25 million. Terms, Interest Rates and Fees Typically, EWCP loan maturities either match a single transaction cycle or support a line of credit, generally with a term of up to 12 months. The EWCP places greater authority and profitability in your hands by lifting the interest-rate and lender-fee caps that apply to the SBA's other business loans. Interest rates and fees are negotiated between you and the borrower. Targeted Assistance Several SBA programs provide targeted financial and technial assistance. DELTA Program Defense Loan and Technical Assistance Program The DELTA Program is a joint effort of the SBA and the Department of Defense. It provides both financial and technical assistance to defense- dependent small firms adversely affected by defense cuts to help them diversify into the commercial market. The program offers about $1 billion in gross lending authority. The SBA processes, guarantees and services DELTA loans, generally using the regulations, forms and operating criteria of the 7(a) Program and the 504 Certified Development Company Program. Eligibility In addition to 7(a) or 504 criteria, businesses also must meet DELTA eligibility standards. They must meet SBA size standards and have derived at least 25 percent of total revenues during the previous fiscal year from DoD contracts, Department of Energy defense-related contracts, or subcontracts in support of defense prime contracts. They must also - * be adversely impacted by reductions in defense spending and use the loan to retain jobs of defense workers; or * be located in an adversely impacted community and create new economic activity or jobs; or * modernize or expand facilities in order to diversify operations while remaining in the national technical and industrial base. Maximum Loan Amount The maximum gross loan amount under 7(a) is $1.25 million for a DELTA loan. The maximum guaranty under 504 is $1 million. If both types of loans are used or if there is an existing SBA loan, the total loan amount may not exceed $1.25 million. Collateral DELTA loans may not be typical 7(a) or 504 loans and may require special handling because of complicated credit analyses. While they may have significant collateral, many DELTA applicants may not be able to show the ability to repay based on past operations because of their state of transition. New revisions to the law allow the SBA to resolve reasonable doubts in favor of the DELTA applicant. Technical Assistance Many DELTA clients will also require technical assistance to make the transition to the commercial market. This will be provided through small business development centers, the Service Corps of Retired Executives, other federal agencies, and other technical and management assistance providers. By providing technical assistance, the SBA further reduces your risk on a DELTA loan. Minority Prequalification Loan Program and Women's Prequalification Loan Program The Minority Prequalification Loan Program and the Women's Prequalification Loan Program are pilot programs that use intermediaries to assist prospec- tive minority and women borrowers in developing viable loan application packages and securing loans. The women's program uses only nonprofit organi- zations as intermediaries; the minority program uses for-profit intermedi- aries as well. Once the loan package is assembled, it is submitted to the SBA for expedited consideration; a decision usually is made within three days. If the application is approved, the SBA issues a letter of prequalification stating the SBA's intent to guarantee the loan. The maximum amount for loans under the women's program is $250,000; under the minority program, it is generally the same, although some district offices set other limits. With both, the SBA will guarantee up to 75 percent (80 percent on loans of $100,000 or less). The intermediary then helps the borrower locate a lender offering the most competitive rates and terms. Intermediaries may charge a reasonable fee for loan packaging. These programs are available through a number of SBA district offices nation- wide. To find out if these programs are available in your area, contact your nearest SBA district office. Eligibility * Businesses at least 51 percent owned, operated and managed by people of ethnic or racial minorities, or by women * Businesses with average annual sales for the preceding three years that do not exceed $5 million * Businesses that employ fewer than 100, including affiliates * Businesses that are not engaged in speculation or investment Streamlined Applications and Approvls There are several options available to lenders that help streamline delivery of SBA guaranties. LowDoc Low Documentation Loan Program LowDoc offers a one-page SBA application form and rapid turnaround on approvals for loans up to $100,000. Once a borrower has met your requirements for credit, you may request a LowDoc guaranty for up to 80 percent of the loan amount. Completed applications are processed quickly by the SBA, usually within two or three days. Proceeds may not be used to repay certain types of existing debt. Eligibility * Businesses with average annual sales for the past three years not exceeding $5 million and with 100 or fewer employees (including affiliates), or * Business start-ups The Main Street Investment Program Main Street Investment, while not a 7(a) loan program, enables lenders to make more 7(a) loans to small businesses. Through a public/private partnership between the SBA and state governments, the states invest tax revenues in community banks that agree to make LowDoc loans. FA$TRAK Program FA$TRAK provides SBA guaranties on loans of up to $100,000 without using the SBA paperwork and approval process. You use your existing documenta- tion and procedures to approve and service the loan. You also use your own existing procedures for loan liquidation. The SBA guarantees up to 50 percent of a FA$TRAK loan. For more information on FA$TRAK certification, contact your SBA district office. Terms Like most 7(a) loans, maturities of term loans are usually five to seven years for working capital and up to 25 years for real estate or equipment. Revolving credits must have a termination date not more than five years after the first disbursement. Certified and Preferred Lenders Program The most active and expert lenders qualify for the SBA's Certified and Preferred Lenders Program. Participants are delegated partial or full authority to approve loans, which results in faster service. Certified lenders are those that have been heavily involved in regular SBA loan-guaranty processing and have met certain other criteria. They receive a partial delegation of authority and are given a three-day turnaround on their applications (they may also use regular processing). Certified lenders account for 10 percent of all SBA business loan guaranties. Preferred lenders are chosen from among the SBA's best lenders and enjoy full delegation of lending authority. This authority must be renewed at least every two years, and the lender's portfolio is examined by the SBA periodically. Preferred lenders now receive the same 75 percent guaranty rate (80 percent on loans of $100,000 or less) as regular SBA-backed loans. The Preferred Lender Program is designed to be used only for the strongest credits, those on which the SBA can justify giving the lender unilateral right to risk government funds. Lenders may then offer their stronger credits more expeditious service (they may also use certified and regular processing). Preferred loans account for 18 percent of SBA loans. 7(m) MicroLoan Program The MicroLoan Program provides small loans ranging from under $100 to $25,000. Under this program, the SBA makes funds available to nonprofit intermediaries; these, in turn, make the loans. The average loan size is $10,000. Completed applications usually are processed by the intermediary in less than one week. This is a pilot program available at a limited number of locations. Use of Proceeds Microloans may be used to finance machinery, equipment, fixtures and leasehold improvements. They may also be used to finance receivables and for working capital. They may not be used to pay existing debts. Terms, Interest Rates and Fees Microloans must be paid in the shortest term possible (no longer than six years) depending on the earnings of the business. Rates are pegged at up to 4 percent over the lowest prime rate. There is no guaranty fee. Collateral Each nonprofit lending organization will have its own requirements, but must take as collateral any assets purchased with the microloan. In most cases, the personal guaranties of the business owners are also required. Eligibility Virtually all types of for-profit businesses that meet SBA eligibility requirements qualify. The 504 Certified Development Company Program The 504 Certified Development Company Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A certified development company is a nonprofit corporation set up to contribute to the economic development of its community or region. CDCs work with the SBA and private-sector lenders to provide the financing to small businesses. There are about 290 CDCs nationwide. The program is designed to enable small businesses to create and retain jobs; the CDC's portfolio must create or retain one job for every $35,000 of debenture proceeds provided by the SBA. Typically, a 504 project includes -- * a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, * a second loan with a junior lien from the CDC (a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and * a contribution of at least 10 percent equity by the borrower. The SBA-guaranteed debentures are pooled monthly and sold to private investors. The maximum debenture is generally $750,000 (up to $1 million in some cases). Use of Proceeds Proceeds from the 504 loans must be used for fixed-asset projects such as - * purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; * constructing, modernizing, renovating or converting existing facili- ties; and * purchasing machinery and equipment. The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing. Terms, Interest Rates and Fees Interest rates on 504 loans are based on the current market rate for five-year and 10-year U.S. Treasury issues, plus an increment above the Treasury rate, based on market conditions. Maturities of 10 and 20 years are available. Fees total approximately 3 percent of the debenture and may be financed with the loan. These include a CDC processing fee of 1.5 percent, a guaranty fee, a funding fee and an underwriting fee. Collateral Generally the project assets being financed are used as collateral. Personal guaranties of the principal owners are also required. Eligibility To be eligible, the business generally must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, a business qualifies as small if it does not have a tangible net worth in excess of $6 million and does not have an average net income in excess of $2 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment. Loan Liquidation When a small business encounters difficulties, the SBA is ready to help with expert bssiness counseling and assistance. In the event that a borrower is unable to meet the obligatins of an SBA loan, the SBA works closely with the lender and/or borrower to negotiate a feasible solution. If a loan workout is not possible, the SBA will work to liquidate the loan. The agency is currently working on a liquidation improvement project that will increase dollar recoveries and encourage the timely completion of liquidations. Selling in the Secondary Market About $2.7 billion in new loans enter the secondary market each year, while another $1 billion of previously sold loans are traded. If you hold business loans guaranteed by the SBA, you may also profit by selling the guaranteed portions of the loans in the active secondary market. Selling a loan im- proves your liquidity position and profits. Banks, savings and loan associ- ations, credit unions, pension funds and insurance companies are frequent buyers. The SBA guaranty can be converted into cash in as little as two weeks. You and the buyer sign an agreement - SBA Form 1086, Secondary Participation Guarantee Agreement - describing the rights and responsibilities of both parties. This is sent to a fiscal and transfer agent who reviews the documentation and arranges a settlement. On the settlement date, the buyer wires funds to the FTA, which issues a certificate to the buyer and wires the funds to you. Profits from selling a loan come from - * the premium at the time of sale, * the float on the borrower's loan payment, and * the servicing fee during the life of the loan. Variable-rate SBA loans usually sell at a premium. The premium varies with market conditions and the servicing fee that you retain. The payment flow from the borrower to the investor allows you to earn float income on the loan payment until it must be sent to the FTA. The FTA manages transactions between you, the investors and borrowers, keeping track of payments made, distributing funds, and forwarding servicing requests and responses. You need make only one payment to the FTA to cover all loans you have sold. Small Business Investment Company Program The Small Business Investment Company Program fills the gap between the availability of venture capital and the needs of small businesses that are either starting or growing. Licensed and regulated by the SBA, SBICs are privately owned and managed investment firms that make capital available to small businesses through investments or loans. They use their own funds plus funds obtained at favorable rates with SBA guaranties and/or by selling their preferred stock to the SBA. SBICs are for-profit firms whose incentive is to share in the success of a small business. In addition to equity capital and long-term loans, SBICs provide debt-equity investments and management assistance. The SBIC Program provides funding to all types of manufacturing and service industries. Some investment companies specialize in certain fields, while many others seek out small businesses with new products or services because of the strong growth potential. Most, however, consider a wide variety of investment opportunities. Surety Bond Program By law, prime contractors to the federal government must post surety bonds on federal construction projects valued at $100,000 or more. Many state, county, city and private-sector projects require bonding as well. The SBA can guarantee bid, performance and payment bonds for contracts up to $1.25 million for small businesses that cannot obtain bonds through regular commercial channels. Bonds may be obtained in two ways: * Prior Approval - Contractors apply through a surety bonding agent. The guaranty goes to the surety. * Preferred Sureties - Preferred sureties are authorized by the SBA to issue, monitor and service bonds without prior SBA approval. Business Counseling and Training The SBA provides a variety of business counseling and training services to current and prospective small business owners. The Service Corps of Retired Executives -- The collective experience of SCORE counselors spans the full range of American enterprise. SCORE volunteers provide free management and technical expertise and are available at SBA district offices, business information centers and some small business development centers. Small Business Development Centers -- SBDCs provide management assistance to current and prospective small business owners. SBDCs offer a broad spectrum of business information and guidance as well as assistance in preparing loan applications. The program is a cooperative effort of the private sector; the educational community; and federal, state and local governments. Business Information Centers -- BICs provide the latest in high-tech hardware, software and telecom- munications to help small businesses get started and grow strong. Supported by local SBA offices, BICs also offer expert counseling by SCORE volunteers. One-Stop Capital Shops -- OSCSs are the SBA's contribution to the Empowerment Zones/Enterprise Communities Program, an interagency initiative that provides resources to economically distressed communities. The shops provide a full range of SBA lending and technical-assistance programs. SBA Online, the SBA's Internet Home Page and the U.S. Business Advisor -- An electronic bulletin board, SBA Online offers current business information around the clock. The SBA Home Page offers a wealth of information, including SBA publications on starting and building a small business. The U.S. Business Advisor is currently being developed with users to provide interactive access to all federal business information and services. Quick Reference to SBA Loan Programs PROGRAM: 7(a) Loan Guaranty Program, the SBA's primary loan program Maximum Amount Guaranteed: $750,000 in most cases Percent of Guarantee (Max.): 75% (80% if total loan is $100,000 or less) Use of Proceeds: Expansion or renovation; construction of new facility; purchase land or buildings; purchase equipment, fixtures, leasehold improvements; working capital; refinance debt for compelling reasons; seasonal line of credit; inventory acquisition Maturity: Depends on ability to repay; generally working capital is 5-10 years; machinery/equipment, real estate, construction, up to 25 years (not to exceed life of equipment) Maximum Interest Rates: Negotiable with lender: loans under 7 years, max. Prime + 2.25%; 7 years or more, max. 2.75% over prime; under $50,000, rates may be slightly higher Guaranty and Other Fees: Paid by lender (usually passed onto borrower). Based on maturity, amount of SBA exposure: 1 year or less, 0.25%; over 1 year, SBA share $80,000 or less, 2%; over 1 year, SBA share more than $80,000, figured on incremental scale Eligibility: Must be operated for profit; meet SBA size standards; show good character, management expertise and commitment, and always show ability to repay; may not be involved in speculation or investment PROGRAM: CAPLines, Short-term and RLCs; Seasonal, Contract, Builders, Standard Asset-Based, Small Asset-Based Maximum Amount Guaranteed: $750,000 (except Small Asset-Based); Small Asset-Based $200,000 (total loan amount) Percent of Guarantee (Max.): 75%, see 7(a) Use of Proceeds: Finance seasonal working-capital needs; costs to perform; construction costs; advances against existing inventory and receivables; consolidation of short-term debts possible Maturity: Up to 5 years Maximum Interest Rates: 2.25% Guaranty and Other Fees: See 7(a); Under Standard Asset-Based, no restrictions on servicing fees Eligibility: Existing businesses, see 7(a) PROGRAM: International Trade Loan Program, Short- and long-term financing Maximum Amount Guaranteed: $1.25 million Percent of Guarantee (Max.): 75%, see 7(a) Use of Proceeds: Working capital; improvements in U.S. for producing goods or services; may not be used to repay existing debt Maturity: Up to 25 years Maximum Interest Rates: See 7(a) Guaranty and Other Fees: See 7(a) Eligibility: Small businesses engaged or preparing to engage in inter- national trade or adversely affected by competition from imports; see 7(a) for other qualifications PROGRAM: Export Working Capital Program, 1-page application, fast turnaround; may apply for prequalification letter Maximum Amount Guaranteed: $750,000 (may be combined with International Trade Loan) Percent of Guarantee (Max.): 90%, see 7(a) Use of Proceeds: Short-term working-capital loans to finance export transactions Maturity: Matches single transaction cycle or generally 1 year for line of credit Maximum Interest Rates: No cap Guaranty and Other Fees: See 7(a); no restrictions on servicing fees Eligibility: Small business exporters who need short-term working capital; see 7(a) for other qualifications PROGRAM: DELTA, Defense Loan and Technical Assistance Program, provides financial and technical assistance to help defense-dependent firms diversify into commercial market; effort of SBA and DoD Maximum Amount Guaranteed: 7(a) or combined with 504: $1.25 million (total loan amount). 504: $1 million SBA share (up to 40% of project) Percent of Guarantee (Max.): Depends on whether done under 7(a) or 504; see both Use of Proceeds: Defense conversion; see 7(a), 504 Maturity: See 7(a), 504 Maximum Interest Rates: See 7(a), 504 Guaranty and Other Fees: See 7(a), 504 Eligibility: Defense-dependent small firms adversely affected by defense cuts; see 7(a), 504 for qualifications (program authority will expire 9/30/98) PROGRAM: Minority Prequalification Loan Program and Women's Prequalification Loan Program, Help to prepare application and secure loan; SBA prequalification letter; pilot programs, limited sites Maximum Amount Guaranteed: Minority Prequalification Loan Program $250,000 generally (total loan amount); Women's Prequalification Loan Program $250,000 (total loan amount) Percent of Guarantee (Max.): 75%, see 7(a) Use of Proceeds: See 7(a) Maturity: See 7(a) Maximum Interest Rates: See 7(a) Guaranty and Other Fees: See 7(a); plus minority program may use for-profit intermediaries; women's program uses nonprofits only; both may charge fees Eligibility: Must be at least 51% owned and operated by racial/ethnic minority or women; $5 million or less annual sales for past 3 years; employ 100 or fewer, focus on credit history, ability to repay, probability of success PROGRAM: LowDoc, One-page SBA application to obtain guaranty, quick turnaround after applicant meets lender requirements Maximum Amount Guaranteed: $100,000 (total loan amount) Percent of Guarantee (Max.): 80% Use of Proceeds: Same as 7(a) except may not be used to repay certain types of existing debt Maturity: See 7(a) Maximum Interest Rates: See 7(a) Guaranty and Other Fees: See 7(a) Eligibility: Start-ups and businesses with $5 million or less annual sales for past 3 years; employ 100 or fewer; program relies on applicant's character and credit history PROGRAM: FA$TRAK, Lender approves loan, no additional paperwork for SBA; pilot program, limited sites Maximum Amount Guaranteed: $100,000 (total loan amount) Percent of Guarantee (Max.): 50% Use of Proceeds: Same as 7(a); limitations on real estate and construction; may be used for term loans or revolving credits Maturity: Term loan same as 7(a); no more than 5 years on revolving line of credit Maximum Interest Rates: See 7(a) Guaranty and Other Fees: See 7(a) Eligibility: See 7(a) PROGRAM: 7(m) MicroLoan Program, Loans made through non-profit lending organizations; technical assistance also provided; pilot program, limited sites Maximum Amount Guaranteed: $25,000 (total loan amount) Percent of Guarantee (Max.): NA Use of Proceeds: Purchase equipment, machinery, fixtures, leasehold improvements; finance increased receivables; working capital; may not be used to repay existing debt Maturity: Shortest term possible, not to exceed 6 years Maximum Interest Rates: Negotiable with intermediary Guaranty and Other Fees: No guaranty fee Eligibility: Same as 7(a) PROGRAM: 504 Certified Development Company Program, Long-term, fixed-asset loans through nonprofit development companies; must create or retain 1 job per $35,000 of debenture proceeds Maximum Amount Guaranteed: Limit on SBA portion of project is $750,000 to $1 million Percent of Guarantee (Max.): 40% of project (100% SBA-backed debenture); private lender unlimited Use of Proceeds: Purchase of major fixed assets such as land, buildings, improvements, long-term equipment, construction, renovation Maturity: 10 or 20 years only Maximum Interest Rates: Based on current market rate for 5- and 10-year Treasury issues, plus an increment above Treasury rate Guaranty and Other Fees: Fees related to debenture, approx. 3% Eligibility: For-profit businesses that do not exceed $6 million in tangible net worth and did not have average net income over $2 million for past 2 years SBA Customer-Service Standards As one of the first initiatives of this administration, President Clinton and Vice President Gore challenged us to "reinvent" the SBA, to create an agency that not only works better, but is smaller and costs less. The best possible customer service is a key element of reinventing government, and we at the SBA re committed to providing quality service at all our service delivery points and to all our customers - small businesses, lenders, resource partners, among others. We are establishing "benchmarks" from the best of the business community and applying these standards to our programs, monitoring our success and eliciting regular feedback from our customers on our performance. Specifically, we are committed to the following customer-service principles: 1. We will provide prompt, courteous and accurate responses to requests for information received by telephone, in writing or in person. 2. We will continue to look for cost-effective and user-friendly ways to make information easily accessible to the small business community. 3. We will continue to streamline and reinvent processes to make conduct- ing business with the SBA easier for both our resource partners and small business owners. 4. We will provide the small business owner with specialized technical assistance through a variety of programs in a variety of locations. 5. We will continue to work to relieve the regulatory burden on small business. 6. We will continue to facilitate and strengthen working relationships between small contractors and federal procuring agencies. For More Information The SBA has offices located throughout the United States. For the one nearest you, look under "U.S. Government" in your telephone directory, or call the SBA Answer Desk at (800) 8-ASK-SBA. To send a fax to the SBA, dial (202) 205-7064. For the hearing impaired, the TDD number is (704) 344-6640. To access the agency's electronic public information services, you may call the following: SBA Online: electronic bulletin board - modem and computer required (800) 697-4636 (limited access) (900) 463-4636 (full access) (202) 401-9600 (D.C. metro area) Internet: using uniform resource locators (URLs) SBA Home Page: http://www.sba.gov SBA gopher: gopher://gopher.sba.gov File transfer protocol: ftp://ftp.sba.gov Telnet: telnet://sbaonline.sba.gov U.S. Business Advisor http://www.business.gov You also may request a free copy of The Resource Directory for Small Business Management, a listing of for-sale publications and videotapes, from your local SBA office or the SBA Answer Desk. All of the SBA's programs and services are provided to the public on a nondiscriminatory basis. Did you know the SBA ... * Has a portfolio guaranteeing over $27 billion in loans to 185,000 small businesses that otherwise would not have had such access to capital? * Guaranteed over 60,000 loans totaling $9.9 billion to America's small businesses in fiscal year 1995? * Last year extended management and technical assistance to nearly one million small businesses through its 950 Small Business Develop- ment Centers and 13,000 Service Corps of Retired Executives volunteers? * Provided more than 45,000 loans totaling $1.2 billion to disaster victims for residential, personal property, as well as business losses in fiscal year 1995? * Has 7,000 private sector lenders as partners providing their capital to small business? * Has increased its venture capital program with more private capital in the past two years than in the previous 15 years combined? * Provides loan guarantees and technical assistance to small business exporters through U.S. Export Assistance Centers in 15 cities? * Can respond to written small business questions through the U.S. Business Advisor on the Internet (http://www.business.gov)? Did you know that America's 22 million small businesses ... * Employ more than 50 percent of the private workforce, * Generate more than half of the nation's Gross Domestic Product, and * Are the principal source of new jobs? SBA field offices listed alphabetically by state & city: AK Anchorage AL Birmingham AR Little Rock AZ Phoenix CA Fresno Glendale Sacramento San Diego San Francisco Santa Ana CO Denver CT Hartford DC Washington, D.C. DE Wilmington FL Coral Gables Jacksonville GA Atlanta HI Honolulu IA Cedar Rapids Des Moines ID Boise IL Chicago Springfield IN Indianapolis KS Wichita KY Louisville LA New Orleans MA Boston Springfield MD Baltimore ME Augusta MI Detroit Marquette MN Minneapolis MO Kansas City St. Louis Springfield MS Gulfport Jackson MT Helena NC Charlotte ND Fargo NE Omaha NH Concord NJ Newark NM Albuquerque NV Las Vegas NY Buffalo Elmira Melville New York City Rochester Syracuse OH Cincinnati Cleveland Columbus OK Oklahoma City OR Portland PA Harrisburg King of Prussia Pittsburgh Wilkes-Barre PR Hato Rey RI Providence SC Columbia SD Sioux Falls TN Nashville TX Corpus Christi El Paso Fort Worth Harlingen Houston Lubbock San Antonio UT Salt Lake City VA Richmond VT Montpelier WA Seattle Spokane WI Madison Milwaukee WV Charleston Clarksburg WY Casper In addition to the above listing of SBA field offices, there are 900 small business development center locations and more than 400 SCORE offices to help you start and/or strengthen your business. 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