CAPITAL RESOURCES FOR SMALL BUSINESS

1
CAPITAL RESOURCES FOR SMALL BUSINESS

• Bill Brice
• Southwestern Business Financing Corporation
• [phone]

2
CONSIDERING PURCHASING LAND OR A BUILDING?

• Consider an SBA 504 loan
• 10 Injection
• 50 Bank Loan
• 40 Certified Development Company (CDC) SBA Loan

3
ATTRACTIVE TERMS

• Low rate typically lower than prime
• Fixed rate fixed at time of funding for entire
  term of loan
• Long term 20 year full amortization with no
  balloon or stop

4
FREQUENTLY ASKED QUESTIONS ON THE SBA 504

• 1. How old does the business have to be?
• A business should have been operating for 2 or
  more complete fiscal years. This may be
  mitigated by owners backgrounds, or the type of
  business, or the strength of the business,
  earnings record, long term prospects for
  successful operation, and credit history.

5
HOW PROFITABLE DOES THE BUSINESS HAVE TO BE?

• The company must be able to demonstrate it has
  the financial capacity to repay the bank loan and
  the loan requested from the CDC.

6
WHAT IS THE MAXIMUM LOAN AMOUNT? MINIMUM?

• The normal maximum that a business can borrow
  from the CDC is 1,500,000, although loans
  meeting certain SBA public policy criteria can go
  to 2,000,000 and loans to manufacturers can be
  as much as 4,000,000.
• The minimum SBFC 504 loan is 50,000.

7
WHAT IS THE JOB CREATION REQUIREMENT?

• For every 50,000 borrowed from the CDC, expect
  one full time job to be created within 2 years of
  the date of the loan funding, unless the company
  meets any one of the large number of SBA
  exemptions.

8
WHERE DOES CDC GET THE MONEY IT LENDS?

• CDC issues a debenture in the bond market for the
  same about and term as the loan it is making.
  The debenture is 100 guaranteed by the U.S.
  Small Business Administration and therefore sells
  for an attractive rate. These bonds are sold
  once a month and the loan funds when the
  debenture sells.

9
WHAT IS THE INTEREST RATE ON YOUR LOANS?

• CDC loans are funded by the sale of debentures
  and the rate is based upon the rate investors
  require at the time of sale. The rate on a
  twenty-year bond is usually 100-125 basis points
  over the 10 year Treasury Market Rates.

10
WHAT IS THE TERM OF THE LOAN?

• Either ten or twenty years, depending on the life
  of the assets being financed.

11
ADVANTAGES OF THE 504 PROGRAM TO THE SMALL
BUSINESSES

• Long Term financing with loan maturities of 10 or
  20 years result in reduced debt service
• Attractive fixed rate for the life of the loan.
• Low down payment (usually 10)
• SBA 504 is assumable