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Illinois District Office

Illinois District Office. In FY 2010, SBA Nationally delivered over $17.0 billion in financing, guaranteed over 60,771 loans In FY 2010, SBA in Illinois 221 participating lenders delivered over $719.6 million in financing, guaranteed 2,357 loans. What is the SBA?.

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Illinois District Office

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  1. Illinois District Office

  2. In FY 2010, SBA Nationally • delivered over $17.0 billion in financing, • guaranteed over 60,771 loans • In FY 2010, SBA in Illinois • 221 participating lenders • delivered over $719.6 million in financing, • guaranteed 2,357 loans

  3. What is the SBA? • Small independent federal agency • Started in 1953 • Mission: Help small businesses start, grow, succeed • Programs delivered through district offices, working with resource partners

  4. Programs & Partners • Counseling & Training Assistance • SCORE / SBDC’s • Financial Assistance • Banks, S&Ls, Credit Unions • Federal Contracting Assistance • Agencies - DOD, GSA, VA

  5. SCORE • Counselors to America’s Small Business • Free confidential one-on-one assistance • Monthly workshops • www.scorechicago.org

  6. Small Business Development Center (SBDC) • Provides free services of specialized technical assistance to small businesses • Help develop business plans • Low cost Seminars • www.ilsbdc.biz

  7. SBA Guaranty Loan Programs • No grants • No direct loans • We do have several guaranteed loan programs

  8. Three (3) Main Reasons Why Lenders Use SBA • Newer or Start-Up Business • Inadequate Collateral • Longer Repayment Term

  9. Process Borrower applies for a loan with an SBA participating lender Lender submits application for SBA review and approval After SBA approval, lender disburses funds

  10. All Business Purposes • Export Financing • Working Capital Financing • Receivable Financing • Inventory Financing • Real Estate Financing • Equipment Financing

  11. A Typical 504 Project • A private sector loan covering up to 50% • A loan from the CDC covering 40% (100% SBA-guaranteed debenture) • At least 10% equity from the small business • Participating lender has first lien on assets

  12. 504 Projects • New Construction • Purchase of existing leased building • Long Term equipment • Projects can be companioned with 7 (a) 504 Loan Program • Up to $ 5,500,000 for SBA Portion • Up to $ 13,750,000 Project

  13. JOBS ACT September 27,2010 • 7(a) loans from $2 million to $5 million; • 504 loans from $2 million to $5 million • standard borrowers(project up to $12.5 M) • from $4 million to $5.5 million • manufacturers (project up to $13.75 M) • Microloans from $35,000 to $50,000

  14. 90 Percent Guarantee • As of September 27, 2010 - SBA to raise its loan guarantee to as much as 90% • Prior SBA would guarantee loans up to 85% on loans up to $150,000, up to 75% on loans greater than $150,000. • Maximum SBA guarantee $4.5M JOBS ACT September 27, 2010

  15. Temporary Elimination of fees • Fees for SBA’s 7(a) and 504 loan programs until December 31, 2010. • 7 (a) - Upfront borrower guaranty fees • range 2% to 3.75% • 504 - Processing fee 1.5% Third party Lender fee .5% JOBS ACT September 27, 2010

  16. Survival Rates Business Start-ups: 66 % New Employer Firms Last At Least 2 Years 50% New Employer Firms Last at Least 4 Years Rates Vary By Industry

  17. Major Factors for Success --Adequate Capital --Owners Knowledge of Industry --Knowing Target Market --Low Fixed Cost

  18. Start-up Business Available Info for Risk Analysis: Business Plan --Market for Product --Identified Target Market --Sales forecast --Capital Balance Sheet --Cash Flow projection 12 months --Owners Equity Investment --Identified needed Financing --Demonstrate Debt Repayment

  19. Risk Analysis Info Cont: --Collateral --Managerial Experience --Knowledge of Industry --Credit Score

  20. --Credit Score is a Numeric Summary of the Info on Your Credit Report. --Score is Counted Slightly Different by The Three Major Reporting Agencies. --Equifax, TransUnion and Experian --Use FICO (Fair Isaac Company) --FICO Score Ranges 300 to 850

  21. FICO SCORE Elements 35% --Payment History (Pay on Time) 30% --Debt Level (Keep Debt Low as a % of Credit Limit—Try to stay at 75%) 15% --Length of Credit History (Develop a long relationship with a credit card). 10% --Diversity of Credit Accounts -Mix It Up Car loan, Mortgage loan- shows you can manage 10% --Number of New Attempts To Get Credit Cards More attempts Hits Lowers your Score. 100%

  22. FICO Scores National Distribution 58% 700 Plus 27% 600 to 699 15% 0 to 599 Very Bad 499 to 0 Bad 500 to 580 Sub Prime 581 to 619 Okay 620 to 679 Good 680 to 699 Very Good 700-Plus

  23. Most Start-Ups F/S Capital Balance Sheet and Income Statement ( Financial Forecast at Best) Risk Management Association (RMA) Financial Ratio Benchmarks( Key Ratios Expressed in Upper, Median, Lower Range) Annual Statements Studies by Industry Identify industry by using Standard Industrial Codes(SIC) North American Industry Classification Code(NAICS)

  24. --Meaningful Ratio Analysis Requires a • Comparison Trend Over Several Years and to • Industry Norms • --Start-up Businesses Have No Track Record. • This Limits our Analysis to: • --A Few Key Ratios • --Capital Balance Sheet • --Income Financial Forecast • --Cash Flow Statement

  25. Industry Norms vs. Start-up Business B/S Assets Current Assets % Non-Current Assets % Intangible Assets % Total Assets 100% LIABILITIES Current Liabilities % Non-Current Liabilities % Total Liabilities 50% Net Worth 50% Total Liabilities & Net Worth 100% Compare value in each category to a norm for the industry for at least a one year period.

  26. Compare Start-up Forecast to Industry Norm Forecast Income Statement Sales 100.0% - Cost of Sales (Inventory) 56.0% Gross Profit 44.0% -Operating Expenses 40.4% Operating Profit 3.6% -Other Expenses 1.9% Profit before Taxes 1.7% Shoe Store, SIC#5139,5661, NAICS#448210 RMA Page 974-975

  27. Key Ratios Capital Balance Sheet Liquidity Ratios

  28. Dollar Sales Breakeven Fixed Costs $ BE= 1.-- Variable Costs Sales Divide $ BE by widget SP to determine number of widget to sell to achieve BE.

  29. Repayment Ability Monthly Cash flow for 12 month period Positive Cash each month to service P & I Month with largest Negative figure represents W/C needs.

  30. Additional Information- Contact: Illinois District Office 500 W. Madison, Suite 1150 (312) 353-4528 SBA.GOV/IL

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