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Presented by David Tiller-Veterans Business Development Officer U.S. Small Business Administration TN District Office

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Presentation on theme: "Presented by David Tiller-Veterans Business Development Officer U.S. Small Business Administration TN District Office"— Presentation transcript:

1 Presented by David Tiller-Veterans Business Development Officer U.S. Small Business Administration TN District Office – 615-736-7176 Financing for Veterans the SBA Way

2 Why do you want to go into business? List your reasons, e.g. freedom & dogs What business is “right for you”? Identify the niche your business will ‘fill’ Before you start: see the SBDC or SCORE WHEN will you “really start” ? Getting Started

3 Details on the business you are starting: What services or products will I sell? Where will I be located? What skills and experience do I bring to the business? What will be my legal structure? PreBusiness Checklist

4 What will I name my business? What equipment or supplies will I need? What financing will I need? What are my resources? How will I compensate myself? PreBusiness Continued

5 Sole Proprietorship General Partnership Limited Partnership Corporation Limited Liability Company (LLC) Types of Business Structures

6 Personal Savings. Friends and relatives. Banks/SBA and Credit Unions. Financing a Business

7 Small business people have a difficult time borrowing money. True or False? Banks make money by lending money. You must show them their investment in you will pay Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: HIGH RISK! Borrowing Money$$$

8 To be successful in obtaining a loan, you must be prepared and organized. You must know exactly how much money you need, why you need it and how you will pay it back. Your business plan must convince your lender that you are a good credit risk. Borrowing Money$$$ Continued

9 What is the opportunity your business presents? Business Description Management Profile Market Information Financial Information Business Plan & Loan Proposal

10  Purpose of the Loan: Sources and Uses of Capital  History of the business  Financial statements for 3 years. (existing business)  Aging of accounts receivable and payable. (existing business)  Projected opening-day balance sheet. (new business)  Lease details – copy of the lease or contract for sale  Amount of investment in the business by the owner.  Projections of income, expenses and cash flow.  Signed personal financial statements.  Personal resume – bio may be best What to Take to the Bank

11 Good Character Management Expertise and Commitment Sufficient Funds (including loan) to operate Feasible business plan Adequate equity investment in the business Sufficient collateral Ability to repay the loan What SBA Looks for

12 What is considered: 1. Credit Score – 700 or above - good 2. Delinquent Accounts - Judgments 3. Payments over 30 days past due Free Credit Report: Your Credit Report

13 1.Character 2.Cash Flow 3.Collateral 4.Capitalization 5.Conditions How Your Loan Request is Viewed The Five “C’s” of Credit

14 $MicroLoan Program $Micro Loans—up to $50,000 $Patriot Express Loan Initiative $SBA Community Advantage & Small Loan Advantage $504 Loan Program $7(a) Loan Guaranty Program $SBAExpress Loan Program SBA Financial Programs

15 $50,000 Microloans $500,000 Patriot Express $5.0 million $5.5million If mfg. 504 Loans $5.0 million 7(a) Loans $350,000 SBAExpress Growth in Business & Changes in Capital Needs SBA Serves a Wide Variety of Capital Needs

16 One Micro Lender in TN—Pathway Lending (formerly SE Community Capital) Finan MICROLOANS

17 MicroLoans Direct loans through nonprofit intermediaries Loans of up to $50,000 Fast turnaround Up to six years to repay Used for — –Machinery, equipment, fixtures –Leasehold improvements –Inventory –Working capital Technical and management assistance available

18 Financial Assistance SBAExpress Underwriter uses own forms -- not SBA’s Use bank’s lending policies -- not SBA’s Loans or revolving lines of credit to $350,000 SBA guaranty is 50% Interest rate maximums apply

19 Patriot Express Loan Initiative * Begun June 2007-Now $3.1B in loans since *Loans to $500k—Vets, Spouses, Widows, *Guardsmen, Reservists—interest rate adv. *Loans under $25K-No Collateral Required *SBA TN Success Stories: Dents-R-Us *VOSBs are Veteran Owned Small Businesses—Get used to acronyms

20 504 Certified Development Co. Program Long-term, fixed-rate financing Up to $5 million in SBA-backed debentures SBA debenture guaranty of up to 40% of total loan Must create or retain one job for every $50,000 of SBA debenture proceeds Financial Assistance Loans for Fixed Assets SBA 504 Program

21 Benefits of a SBA 504 Loan High-leveraged financing for fixed-asset purchases Long-term pay back - 10 or 20 years Lower interest rate Financial Assistance

22 To Qualify for a 504 Loan* Business must be operated for a profit Tangible net worth of less than $7.5 million Average net income of less than $2.5 million for the preceding two years * Business cannot be involved in speculation or rental real estate investment Financial Assistance

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

24 7(a) Loan Guaranty All TN SBA 7(a) Lenders are listed at the TN District Office website:

25 Financial Assistance Basic 7(a) Loan Guaranty Program You apply for a loan guaranty with an SBA participating lender Interest rates are negotiable Lender submits application for SBA review and approval Loans are centrally processed After SBA approval, lender disburses funds You pay the bank, not the SBA Financial Assistance

26 7(a) loans may be used to: –Expand, renovate facilities –Buy machinery, equipment, fixtures, buildings and land for business –Finance receivables and augment working capital –Refinance existing debt (with compelling reason) –Finance seasonal lines of credit –Construct commercial buildings –Finance direct costs on contracts Loan Proceeds Eligible for Most Business Uses

27 Small Loan Advantage New Loan Program June 2012 Loans to $25k-prime +3.75%-no collateral Loans $26k-50k-prime +3.75% + collateral $26k-50k—may require UCC filing DUNS number required-free to borrower Loan payments come from business checking account Loan is made in the business’ name

28 Thank You! David Tiller-Vets Business Dev.Officer 615-736-7176 »Questions

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