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SBA is not a direct lender

7(a) Loan Guaranty Program. SBA is not a direct lender. SBA 7(a) program offers guaranty to lenders Guaranty is a partial refund for a failed loan Lender obtains guaranty from SBA. 7(a) Loan Guaranty Program. Lenders originate and service loans

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SBA is not a direct lender

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  1. 7(a) Loan Guaranty Program SBA is not a direct lender • SBA 7(a) program offers guaranty to lenders • Guaranty is a partial refund for a failed loan • Lender obtains guaranty from SBA Visit us at www.sba.gov

  2. 7(a) Loan Guaranty Program • Lenders originate and service loans • The SBA loan guaranty program is not a guaranty of a low interest rate Visit us at www.sba.gov

  3. 7(a) Loan Guaranty Program Not everyone needs an SBA Guaranty If risk is too high - lender comes to SBA • Start-up businesses • Insufficient collateral • Non-standard repayment terms • Industry Risk Visit us at www.sba.gov

  4. 7(a) Loan Guaranty Program • SBA lending relies primarily on a demonstration of adequate cash-flow. • There must be a reasonable expectation that the loan will be repaid. Visit us at www.sba.gov

  5. Size Requirements • Must be independently owned and operated • Must be a small business as defined by SBA • Federal standard – NAICS • SBA.GOV/SIZE • Maximum size examples • Wholesaling – less than100 Employees • Retail/Service – average sales $4.5M to $32.5M • Manufacturing – less than500 Employees • Construction – average sales $13M to $32M Visit us at www.sba.gov

  6. Ineligible Businesses • Gambling or Speculation • Real Estate Investment • Adult Industry • Non-Profit Organizations • Religious Organizations • Defaulted on a Federal Loan Visit us at www.sba.gov

  7. 7(a) Use of Proceeds • Working capital • Inventory • Lines of credit • Expansion / renovation • Leasehold improvements • Land or buildings • Furniture / fixtures / equipment • Refinance debt for compelling reasons Visit us at www.sba.gov

  8. Loan Maturity Dates • Working Capital Loans - Up to 7 Years • Machinery and Equipment - Up to 10 Years • Construction of Plant Facilities - Up to 25 Years Visit us at www.sba.gov

  9. 7(a) Loan Amounts • Maximum amount $2 million • Guaranteed portion • Less than $150,000 = 85% • Greater than $150,000 = 75% • 90% to a maximun of $1,500,000 thru 12/31/2009 Visit us at www.sba.gov

  10. 7(a) Interest Rates • Negotiated between borrower and lender • Maximum interest rate: • Less than 7 Year Term = Prime + 2.25% • Greater than 7 Year Term = Prime + 2.75% • Higher rates permitted for loans of less than $50,000 and SBA Express Loans Visit us at www.sba.gov

  11. 7(a) Cost of Guaranty SBA Guaranty Fees • Can be included in loan • Calculated on guaranteed portion of loan • Maturity less than or equal to 1 year • 0.25% • Maturity greater than 1 year • Less than $150,000 = 2% • $150,000 - $700,000 = 3% • Greater than $700,000 = 3.5% • Guaranty greater than$1M • Additional 0.25% Visit us at www.sba.gov

  12. What is new? • Reduce Fees • Increase guaranty • Expand Secondary Market • Up to $15 Billion to purchase loan securities on the secondary market. • Refinancing using 504 loans • Business stabilization loans Visit us at www.sba.gov

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