1. Capital Access: SBA Financing Options for Your Small Business Presented by U.S. Small Business Administration’s Colorado District Office

2. SBA Loan Guaranties- Understanding How It Works SBA does not provide: Grants Low interest rate loans Minority- or women-owned small business loans 100% financing Direct business loans

3. 7(a) Loan Guaranty Program Applicant applies for commercial loan at bank If commercial loan declined, applicant may ask SBA participating lender to consider an SBA 7(a) guaranteed loan. Lender submits SBA guaranty application to SBA. After SBA guaranty approved, lender disburses funds to applicant. SBA guaranties range from 50-90%.

4. SBA Eligibility Requirements Be independently owned and operated for profit Not dominant in its field of operation or industry May not exceed SBA size standards (based on average annual receipts for past 3 fiscal years or average number of employees over last 12 months) Businesses must:

5. Management: related industry experience, education, ownership and management experience Repayment ability: historical/projected cash flow & debt service coverage Collateral: Secondary source of repayment Credit: personal/historical business credit experience Leverage: debt/tangible net worth, retained earnings & capitalization Equity injection: cash injection/seller carry-back (Generally on full standby during term of SBA loan) SBA Basic Requirements

6. SBA Requirements (Con’t) Cash/Equity injection required: generally 20-30% in a normal economy SBA considers type of business & its industry risk Availability of funds from other sources Personal guaranties required of all owners of 20% or more of business

7. SBA Requirements (Con’t) Businesses Ineligible for SBA Guaranty: Non-profits Businesses engaged in lending activities Speculative or investment type businesses Businesses engaged in gambling Illegal businesses Businesses providing prurient sexual material Businesses promoting religion

8. Use of Proceeds Expand & renovate facilities; Purchase machinery & equipment, construct leasehold improvements, purchase land and existing building for business; Finance receivables & augment working capital; Refinance existing debt (with compelling reason); Finance seasonal lines of credit; and/or Construct commercial buildings.

9. Loan Terms Flexible maturities: – Up to 10 years for working capital – Up to 10 years for equipment – Up to 25 years for fixed assets: Real estate Construction Capital Equipment (based on economic life of equipment) Interest rates: Negotiated between borrower & lender Under 7 year term cannot exceed base rate plus 2.25% Over 7 year term cannot exceed base rate plus 2.75% Base rate options: NY prime, 30-day LIBOR + 3% or SBA peg rate (3.375%)  May be higher for SBAExpress program or smaller loans

10. SBA Loan Programs 7(a) Loan Program –Expedited Programs SBAExpress Small Loan Advantage Veterans Advantage –CAPLines 504 fixed asset financing Micro-loan program

11. 7(a) Loan Can be used for basically any purpose. Loan up to $5M SBA guaranty of 75% - 85% Maturity length and interest rates as discussed previously

12. SBAExpress Lender uses its own forms Loan or revolving lines of credit up to $350,000 Limited SBA guaranty of 50% Interest rates: 4.5% over prime for loans over $50,000 but 6.5% over prime for loans under $50,000 36-hour response from the SBA

13. Small Loan Advantage $350,000 Max Term Loan Uses expedited credit scoring method Maturity Length same as standard 7(a) Proceeds to be used for all of the same items as listed in 7(a) 85% guaranty for loans $150,000 or less, 75% on loans greater than $150,000

14. Veterans Advantage Targets veterans and service-disabled veterans, reservists, National Guard, their spouses or widowed spouses Uses expedited SBA review & approval process Maximum loan amount of $350,000 75-85% loan guaranty to bank depending upon loan amount NO FEES!!!

15. CAPLines Working Capital Program) For short-term & cyclical working capital needs Maximum loan of $5.0 million Proceeds advanced against inventory or receivables Types of CAPLines: Seasonal Line Contract Line Builders Line Working Capital

16. 504 Fixed Assets Financing Long-term, fixed-rate financing (10 & 20 year terms) Up to $5.0 million in SBA-backed debenture under job creation goal; $5.5 million for manufacturers Used for Property, Building, and Large Fixed Assets

17. A Typical 504 Project — A third party lender (bank/credit union) provides 50% of project financing 504 loan through a CDC provides up to 40% of project financing backed 100% by SBA debenture sold to institutional investors At least 10% of project financing provided by applicant (additional 5% for single or limited use building & additional 5% for startup business)

18. Micro-Loans SBA provides direct loan through non-profit intermediary Micro-lender loans of up to $50,000 to small businesses Term of up to six years Used for — Machinery, equipment & fixtures Leasehold improvements Inventory Working capital Technical assistance available

19. Questions & Answers