2. U.S. Small Business Administration Office of Capital Access
LRS Monthly Call
October 17th , 2018

3. Office of Capital Access
John Miller - OCA Updates Bill Briggs – Marketing Materials Bob Carpenter – OFA Updates Greg Prichard- Center Updates

4. Office of Capital Access

5. Office of Capital Access
John Miller
Deputy Associate Administrator

6. Priority Goal: Increase the number of loans to small businesses in socially and economically disadvantaged urban communities and rural areas
Total Rural and Urban Hubzone Cumulative Approvals
Rural Approval Count
Rural Approval Amount
Urban Hubzone Approval Count
Urban Hubzone Approval Amount
Total Approval Count
Total Approval Amount
I - New England  
1,073
$207M
585
$116M
1,658
$322M
II - Atlantic    
1,121
$246M
1,380
$305M
2,501
$552M
III - Mid-Atlantic
893
$324M
737
$230M
1,630
$554M
IV - Southeast   
2,148
$1,186M
1,590
$952M
3,738
$2,138M
V - Great Lakes  
3,492
$1,176M
1,681
$547M
5,173
$1,723M
VI - South Central
1,161
$772M
1,180
$692M
2,341
$1,464M
VII - Great Plains
759
$278M
277
$112M
1,036
$390M
VIII - Rocky Mountains
621
678
$346M
1,299
$576M
IX - Pacific     
359
$213M
2,610
$1,651M
2,969
$1,864M
X - Pacific Northwest
532
$228M
609
$303M
1,141
$531M
Unknown 1
$00M 10 11
Total Lenders
12,160
$4,859M
11,337
$5,254M
23,497
$10,114M
- All approvals numbers include 7(a), 504, and Microloan approvals.
Activity through 09/30

7. YTD Activity – Total 7(a) and 504
7(a) Lending Activity
504 Lending Activity
Time Period Comparison (activity through 09/30 of each FY)

8. YTD Activity – 7(a) Small Dollar Loans
Up to $150k Lending Activity
$150k to $350k Lending Activity
Time Period Comparison (activity through 09/30 of each FY)

9. YTD Activity – Export and SBA Express
Time Period Comparison (activity through 09/30 of each FY)
*Includes export program loans and all 7(a)/504 loans where applicant business is an exporter

10. YTD Activity – Underserved Markets
Minority
Women
Veteran
Time Period Comparison (activity through 09/30 of each FY)
**Information submitted on a voluntary basis and not verified by SBA for completeness or accuracy

11. YTD Activity – Franchise
7(a) Franchise Lending Activity
504 Franchise Lending Activity
Time Period Comparison (activity through 09/30 of each FY)
*The addition of the Franchise Directory this year has resulted in an over 50% increase in eligible franchise brands. Now on the Franchise Directory there are 3,192 brands, when the Directory was first published in October 2017 there were 2,034 brands.

12. YTD Activity – Mission Programs
Microloans
FY18 Microloan approvals underreported due to lag in micro lender reporting.
Community Advantage
Time Period Comparison (activity through 09/30 of each FY)

13. YTD Activity – Microloans – Underserved Markets
Minority
Women
Veteran
Time Period Comparison (activity through 09/30 of each FY)
**Information submitted on a voluntary basis and not verified by SBA for completeness or accuracy

14. YTD Activity – Active 7(a) Lenders
Total 7(a) Lenders
Active Banks
Potential New Banks
Active Credit Unions
Potential Credit Unions
Active Comm. Adv. Lenders
Active Non Bank Lenders
Total Active 7(A) Lenders
I - New England  
128
111 26
356 6
160
II - Atlantic     78
167 8
530 9 4 99
III - Mid-Atlantic 95
292 12
751 1
112
IV - Southeast   
194
753 11
781 2
216
V - Great Lakes  
389
1005 49
1161 16
458
VI - South Central
202
734 22
802
232
VII - Great Plains
785 7
350
225
VIII - Rocky Mountains 88
277
291 5
104
IX - Pacific     
110
113 21
421 13
150
X - Pacific Northwest 38 51
185 54
Total Lenders
1538
4288
178
5628 72
1810
- Active Banks / Credit Unions are banks/CUs that have approved a 7(a) loan in FY18
- Potential New Banks/Credit Unions includes all FDIC insured lending institutions / NCUA regulated CUs that have not made a 7(a) loan in FY18
- Other Non-Bank Lenders include SBLC’s and all other lending institutions that have approved a 7(a) loan in FY18
Activity through 09/30

15. YTD Activity - Surety Bond Guarantee Program
Bid, Payment/Performance Activity
Fiscal Year
Total Bonds
Total Dollars
2018
10,866
$6,568,167,310
2017
10,445
$6,121,580,661
2016
10,469
$5,815,137,159
2015
11,535
$6,454,516,829
2014
12,441
$6,525,391,625
Payment/Performance Activity
Fiscal Year
Guaranteed Bonds
Guaranteed Dollars
2018
3,512
$1,859,390,010
2017
3,027
$1,451,429,790
2016
2,961
$1,462,224,190
2015
3,156
$1,418,453,192
2014
3,117
$1,469,190,518
FY18 Highlights - 1,882 Small Businesses Assisted; 35 Participating Surety Companies – 5 New ;
34% of Portfolio from QuickApps (≤ $400K); % Loss Rate ; $2,203,217 Recovered ; $515,716 Average Contract Size
Time Period Comparison (activity through 09/30 of each FY)

16. Office of Financial Program Operations
Greg Prichard
Director
7(a) Loan Guaranty Processing Center

17. 7(a) Small Loan Quality Reviews
The Loan Guaranty Processing Center regularly reviews a sampling of loan applications processed for quality; including completeness and adherence to policies.
Recent reviews of 7(a) Small Loans in the amount of $150,000 and less have revealed the need to remind our Lenders of FIVE Hot Items.

18. FIVE Hottest Small Loan Items

19. Credit Elsewhere
The Lender must include in its credit memorandum that the loan is not available from:
Conventional lenders
Other non-Federal sources of credit.
Liquidity of the Applicant Business, itself
Liquidity of owners of 20% or more of the equity of the Applicant, their spouses and minor children

20. Equity Injection Start-Up
Borrower contribution of no less than ten (10) percent of the total project costs.
Complete Change of Ownership
SBA requires an equity injection of no less than 10 percent of total project costs.
Change of Ownership – via Partner Buyout (partial)
Significant changes to SOP (J) were made to this policy through SBA Policy Notice effective April 3, 2018.
Start-Up:
SBA consider a business to be a “start-up” for the purpose of determining equity injection when it has been in operation (i.e., generating revenue from intended operations) for up to one year.
Total project costs include all costs required to become operational, regardless of the source of funds.
If the borrower is obtaining a term loan for working capital, it is that considered part of the total project cost.
If the borrower is obtaining a separate line of credit, it is not considered part of the total project costs. There should be adequate working capital built into the project. The separate line of credit is to be used for ongoing operations.
Complete Change of Ownership:
Seller debt can be used to meet the injection requirement only if it is on full standby for the life of the SBA loan and it does not exceed half of the required equity injection.
The borrower can not make interest payments on the seller debt. Full standby requires that no principal or interest payments are made.
Partner Buyout:
In order for a 7(a) loan to finance greater than 90% of the purchase price of a partner buyout:
the remaining owner(s) must certify that he/she has been actively participating in the business operation and held the same ownership interest in the business for at least the past 24 months (Lender must include in the credit memorandum confirmation that the borrower has made the required certification and retain such certification in the loan file); and
the business balance sheets for the most recent completed fiscal year and current quarter must reflect a debt-to-worth ratio of no greater than 9:1 prior to the change in ownership.
In the event the Lender is unable to document that both (1) and (2) on the next slide are satisfied, the remaining owner(s) must contribute cash in the amount of at least 10% of the purchase price of the business, as reflected in the purchase and sale agreement.

21. OFPO Turn Time Dashboard

22. QUESTIONS?

23. Thank You! Gregory Prichard, Director
7(a) Loan Guaranty Processing Center (LGPC)

24. Office of Capital Access
Bill Briggs Senior Advisor

25. New Marketing Materials

26. New Marketing Materials
DRAFT

27. New Marketing Materials

28. New Marketing Materials

29. New Marketing Materials

30. New Marketing Materials

31. New Marketing Materials

32. New Marketing Materials

33. New Marketing Materials

34. New Marketing Materials

35. New Marketing Materials

36. New Marketing Materials

37. New Marketing Materials

38. New Marketing Materials

39. Office of Financial Assistance
Bob Carpenter
Acting 7(a) Policy and Program Chief

40. OFA Updates
Federal Register Request for Comment on the SBA Express has been extended to December 19, /express-loan-programs-affiliation-standards
Main Street Employee Ownership Act -

41. SBA Form 159
SOP (J) page 158
Link to SBA Form 159 Fee Disclosure
Link To SBA Notice SBA Form 159

42. SBA Form 159
Why cant a Lender Service Provider or Referral Agent or a Packager be paid twice ?
13 CFR Any unlawful or unethical activity is good cause for suspension or revocation of the privilege to conduct business. This includes: ………(g) Acting as both a Lender Service Provider or Referral Agent and a Packager for an Applicant on the same SBA business loan and receiving compensation for such activity from both the Applicant and lender. A limited exception to this ‘‘two master’’ prohibition exists when an Agent acts as a Packager and is compensated by the Applicant for packaging services; also acts as a Referral Agent and is compensated by the lender for those activities; discloses the referral activities to the Applicant; and discloses the packaging activities to the lender.

43. Who needs to sign the Form 159?
SBA Form 159
Who needs to sign the Form 159?
The Applicant must always sign the Form 159, even if the lender pays the referral agent a fee. The lender is informing the Applicant of the referral fee the lender paid in connection with the loan. The only time the SBA Form 159 is not required: if the Agent is an LSP and the fee paid to the LSP was connected with an LSP contract previously approved by SBA, or if the recipient of the fee meets one of the exceptions in Paragraph VIII. B.3 on page 163 of the SOP (J).

44. What needs to be itemized?
SBA Form 159
What needs to be itemized?
And is this new?
Per SOP (J), page 158: Lender must document the services provided in each loan file, regardless of the amount charged A standard or flat fee charged to all Applicants is not acceptable A referral fee is not required to be itemized; however, a packaging fee or fee for other services where the Agent or Lender is providing some service for which they are charging the Applicant. If the fee is $2,500 or less: they still are required to document the file on the actual services performed or If the fee is over $2,500: An itemized listing of what services were being provided and the charges on an hourly basis for fees for services
SBA may review these fees at any time. Lenders and third parties must refund any fee considered unreasonable or impermissible by SBA

45. Equity Injections
Hot Topics
Only time an 10% Equity Injection is required – Change of Ownership or Start-up Business
For SBA Express, Export Express and Community Advantage loans: if the lender requires an equity injection as part of its standard processes for non- SBA loans, it must do so for SBA Express and Export Express loans.
An acquisition organized under a new entity will have it’s own balance sheet, and must show the 10% equity requirement on a proforma basis
Grants can be a source of equity injections if: it is from a government entity such as economic development, state, local program or other similar private organization.  This does not include a “grant” from a private individual. Grant terms must be considered in the documentation and review of the loan.

46. Express Bridge Loan Pilot Program
Capital Access offers Immediate Disaster Assistance
Hurricane Michael Florida Primary Counties: Bay, Franklin, Gulf, Taylor, Wakulla.
Hurricane Michael Georgia Primary Counties:
Baker, Decatur, Dougherty, Early, Miller, Seminole
To see more Major Presidential Disasters, click on link below
EBL Program Guide available online!

47. October 23rd 7(a) Lenders Connect Call 3:00 pm EST Save the Date!
Step 1: Dial into the conference 10 minutes prior.
Dial-in: or
Access Code: ##
Step 2: Join the conference on your computer.
Entry Link:
(copy and past this address into browser for easier log-in)
October 23rd
7(a)
Lenders
Connect Call
3:00 pm EST

48. December 4th 504 Connect Call 3:00pm EST Save the Date!
Step 1: Dial into the conference 10 minutes prior.
Dial-in: or
Access Code: ##
Step 2: Join the conference on your computer.
Entry Link:
(copy and past this address into browser for easier log-in)
December 4th
504
Connect Call
3:00pm EST

49. November Call Cancelled
Happy Thanksgiving to you and your family

50. Questions ?