1. SBA Financing Options for Your Small Business Hosted by U.S. Small Business Administration Colorado District Office

2. SBA Financing-Understanding How It Works SBA does not provide: Grants Grants Low interest loans Low interest loans Minority, women & veteran specific loans Minority, women & veteran specific loans 100% financing 100% financing Direct business loans Direct business loans

4. 7(a) Loan Guaranty Program Applicant applies for commercial loan at bank Applicant applies for commercial loan at bank If commercial loan declined, applicant may ask SBA participating lender to consider an SBA guaranteed loan. If commercial loan declined, applicant may ask SBA participating lender to consider an SBA guaranteed loan. The lender submits an SBA guaranty application for SBA’s review and approval. The lender submits an SBA guaranty application for SBA’s review and approval. After SBA guaranty is approved, lender disburses funds. After SBA guaranty is approved, lender disburses funds. SBA guarantee ranges from 50-90%. SBA guarantee ranges from 50-90%.

5. SBA Eligibility Requirements Be independently owned and operated for profit Be independently owned and operated for profit Not dominant in its field of operation or industry 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) 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:

6. SBA Basic Requirements Applicant of good character Applicant of good character Management expertise & commitment to succeed Management expertise & commitment to succeed Reasonable personal contribution or business equity Reasonable personal contribution or business equity Feasibility of business success Feasibility of business success Ability to repay loan from projected cash flow Ability to repay loan from projected cash flow Secondary source of repayment ability −collateral to secure the loan Secondary source of repayment ability −collateral to secure the loan

7. SBA Requirements (Con’t) Cash/Equity injection required: generally 20-25% Cash/Equity injection required: generally 20-25% SBA considers type of business & its industry SBA considers type of business & its industry Availability of funds from other sources Availability of funds from other sources Personal guarantees required of all owners of 20% or more of business Personal guarantees required of all owners of 20% or more of business

8. SBA Requirements (Con’t) Collateral is generally required Collateral is generally required Valuation of collateral (Based on quick sale of collateral) Valuation of collateral (Based on quick sale of collateral)

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

10. Use of Proceeds 7(a) loans may be used to: Expand & renovate facilities; Expand & renovate facilities; Buy machinery, equipment, fixtures, buildings and land for business; Buy machinery, equipment, fixtures, buildings and land for business; Finance receivables & augment working capital; Finance receivables & augment working capital; Refinance existing debt (with compelling reason); Refinance existing debt (with compelling reason); Finance seasonal lines of credit; and/or Finance seasonal lines of credit; and/or Construct commercial buildings. Construct commercial buildings.

11. Terms Flexible maturities: Flexible maturities: Up to 7 years for working capital Up to 7 years for working capital Up to 10 years for equipment Up to 10 years for equipment Up to 25 years for fixed assets: Up to 25 years for fixed assets: Real estate Real estate Construction Construction Capital Equipment Capital Equipment Interest rates: Interest rates: Negotiated between borrower & lender Negotiated between borrower & lender Under 7 year term cannot exceed prime rate plus Under 7 year term cannot exceed prime rate plus 2.25% 2.25% Over 7 year term cannot exceed prime rate Over 7 year term cannot exceed prime rate plus 2.75% plus 2.75%  May be higher for SBAExpress program or smaller loans

12. Guarantee Fees MaturitySBA Loan Portion Guaranty Fee* 1 year or lessAny amount up to maximum0.25% loan of $2.0 million Over 1 year$150,000 or less 1.0% Over 1 year$150,000 to $700,0002.5% Over 1 year$700,000-1,000,0003.5% Over 1 yearOver $1,000,0003.75%  Subject to change

13. SBA Loan Programs 7(a) loan guarantees 7(a) loan guarantees Expedited Programs Expedited Programs SBALowDoc SBALowDoc SBAExpress SBAExpress Community Express Community Express Export Express Export Express CAPLines CAPLines Export Working Capital Program Export Working Capital Program International Trade Term loans International Trade Term loans 504 fixed asset financing 504 fixed asset financing Microloan program Microloan program

14. SBALowDoc (Low Documentation Loan Program) Appropriate for applicants with “clean” credit histories Appropriate for applicants with “clean” credit histories For loans up to $150,000 For loans up to $150,000  Up to 7 years for working capital; 10 years for equipment and 25 years for fixed assets Up to 85% guaranty to bank Up to 85% guaranty to bank One-page SBA application One-page SBA application 36-hour response from the SBA 36-hour response from the SBA

15. SBAExpress Lender uses its own forms Lender uses its own forms Loans or revolving lines of credit up to $250,000 Loans or revolving lines of credit up to $250,000 SBA guaranty of 50% SBA guaranty of 50% Interest rates: 4.5% over prime for loans over $50,000; 6.5% over prime for loans under $50,000 Interest rates: 4.5% over prime for loans over $50,000; 6.5% over prime for loans under $50,000 36-hour response from the SBA 36-hour response from the SBA

16. Spurs job creation Spurs job creation For under-represented minorities, veterans & women business owners For under-represented minorities, veterans & women business owners Businesses located in low-moderate income urban and in rural areas Businesses located in low-moderate income urban and in rural areas Maximum loan amount of $250,000 Maximum loan amount of $250,000 Technical assistance support included Technical assistance support included CommunityExpress

17. SBA ExportExpress Only lenders approved for SBAExpress may participate in program Only lenders approved for SBAExpress may participate in program Uses expedited SBA review & approval process Uses expedited SBA review & approval process Maximum loan amount of $250,000 Maximum loan amount of $250,000 Proceeds to be used for most export- related purposes Proceeds to be used for most export- related purposes

18. CAPLines (Working Capital Program) For short-term & cyclical working capital needs For short-term & cyclical working capital needs Maximum loan of $2.0 million Maximum loan of $2.0 million Proceeds advanced against inventory or receivables Proceeds advanced against inventory or receivables Maximum maturity of five years Maximum maturity of five years Types of CAPLines: Types of CAPLines: Seasonal LineStandard Asset-based Line Contract LineSmall Asset-based Line Builders Line

19. EWCP (Export Working Capital Program) Short-term financing for exporters Short-term financing for exporters 90% SBA guaranty — up to $2.0 million loan 90% SBA guaranty — up to $2.0 million loan One-page application; turnaround — less than 10 days One-page application; turnaround — less than 10 days Maturity — Maturity — A single transaction cycle or A single transaction cycle or Revolving line of credit for 12 months Revolving line of credit for 12 months Repaid from the proceeds of the export sale Repaid from the proceeds of the export sale May be used for both — May be used for both — Pre-shipment working capital Pre-shipment working capital Post-shipment exposure Post-shipment exposure

20. International Trade Term Loan Long- & short-term financing — Long- & short-term financing — Maximum loan amount — $2.0 million Maximum loan amount — $2.0 million For businesses — For businesses — Exporting or preparing to export Exporting or preparing to export Adversely affected by import competition Adversely affected by import competition May be used for — May be used for — Working capital and/or Working capital and/or To purchase facilities or equipment that will be used within the U.S. for producing goods or services for export To purchase facilities or equipment that will be used within the U.S. for producing goods or services for export

21. MicroLoans Direct loans through non-profit intermediaries Direct loans through non-profit intermediaries Loans of up to $50,000 Loans of up to $50,000 Term of up to six years Term of up to six years Used for — Used for — Machinery, equipment & fixtures Machinery, equipment & fixtures Leasehold improvements Leasehold improvements Inventory Inventory Working capital Working capital Technical assistance available Technical assistance available

22. Fixed Assets Financing 504 Certified Development Company Program Long-term, fixed-rate financing (10 & 20 year terms) Long-term, fixed-rate financing (10 & 20 year terms) Up to $1 million in SBA-backed debenture; $1.3 million under public policy goals Up to $1 million in SBA-backed debenture; $1.3 million under public policy goals Must create or retain one job for every $50,000 of SBA debenture proceeds or meet public policy goals Must create or retain one job for every $50,000 of SBA debenture proceeds or meet public policy goals

23. To Qualify for a 504 Loan * Business must be operated for a profit Business must be operated for a profit Tangible net worth of less than $7 million Tangible net worth of less than $7 million Average net income of less than $2.5 million for the preceding two fiscal years Average net income of less than $2.5 million for the preceding two fiscal years * Business may not be involved in speculation, real estate rentals or investment

24. A Typical 504 Project — A third party lender (bank) provides 50% of project financing A third party lender (bank) provides 50% of project financing A 504 loan through a CDC provides up to 40% of project financing backed 100% by SBA Debenture A 504 loan through a CDC provides up to 40% of project financing backed 100% by SBA Debenture At least 10% of project financing provided by applicant (additional 5% for special purpose building & additional 5% for startup business) At least 10% of project financing provided by applicant (additional 5% for special purpose building & additional 5% for startup business)

25. What to take with you to the bank Common documentation includes: Purpose of loan Purpose of loan Business history* Business history* 3 years of business financial statements* 3 years of business financial statements* Schedule of term debts* Schedule of term debts* Aging of accounts receivable and payable* Aging of accounts receivable and payable* Projected opening-day balance sheet** Projected opening-day balance sheet** Copy of Lease Copy of Lease Amount of owner investment in business Amount of owner investment in business Projections of income, expenses & cash flow Projections of income, expenses & cash flow Signed personal financial statements Signed personal financial statements Personal résumés Personal résumés * for existing businesses **for new businesses

26. Questions Banker May Ask Why do you want this money? Why do you want this money? What exactly does your business do? What exactly does your business do? How long have you been in business? How long have you been in business? How will you repay your loan? How will you repay your loan? If your initial repayment plan fails, how will you repay the loan? If your initial repayment plan fails, how will you repay the loan? Why did you pick this bank? Why did you pick this bank? How will you pay the fees involved with an SBA guarantee? How will you pay the fees involved with an SBA guarantee?

27. Other Banker Concerns Continuity of your business Continuity of your business What other services the bank may offer your company What other services the bank may offer your company How long you can wait for your loan funds How long you can wait for your loan funds

28. Additional Considerations Applicant’s cash or equity injection into business Applicant’s cash or equity injection into business Financial ratios & leverage Financial ratios & leverage Payment history on government obligations Payment history on government obligations Repayment Repayment

29. The Five C’s of Credit Character: applicant’s willingness and ability to pay debts & abide by the laws of the community Character: applicant’s willingness and ability to pay debts & abide by the laws of the community Credit: your debt payment history Credit: your debt payment history Cash Flow: loan repayment from the cash generated by the business Cash Flow: loan repayment from the cash generated by the business Capacity: ability to pay loan if business experiences a downturn Capacity: ability to pay loan if business experiences a downturn Collateral: assets pledged to secure the loan if cash flow is insufficient to repay Collateral: assets pledged to secure the loan if cash flow is insufficient to repay

30. Questions & Answers