American Recovery Act Resources for Small Businesses

1
American Recovery ActResources for Small
Businesses

• Presented by
• Mark Quinn, District Director
• U.S. Small Business Administration
• San Francisco District Office

2
Recovery Act Overview

• Temporary elimination of loan fees
• Higher loan guaranty
• Secondary market liquidity
• Expanded limits on 504
• ARC Stabilization loans
• Increase in micro loans
• Surety Bond program expansion
• SBA support for government contracts

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SBA Role in Bank Financing for Small Businesses

• SBA is not a direct lender
• SBA partners with banks and lenders
• SBA guarantees bank loans (75-85) 90
• Banks risk is offset by the SBA guaranty
• Applicants apply directly to the bank/lender
• Bank decides when to use the SBA
• Bank gets paid if business fails
• Business remains liable for the debt

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7(a) Guaranty Loan Terms

• SBA does not set actual terms, but does set
  parameters
• Terms are negotiated between bank borrower
• Maximum Loan Amount 2,000,000
• Maximum SBA Guaranty Now 90
• 75 to 85 of the loan, up to 1.5 million
  maximum
• Term (maturity) based on use of proceeds
• Generally 7-10 years for non-real estate

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7(a) Guaranty loan Terms (continued)

• SBA Guaranty fee Fees Eliminated
• 2 to 3½ of SBA-Guaranteed amount
• For 100,000 loan, fee 1,700
• For 500,000 loan, fee 11,250
• Guaranty fee may be financed as part of loan
• Interest Rate
• Usually variable rate loan
• Generally Prime plus up to 2.75
• Rate can be higher for loans under 50k or for
• SBAExpress Loans

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SBA Guaranty LoanEligible Use of Proceeds

• All Legitimate Business Purposes
• Inventory
• Machinery Equipment
• Working Capital
• Real Estate (owner-occupied only)
• Debt repayment (business debts only)
• Business Acquisitions
• Franchises (must be an eligible franchisor)

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SBA Loan Eligibility Issues

• Must be a for-profit business
• Must qualify as a small business concern
• Must be an eligible type of business
• Must meet personal financial resources test
• Must be at least 51 owned by U.S. Citizens or
  Legal Permanent Residents
• Cannot be on probation or parole

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Benefits of the SBA Loan

• Reduces lenders risk, making it more likely to
  approve a small business loan application
• Provides a longer loan term, or maturity
• All SBA loans are fully amortizing, i.e.,
• no balloon payment

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How to Apply for an SBA Loan

• Gather up your business personal financial
  information
• Personal financial statement
• Personal income tax returns for the last 3 years
• Business financial statements tax returns for 3
  years if already in business
• Decide on a Lender factors to consider
• Your experience with the lender
• Type of lender National, regional, community
  bank

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SBA Guaranty Loan Process
1.
2.
Applicant
Lender/Banker
SBA

3.
4.

• Business Owner applies to Lender
• Lender contacts SBA if lender requests SBA
  guaranty
• If approved, SBA guarantees lenders loan
• Lender then can disburse loan to Business Owner

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Other SBA Loan Programs

• SBAExpress
• Maximum Loan amount 350,000
• Loans can be term loans, or lines of credit
• Lender may use its own forms
• Maximum SBA guarantee is 50 of the loan
• Interest Rate Prime plus up to 6.5
• SBA 504 Loan Fees Eliminated
• Only for Purchase/Improvement of long-term fixed
  assets such as real estate
• Apply through a lender, or an SBA-approved
  Certified Development Company (CDC)

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Other SBA Loan Programs

• SBA Microloan Program Increased funding
• SBA lends money to non-profit intermediaries who
  re-lend to businesses
• Maximum loan amount 35,000
• Intermediary packages, underwrites, and disburses
  the loan
• SBA is not involved with the individual loan
  decision
• Apply through a SBA Microloan Intermediary

13
ARC Stabilization Loan Program

• New SBA loan program to help firms make existing
  payments on existing small business debt or
  leases but not SBA loans.
• Loan amounts up to 35,000 with 100 guarantee
• Repayment deferred up to 12 months
• Program launch date June 2009

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Surety Bond Guaranty Fund

• SBA Guarantees surety bonds issued by private
  insurance companies
• Bonds available for eligible contractors for
  Federal Contracts
• Limits increased from 2 million to 5 million
• http//www.sba.gov/services/financialassistance/su
  retybond/index.html
• Supervisory Surety Bond SpecialistThomas
  EwbankPhone 206/553-0961

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Government Contracting

• ARA includes significant increases in federal
  contracting opportunities
• www.recovery.gov
• www.fedbizopps.gov
• www.ccr.gov
• www.acteva.com/go/sba

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SBA Websites

• SBA Home Page
• www.sba.gov
• SBA Loan Programs
• www.sba.gov/financing
• SBA San Francisco District Office
• www.sba.gov/ca/sf
• Information about federal regulations
• www.business.gov