\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a HOW TO RAISE MONEY FOR A SMALL BUSINESS\u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nSuccessful small business expansions and new
\nformations lead the way in creating new
\nmarkets, innovations and jobs that fuel
\neconomic growth and prosperity.<\/p>\n
In recognition of the importance of
\nsmall business to a strong economy, the
\nU.S. Small Business Administration
\n(SBA) is pleased to help meet the
\ninformation needs of existing business
\nowners and aspiring entrepreneurs.<\/p>\n
We hope “Focus On The Facts” meets your
\nneeds and we invite your comments and
\nquestions. Your success in business depends
\non what you know and how well you can apply
\nwhat you have learned.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a RAISING MONEY \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nOne key to successful business start-up and
\nexpansion is your ability to obtain and
\nsecure appropriate financing. Raising
\ncapital is the most basic of all business
\nactivities. But as many entrepreneurs who
\nare just beginning quickly discover, raising
\ncapital may not be easy. It can be a
\ncomplex and frustrating process. But if
\nyou are informed, well prepared and
\nhave planned effectively, raising money for
\nyour business will not be a painstaking
\nexperience.<\/p>\n
This information summary focuses on the ways
\na small business can raise money and
\ndescribes how to prepare a loan proposal.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a WHERE TO FIND THE MONEY YOU NEED \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nThere are several sources to consider when
\nlooking for funding. It is important that
\nyou explore all of your options before
\nmaking a decision.<\/p>\n
\u0e59 Personal Savings: Most new businesses are
\n started with the primary source of
\n capital coming from personal savings and
\n other forms of personal equity.<\/p>\n
\u0e59 Friends and Relatives: Many entrepreneurs
\n look to private sources such as friends
\n and family when starting out in a
\n business venture. Oftentimes, money is
\n loaned at no interest, or with low
\n interest, which can be beneficial when
\n getting started.<\/p>\n
\u0e59 Venture Capital Firms: These firms
\n provide start-up and other needed money
\n for new companies in exchange for equity
\n or part ownership.<\/p>\n
\u0e59 Banks and Credit Unions: the most common
\n source of funding, banks and credit
\n unions will provide a loan if you can
\n show that your business is sound.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a BORROWING MONEY \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nIt is often said that small business
\npeople have a difficult time borrowing
\nmoney. This is not necessarily true.
\nBanks are in the business to make
\nmoney, and the way they make money
\nis by lending money. However, it is the
\ninexperience of small business owners
\nin financial matters, that prompts many
\nsmall business loan requests to be
\nturned down. To be successful in
\nobtaining a loan, you must be prepared
\nand organized. You must know exactly
\nhow much money you need, why you
\nneed it and how you can pay it back.
\nYou must be able to convince your
\nlender that you are a good credit risk.
\nRequesting a loan when you are not
\nproperly prepared makes a statement to
\nyour lender. That statement is. . .”High
\nRisk!”<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a BUILDING EXCELLENCE IN ENTERPRISE \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nTypes Of Business Loans<\/p>\n
Short-Term Loans: Loans that are paid
\nback in less than one year. Types of
\nshort-term loans include:<\/p>\n
\u0e59 Working Capital Loan
\n\u0e59 Accounts Receivable Loan
\n\u0e59 Line of Credit (Revolving Credit Line)
\nLong-Term Loans: Loans with
\nmaturities greater than one year but
\nusually less than seven years. These
\nloans are used for major business
\nexpansions, purchases of real property,
\nacquisitions and in some instances
\nstart-up costs. Types of long-term loans
\ninclude:<\/p>\n
\u0e59 Personal Loan
\n\u0e59 Commercial Mortgage
\n\u0e59 Term Loan<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a HOW TO WRITE A LOAN PROPOSAL \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nApproval of your loan request
\ndepends on how well you present
\nyourself, your business and your
\nfinancial needs to a lender. Remember
\nlenders want to make loans, but they
\nwant to make good loans, loans they
\nknow will be repaid. The best way to
\nimprove your chances of obtaining a
\nloan is to prepare a written loan
\nproposal.<\/p>\n
A good loan proposal will contain the
\nfollowing key elements:<\/p>\n
General Information<\/p>\n
\u0e59 Business name, name of principals social
\n security number of each principal and
\n business address. <\/p>\n
\u0e59 Purpose of the loan – State exactly what
\n the loan will be used for and why it is
\n needed.<\/p>\n
\u0e59 Amount required – Request the exact
\n amount you need to achieve your purpose.<\/p>\n
Business Description<\/p>\n
\u0e59 History and nature of business – Give
\n details of your business’s age, number of
\n employees and current business assets.<\/p>\n
\u0e59 Ownership structure – Provide details on
\n your company’s legal structure. <\/p>\n
Management Profile<\/p>\n
\u0e59 Management description – Develop a short
\n statement on each principal staff member
\n in your business; provide background,
\n education, experience, skills and
\n accomplishments.<\/p>\n
Market Information<\/p>\n
\u0e59 Clearly define your products and market.<\/p>\n
\u0e59 Identify your competition and explain how
\n your business competes in the
\n marketplace. <\/p>\n
\u0e59 Profile your customers and explain how
\n your business can satisfy their needs.<\/p>\n
Financial Information<\/p>\n
\u0e59 Financial statements – Provide balance
\n sheets and income statements for the past
\n three years. If you are just starting
\n out, provide a projected balance sheet
\n and income statement.<\/p>\n
\u0e59 Personal financial statement – Prepare a
\n personal financial statement on yourself
\n and other principal owners of the
\n business. <\/p>\n
\u0e59 Collateral – List all collateral you
\n would be willing to pledge to the bank as
\n security for the loan.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a HOW YOUR LOAN REQUEST WILL BE REVIEWED \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nA loan officer’s primary concern
\nwhen reviewing a loan request is
\nwhether or not the loan will be repaid.<\/p>\n
To help answer this question, many
\nloan officers will order a copy of your
\nbusiness credit report from a business
\ncredit reporting agency. Therefore, it is
\nhelpful if you work with these agencies
\nto help them prepare an accurate picture
\nof your business. Using the credit
\nreport, and the information you have
\nprovided, the lending officer will
\nconsider the following issues:<\/p>\n
\u0e59 Have you invested savings or personal
\n equity in your business totaling at least
\n 25% – 50% of the loan you are requesting?
\n Remember a lender or investor will not
\n finance 100% of your business.<\/p>\n
\u0e59 Do you have a sound record of credit
\n worthiness as indicated by your credit
\n report, work history and letters of
\n recommendations? This is very important.<\/p>\n
\u0e59 Do you have sufficient experience and
\n training to operate a successful
\n business?<\/p>\n
\u0e59 Have you prepared a loan proposal and
\n business plan which demonstrates your
\n understanding of the business and your
\n commitment to the success of the
\n business?<\/p>\n
\u0e59 Does the business have sufficient “cash
\n flow” to make the monthly payments on the
\n loan request? <\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a SBA FINANCIAL PROGRAMS \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nThe SBA offers a variety of
\nfinancing options for small businesses.
\nHowever, it rarely makes a direct loan
\nto an individual or company. The
\nAgency is primarily a guarantor – it
\nguarantees loans made by banks and
\nother private lenders to small business
\nclients. <\/p>\n
SBA guaranteed loans generally do not exceed
\n$500,000, of which the Agency guarantees 85
\nor 90 percent of the loan balance to the
\nbank. The average size of an SBA guaranteed
\nloan is $175,000 and the average maturity
\nabout eight years. SBA guaranteed loans are
\nobtained through
\nprivate lenders.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a HOW TO GET MORE INFORMATION \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nInformation is power! – Make it your
\nbusiness to know what business
\ninformation is available, where to get it
\nand most importantly, how to use it.
\nSources of information include:<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a U.S. SMALL BUSINESS ADMINISTRATION \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n\u0e59 SBA District Offices<\/p>\n
\u0e59 Small Business Development Centers
\n (SBDCs)<\/p>\n
\u0e59 Service Corps of Retired Executives
\n (SCORE)<\/p>\n
\u0e59 Small Business Institutes (SBIs)<\/p>\n
Consult your telephone directory
\nunder U . S . Government for your local
\nSBA office or call the Small Business
\nAnswer Desk at l-800-368-5855 for
\ninformation on any of the above
\nresources. In Washington D.C. call
\n653-7561. Also, you may request a free
\nDirectory of Business Development
\nPublications from your local SBA
\noffice or the Answer Desk.<\/p>\n
Other Sources<\/p>\n
\u0e59 State Economic Development Agencies
\n\u0e59 Chambers of Commerce
\n\u0e59 Local Colleges
\n\u0e59 The Library
\n\u0e59 Manufacturers and suppliers of small
\n business technologies and products.<\/p>\n
Good Luck!SMALL LOAN PROGRAM<\/p>\n
THE PROGRAM<\/p>\n
The U.S. Small Business Administration (SBA) started the Small Loan Program
\nto meet the ever-growing need for loans of $50,000 or less. These loans will
\nbe particularly valuable to small firms in the service sector. Under this
\nprogram, the SBA changed the guaranty fee to participating lenders and
\nsimplified the application form to encourage lenders to consider SBA-
\nguaranteed loans of $50,000 or less. The change in the program allows
\nlenders making SBA-guaranteed loans of $50,000 or less with maturities
\ngreater than 12 months to retain half of the guaranty fee that is normally
\npaid to the SBA. For example, a $50,000 loan with a 90 percent guaranty has
\nan SBA- guaranteed portion of $45,000, and the two percent guaranty fee would
\nbe $900. Under the new changes, the lender may retain $450 and forward $450
\nto SBA, or, at its option, the lender may choose not to charge the small
\nbusiness borrower the half of the guaranty that it would have retained. The
\nguaranty fee remain at two percent of the amount that the SBA guarantees on
\nloans exceeding $50,000 with maturities greater than 12 months. The lender
\npays the guaranty fee to SBA. However, the lender may charge the fee to the
\nsmall business borrower. A new and simplified application form (SBA Form 4
\nShort Form) has been designed by the SBA to make the program easier to use. <\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development. The SBA has offices located around the country. For
\nthe one nearest you, consult the telephone directory under U.S. Government,
\nor call the Small Business Answer Desk at 1-800-U ASK SBA.<\/p>\n
All of SBA’s programs and services are extended to the public on a non-
\ndiscriminatory basis.
\nINTEREST RATE POLICY<\/p>\n
POLICY<\/p>\n
The U.S. Small Business Administration’s (SBA) interest rate policies vary,
\ndepending on the typeof loan assistance. <\/p>\n
Interest rates for direct loans are based on a survey of the investment
\nmarket for federal fixed-income securities. The rates are adjusted
\nquarterly.<\/p>\n
On the other hand, interest rates on guaranteed loans are negotiated between
\nborrowers and lenders, although rates cannot be any higher than maximum
\nlevels set by SBA regulations.<\/p>\n
Maximum rates are based on the lowest New York prime rate on the date the SBA
\nreceives the application. For loans with maturities of less than seven
\nyears, the maximum rate is 2.25 percentage points above the prime rate. For
\nloans with maturities of seven or more years, the maximum rate is 2.75
\npercentage points above the prime rate.<\/p>\n
For immediate participation loans, the maximum interest rate for the lenders’
\nshare is one percentage point below the maximum guaranty rate for loans with
\ncomparable maturities.<\/p>\n
The interest rate may be fixed or variable, depending on negotiated loan
\nagreements between the borrower and the lender.<\/p>\n
VARIABLE RATE PEGS<\/p>\n
Variable rate loans may be pegged to either the lowest New York prime rate or
\nthe SBA optional peg rate. The optional peg rate is a weighted average of
\nrates the federal government pays for loans with maturities similar to the
\naverage SBA loan. It is calculated quarterly and published in the Federal
\nRegister.<\/p>\n
The lender and borrower negotiate the amount of “spread” which will be added
\nto the “base” (New York prime or optional peg) rate; not more than 2.25
\npercentage points on loans with maturities of less than seven years, and not
\nmore than 2.75 percentage points on loans with longer maturities.<\/p>\n
Although there may be exceptions, generally, the rate cited in the note upon
\nwhich payment calculations are based will be the base rate plus the
\nnegotiated spread.<\/p>\n
An adjustment period is selected which will identify the frequency with which
\nthe note rate will change. It can be monthly, quarterly, semi-annually, or
\nannually. While it is possible that the base rate (prime, for example) could
\nchange numerous times in one month, the note rate would only be adjusted
\nonce, on the first business day of the month following the last change. This
\nexample assumes that the adjustment period had been identified as being
\nmonthly.<\/p>\n
On the day of the application, the participating lender must have determined:
\n(l) the base rate, (2) the spread, (3) the note rate, and (4) the adjustment
\nperiod.<\/p>\n
EXAMPLE<\/p>\n
A lender agrees to request SBA’s guaranty of a loan to have a 10-year
\nmaturity. New York prime on the day the lender submits the application to
\nSBA is nine percent. The lender and borrower have agreed that payments will
\nbe calculated at “prime plus 2.50 percent” and that the rate will fluctuate
\non a quarterly basis.<\/p>\n
The base rate is nine percent; the spread is 2.50 percent; the note rate is
\n11.50 percent; and the adjustment period is quarterly. If the New York prime
\nchanges either up or down during any calendar quarter, the note rate will
\nchange by the same amount on the first business day of the calendar quarter
\nfollowing the quarter in which the change occurred. The spread stays
\nconstant throughout the term of the loan. Therefore, while the maximum note
\nrate at the time this loan was made was 11.75 percent, if prime goes up to 12
\npercent during the life of the loan, the rate on the note at that time would
\ngo up to 14.75 percent.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-U ASK SBA or (202) 205-7064. For the hearing
\nimpaired, call (202) 205-7333 (TDD).<\/p>\n
All of SBA’s programs and services are extended to the public on a non-
\ndiscriminatory basis.SURETY BOND GUARANTEE PROGRAM<\/p>\n
THE PROGRAM<\/p>\n
The U.S. Small Business Administration (SBA) can guarantee bonds for
\ncontracts up to $1.25 million, covering bid, performance and payment bonds
\nfor small and emerging contractors who cannot obtain surety bonds through the
\nregular commercial channels.<\/p>\n
ELIGIBILITY<\/p>\n
Businesses in the construction and service industries can meet the SBA’s size
\neligibility standards if their average annual receipts, including those of
\ntheir affiliates, for the last three fiscal years do not exceed $3.5 million.
\nLocal SBA offices can answer questions dealing with size standard
\neligibility.<\/p>\n
TYPES OF ELIGIBLE BONDS<\/p>\n
Any contract bond (bid, performance or payment) is eligible for SBA guarantee
\nif the bond is: <\/p>\n
covered by the contracts bonds section of the Surety Association of America
\nRating Manual;<\/p>\n
required by the invitation to bid or by the contract; and<\/p>\n
executed by a surety company that is determined by SBA to be eligible to
\n participate in the program and is certified acceptable by the U.S.
\n Treasury (Circular 570).<\/p>\n
Some non-competitive negotiated contracts are eligible if they are in accord
\nwith appropriate federal regulations.
\nSIZE OF ELIGIBLE CONTRACTS<\/p>\n
The SBA can guarantee bonds for contracts up to $1.25 million.<\/p>\n
SBA GUARANTEE<\/p>\n
The SBA guarantees surety companies against a percentage of losses sustained
\non contracts up to $1.25 million in face value. <\/p>\n
DUTIES OF CONTRACTOR<\/p>\n
Contractors should apply for a specific bond with a surety company of their
\nchoice, providing background, credit and financial information required by
\nthe surety company and the SBA. <\/p>\n
The contractor must use the following forms, which are available from the
\nSBA:<\/p>\n
SBA Form 994: Application for Surety Bond Guarantee Assistance<\/p>\n
SBA Form 912: Statement of Personal History (on first application and once
\nevery two calendar years thereafter)<\/p>\n
SBA Form 994F: Schedule of Uncompleted Work on Hand (required initially and
\nthen at least quarterly)<\/p>\n
DUTIES OF SURETY COMPANY<\/p>\n
After an applicant completes the forms and furnishes the surety company with
\nsufficient underwriting information, the surety company processes and
\nunderwrites the application in the same manner as any other contract bond
\napplication. The surety company decides whether to:<\/p>\n
– execute the bond without the SBA’s guarantee;<\/p>\n
– execute the bond only with the SBA’s guarantee; or<\/p>\n
– decline the bond even with the SBA’s guarantee.<\/p>\n
If the surety company determines an SBA guarantee is required in order to
\nprovide the bond, it must then complete an SBA Form 994B: Underwriting Review
\nand the SBA Form 990: Guarantee Agreement. These forms — and supporting
\ndocuments — are submitted along with the 994, 912 and 994F to the
\nappropriate SBA office. If the application is for a final bond, the
\ncontractor’s guarantee fee check must be attached.<\/p>\n
DUTIES OF THE SBA<\/p>\n
The SBA determines an applicant’s ability to complete the contract based on
\nthe information, documentation and underwriting rationale provided by the
\nsurety company. If the review establishes performance capacity, and all
\nother aspects of the application are approved, a duly authorized SBA official
\nsigns a guarantee agreement and returns it to the surety company. If the
\nreview fails to establish performance capacity, the SBA seeks clarification
\nfrom the surety underwriter. If performance capacity cannot be reasonably
\nassured, the SBA rejects the application.<\/p>\n
COST OF AN SBA
\nGUARANTEED BOND <\/p>\n
The SBA charges fees to both the contractor and the surety company, as
\ndescribed in the most recent edition of 13 CFR 115: <\/p>\n
The small business pays the SBA a guarantee fee of six dollars per thousand
\nof the contract amount.<\/p>\n
When the bond is issued, the small business pays the surety company’s bond
\npremium. This charge cannot exceed the level approved by the appropriate
\nstate regulatory body.<\/p>\n
The surety company pays the SBA a guarantee fee as determined by the
\n SBA.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (FAX). For the
\nhearing impaired, call (202) 205-7333. <\/p>\n
All of SBA’s programs and services are extended to the public on a non-
\ndiscriminatory basis.LOANS TO
\nSMALL GENERAL CONTRACTORS<\/p>\n
THE PROGRAM<\/p>\n
The U.S. Small Business Administration (SBA) makes regular business loans to
\nsmall general contractors to finance construction or renovation of
\nresidential or commercial buildings that will be offered for sale. These
\nloans are available only under the guaranty loan program.<\/p>\n
ELIGIBILITY<\/p>\n
Eligibility rules require construction contractors and homebuilders to have
\nalready demonstrated the managerial and technical ability to build or
\nrenovate projects comparable in size to those for which they are seeking SBA
\nfinancing. In addition, they must qualify as small businesses under the
\nSBA’s size standards and meet the Agency’s credit criteria. <\/p>\n
AMOUNT<\/p>\n
The SBA can guarantee as much as 85 percent of the loan up to $750,000. The
\nmaximum guaranty for loans up to $155,000 is 90 percent. <\/p>\n
TERMS<\/p>\n
The loan maturity cannot be more than 36 months plus a reasonable estimate of
\nthe time it takes to complete the construction or renovation. Principal
\nrepayment may be required in a single payment when the project is sold.
\nInterest payments, however, are required at least twice a year and must be
\npaid from the applicant’s own resources, not from loan proceeds.<\/p>\n
INTEREST RATES<\/p>\n
A lender may charge 2.25 percentage points over the New York prime interest
\nrate.<\/p>\n
USE OF PROCEEDS<\/p>\n
Loan proceeds can be used only for direct expenses of the project.
\nRehabilitation projects also qualify if they are “significant” and if, at the
\ntime of loan application, the estimated costs are equal to or more than a
\nthird of the purchase price or the fair market value of residential or
\ncommercial buildings at the time they are offered for sale. <\/p>\n
Loans also can be used to purchase vacant land if the price is no more than
\n20 percent of the total loan. Not more than 5 percent of the loan can be
\nused for streets, curbs and other developmental costs that benefit properties
\nother than the one being built or rehabilitated.<\/p>\n
SPECIAL APPLICATION REQUIREMENTS<\/p>\n
In addition to the requirements of SBA’s regular business loan program, the
\napplicant must submit three letters to SBA (or to the participating lender).<\/p>\n
One letter must be from a mortgage lender doing business in the area
\naffirming that permanent mortgage financing for qualified purchasers of
\ncomparable real estate is normally available in the project’s area.<\/p>\n
Another letter must come from an independently licensed real estate broker
\nwith three years of experience in the project area. The letter must state
\nwhether a market for the proposed structure exists and whether it is
\ncompatible with other buildings in the neighborhood.<\/p>\n
The third letter must be from an independent architect, appraiser or
\nengineer, confirming availability of construction inspection and
\ncertification at intervals during the project. This letter writer cannot be
\naffiliated with the applicant in any way.<\/p>\n
The cost of construction inspections must be paid by the applicant and can be
\npaid from the loan proceeds. <\/p>\n
COLLATERAL<\/p>\n
Loans for the project must be secured by not less than a second lien. The
\ntotal amount of the first and second liens on a property cannot exceed 80
\npercent of the contractor’s anticipated selling price. The first lien must
\ninclude provisions for transferring clear title to the purchaser of each
\nparcel. The SBA will not take a second position in a subdivision that is
\nsubordinate to a lien requiring the entire loan to be paid in full before any
\nproperty is released. <\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064. For the hearing
\nimpaired, call (202) 205-7333 (TDD).<\/p>\n
All of SBA’s programs and services are extended to the public on a non-
\ndiscriminatory basis.<\/p>\n
8(a) PARTICIPANT LOANS<\/p>\n
The Program<\/p>\n
This program provides financial assistance to businesses participating in the
\n8(a) program. Loans may be made on a direct basis, or through lending
\ninstitutions under SBA’s immediate participation or guaranty program.<\/p>\n
ELIGIBILITY<\/p>\n
Only applicants currently participating in the 8(a) program and therefore
\neligible for contractual assistance under that program are eligible.<\/p>\n
LOAN AMOUNTS<\/p>\n
The maximum SBA guaranty of a loan through a lending institution is $750,000.
\nDirect and immediate participation loans are limited to an SBA share of
\n$150,000.<\/p>\n
LOAN PROCEEDS<\/p>\n
Loan proceeds are to be used within a reasonable time for plant construction,
\n conversion or expansion, machinery and equipment, or facilities. Loan
\nproceeds to manufacturers may be used for working capital purposes. For non-
\nmanufacturers working capital loan proceeds are limited to inventory,
\nsupplies, and materials. No debt payment is permitted.<\/p>\n
INTEREST RATES<\/p>\n
Interest rates on guaranty loans are set by the lender, not to exceed two and
\nthree quarter percentage points over the New York prime interest rate. The
\ninterest rate on direct loans will be one percent less than the SBA direct
\nloan rate, which changes each calendar quarter.<\/p>\n
COLLATERAL<\/p>\n
Collateral requirements for guaranteed loans are the same as SBA’s regular
\nprogram. Generally, collateral is required to the extent it is available and
\nin value sufficient to secure the loan. Direct or immediate participation
\nloans will be subordinate to perfected security interests held by financial
\ninstitutions arising from the borrower’s past borrowings. This provision
\ndoes not apply to past borrowings from individuals.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064. For the hearing
\nimpaired, call (202) 205-7333 (TDD)<\/p>\n
All of SBA’s programs and services are extended to the public on a non-
\ndiscriminatory basis.LOANS FOR VIETNAM-ERA
\nAND DISABLED VETERANS<\/p>\n
THE PROGRAM<\/p>\n
Disabled and Vietnam-era veterans who cannot secure business financing on
\nreasonable terms from private sector or guaranty loan sources can turn to
\nthe U.S. Small Business Administration (SBA) for direct loans. Veterans can
\nuse the loans to set up a small business or to operate or expand an existing
\nsmall business. The ceiling on these loans is $150,000.<\/p>\n
While all qualified veterans get special consideration when they apply for
\nSBA assistance, most loans are made by financial institutions and many are
\nguaranteed by SBA. When a guaranteed loan or other reasonable credit
\nfinancing is available, SBA cannot make a direct loan.<\/p>\n
Applicants must meet certain basic credit criteria. They must, for example,
\nhave sufficient equity in the business and the ability to repay the loan from
\nbusiness earnings. Applicants must apply to local financial institutions for
\nloans in order to show that they cannot get financing on reasonable terms
\nwithout SBA assistance. Applicants must provide evidence that a request for
\na loan on the same or similar terms as those sought from the SBA was
\nrejected for reasons other than credit factors. <\/p>\n
ELIGIBILITY<\/p>\n
Vietnam-era veterans are veterans who served for more than 180 days, any
\npart of which was between August 5, 1964, and May 7, 1975, and were
\ndischarged other than dishonorably. Disabled veterans are veterans with 30
\npercent or more compensable disability or veterans with a disability
\ndischarge.<\/p>\n
A veteran who meets the above criteria must own at least 51 percent of the
\nfirm, participate in the actual day-to-day operation of the business, show
\nability to successfully run a business, show significant capital investment
\nin the firm, and show that the loan requested is not available elsewhere.
\nLoans for investment, rental real estate and gambling are prohibited by law.<\/p>\n
INTEREST RATE<\/p>\n
The interest rate on Vietnam-era and disabled veteran loans is the same as
\nthe current rate for SBA direct loans, which is adjusted quarterly.<\/p>\n
COLLATERAL<\/p>\n
The SBA must be satisfied that loans are of sufficiently sound value or
\nreasonably secured to assure repayment. Generally, applicants must pledge
\navailable collateral. The Agency may also require personal guarantees by
\nprincipals.<\/p>\n
SINGLE LOAN BENEFIT<\/p>\n
The veteran status of an individual may only be used one time to qualify for
\nan SBA loan. Subsequent loans under this program must be based on 51 percent
\nminimum ownership by persons with unused eligibility.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
Most SBA offices cosponsor training to help veterans make decisions on going
\ninto business, acquaint them with lender requirements and help them determine
\nwhat paperwork may be required.<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, international trade and rural
\ndevelopment.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-U ASK SBA.<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnondiscriminatory basis.
\nBLACK-OWNED SMALL BUSINESSES<\/p>\n
SBA ASSISTANCE<\/p>\n
The U.S. Small Business Administration (SBA) provided a total of 518 direct
\nand guaranteed loans (excluding disaster loans) worth more than $91.1 million
\nand 1,628 8(a) contracts totaling nearly $1.44 billion to Black-owned firms
\nin FY 1990. <\/p>\n
More than 1,870 Black-owned firms participate in the 8(a) program. The SBA
\nalso maintains the Procurement Automated Source System (PASS), a computerized
\nlisting of small business contractors seeking government procurements. More
\nthan 13,430 Black-owned firms are profiled in the system.<\/p>\n
CENSUS STATISTICS<\/p>\n
According to the latest U.S. Bureau of the Census statistics, there were
\n424,165 Black-owned businesses in the United States in 1987. That is a 38
\npercent increase from the 1982 total of 308,260. This rate of growth is
\nnearly three times the rate for all businesses during that time.<\/p>\n
In 1987, 49.4 percent of the Black-owned firms were concentrated in the
\nservice industries. These categories accounted for 31 percent of the gross
\nreceipts. Retail trade had the next largest concentration with 15.6 percent
\nof the firms and 29.8 percent of the receipts.<\/p>\n
The manufacturing and wholesale trade industries experienced strong growth
\namong Black-owned firms between 1982 and 1987. Black-owned manufacturing
\nfirms more than doubled, rising from 3,707 in 1982 to 8,004 in 1987. The
\ngrowth in receipts in this industry was nearly a four-fold increase, from
\n$345 million in 1982 to just over $1 billion in 1987. Black-owned firms in
\nthe wholesale trade industry increased from 3,119 businesses in 1982 to 5,519
\nbusinesses in 1987, an increase of 77 percent. Receipts more than
\nquadrupled, rising from $432 million in 1982 to $1.3 billion in 1987.<\/p>\n
The majority of the firms (400,339 or 94.4 percent) owned by Blacks in 1987
\noperated as sole proprietorships. Partnerships accounted for 3.3 percent of
\nthe Black-owned firms, with Subchapter S corporations accounting for three
\npercent.<\/p>\n
Gross receipts in 1987 for Black-owned businesses were $19.8 billion, up from
\n$9.6 billion in 1982. Sole proprietorships accounted for 50.9 percent of
\nthe gross receipts, partnerships for 10 percent, and Subchapter S
\ncorporations, 39.2 percent.<\/p>\n
Almost one-quarter million Americans were employed in Black-owned firms in
\n1987, up 82 percent from 1982. The number of Black-owned businesses with
\npaid employees rose by 87 percent, from 37,841 in 1982 to 70,815 in 1987.<\/p>\n
In 1987, the largest number of Black-owned firms — 47,728 — were located in
\nCalifornia, with gross receipts of $2.4 billion. New York was second with
\n36,289 firms and receipts totaling $1.9 billion.<\/p>\n
Slightly less than 44 percent of the Black-owned firms and 44.7 percent of
\ngross receipts were concentrated in California, Texas, New York, Florida and
\nIllinois.<\/p>\n
The 10 metropolitan areas with the most Black-owned firms in 1987 were:<\/p>\n
City # Firms Receipts
\nNew York 28,063 $1.2 billion
\nLos Angeles 23,932 $1.3 billion
\nWash., D.C. 23,046 $1.0 billion
\nChicago 15,374 $0.9 billion
\nHouston 12,989 $0.4 billion
\nAtlanta 11,804 $0.7 billion
\nPhiladelphia 10,249 $0.6 billion
\nDetroit 9,852 $0.5 billion
\nBaltimore 8,593 $0.3 billion
\nDallas 7,857 $0.2 billion<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract and export assistance. The Agency also offers
\nspecialized assistance to women business owners, other minorities and
\nveterans.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-U ASK SBA.<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnondiscriminatory basis.
\nHISPANIC-OWNED SMALL BUSINESSES<\/p>\n
SBA ASSISTANCE<\/p>\n
The U.S. Small Business Administration (SBA) provided a total of 894 direct
\nand guaranteed loans (excluding disaster loans), totaling 168.3 million to
\nHispanic-owned small businesses in the United States and Puerto Rico in FY
\n1991. <\/p>\n
The SBA awards federal contracts through the 8(a) program to eligible
\nsocially and economically disadvantaged firms. In FY 1991, 1,265 contacts
\nwere let to Hispanic-owned 8(a) firms totaling more than $1.2 billion. There
\nare approximately 1,060 Hispanic-owned firms in the United States and Puerto
\nRico participating in the 8(a) program.<\/p>\n
The SBA also maintains the Procurement Atomated Source System (PASS), a
\ncomputerized data base of small business contractors. The system responds to
\nrequests made by government agencies or major contractors for potential small
\nbusiness suppliers. More than 11,605 Hispanic-owned firms are profiled in
\nthe system.<\/p>\n
GENERAL information<\/p>\n
The most recent data available from the U.S. Bureau of the Census show that
\nin 1987, there were 422,373 U.S. businesses owned by Hispanic persons, up
\nfrom 233,975 in 1982, an increase of 80.5 percent. The rate of growth is
\nalmost six times the rate for all businesses. Hispanic firms account for
\nroughly 3.1 percent of all U.S. businesses.<\/p>\n
Hispanic firms were concentrated in the service industries, which accounted
\nfor 43.7 percent of all Hispanic-owned firms. <\/p>\n
The industries with the strongest relative growth in both number and receipts
\nare wholesale trade and manufacturing. The wholesale trade industry saw a
\n202 percent increase in the number of businesses, up from 3,359 in 1982 to
\n10,154 in 1987. Receipts grew by 219 percent, from $766.65 million in 1982
\nto $2.45 billion in 1987.<\/p>\n
The majority of firms — 396,769 (93.9 percent) — owned by Hispanics in 1987
\noperated as sole proprietorships. Partnerships totaled 12,230 or 2.9 percent
\nof the firms. Corporations accounted for 3.2 percent of the firms.<\/p>\n
Hispanic businesses had gross receipts of $24.73 billion in 1987, up from
\n$11.76 billion in 1982. Sole proprietorships accounted for 61.3 percent of
\nthe gross receipts; partnerships, 9.3 percent; and corporations, 29.4
\npercent.<\/p>\n
The Census Bureau data show that between 1982 and 1987, Hispanic-owned
\nbusinesses with paid employees more than doubled, rising from 39,272
\nbusinesses in 1982 to 82,908 such businesses in 1987. Hispanic-owned firms
\nprovided jobs for 264,846 Americans in 1987.<\/p>\n
Approximately 76 percent of all Hispanic-owned businesses in the U.S. are
\nlocated in California, Texas, Florida and New York. California has the
\nlargest number with 132,212, followed by Texas, 94,754; Florida, 64,413; and
\nNew York, 28,254.<\/p>\n
The firms in these states generated about 76 percent of the receipts of all
\nsuch businesses in the country in 1987. <\/p>\n
The cities with the largest number of Hispanic-owned firms in 1987 were:<\/p>\n
City # Firms Receipts
\nLos Angeles 21,819 $1.22 billion
\nNew York 20,945 $1.1 billion
\nSan Antonio 13,405 $580 million
\nMiami 12,771 $1.29 billion
\nHouston 10,872 $406 million
\nHialeah, Fla. 8,100 $513 million
\nEl Paso 7,399 $415 million
\nChicago 5,021 $294 million
\nSan Diego 4,083 $205 million
\nSan Jose 3,609 $166 million<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, other minorities, veterans, international
\ntrade and rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (FAX). For the
\nhearing impaired, calll (202) 205-7333 (TDD)<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnon-discriminatory basis.<\/p>\n
SMALL BUSINESSES OWNED BY ASIANS,
\nAMERICAN INDIANS AND OTHER MINORITIES<\/p>\n
(NOTE: Black and Hispanic-owned businesses are covered in other SBA fact
\nsheets.)<\/p>\n
THE PROGRAM<\/p>\n
The U.S. Small Business Administration (SBA) provided a total of 1,315 direct
\nand guaranteed loans (excluding disaster loans) in 1991 to small firms owned
\nby Asian Americans, American Indians and other minorities in the United
\nStates and Puerto Rico. The loans were worth $425.6 million.<\/p>\n
The SBA awards federal contracts through the 8(a) program to eligible
\nsocially and economically disadvantaged firms. During FY 1991, 1,458 8(a)
\ncontracts were let to firms owned by Asians, American Indians, and other
\nminorities. These contracts were worth $1.04 billion. There are
\napproximately 979 such firms in the 8(a) program in the United States and
\nPuerto Rico.<\/p>\n
The SBA maintains the Procurement Automated Source System (PASS), a
\ncomputerized database of small business contractors. PASS responds to
\nrequests made by government agencies or major contractors for potential small
\nbusiness suppliers. More than 15,250 firms owned by the above-named groups
\nare profiled in PASS.<\/p>\n
CENSUS STATISTICS<\/p>\n
According to the 1987 Economic Census, there were 376,711 firms in the United
\nStates owned by Asians, American Indians and other minorities.<\/p>\n
Firms owned by these groups had gross receipts of $34 billion. Sixty-eight
\npercent of these firms were concentrated in California, Hawaii, Texas, New
\nYork and Illinois.<\/p>\n
The majority of these firms operated as sole proprietorships: 340,615, or
\n90.4 percent. They accounted for 62.4 percent of the gross receipts. Of the
\ntotal number of firms owned by Asians, American Indians and other minorities,
\n5.1 percent, or 19,261, were partnerships, accounting for 12.4 percent of the
\ngross receipts. Only 4.5 percent were corporations, but they collected 25.1
\npercent of the gross receipts.<\/p>\n
More than 70 percent of all firms owned by Asians, American Indians and other
\nminorities were concentrated in the services and retail trade industry
\ndivisions. The 1987 Census data show that the two largest major industry
\ngroups were business services, with 48,598 firms, and personal services with
\n38,111 firms.<\/p>\n
California led the way with the largest number of businesses, 147,633 and
\ngross receipts of $14.8 billion. New York was second with 36,257 firms,
\nreporting $3.2 billion in gross receipts.<\/p>\n
The metropolitan areas with the largest number of firms owned by
\nAsian Americans, American Indians and other minorities in 1987 were:<\/p>\n
City # Firms Receipts
\nLos Angeles 63,139 $ 6.9 billion
\nNew York 29,248 $ 2.4 billion
\nHonolulu 24,452 $ 1.3 billion
\nSan Francisco 17,260 $ 1.7 billion
\nAnaheim-
\n Santa Ana 15,407 $ 1.4 billion
\nChicago 12,593 $ 1.2 billion
\nOakland 12,011 $ 1.1 billion
\nWash., DC 11,693 $925 million
\nSan Jose 11,566 $993 million
\nHouston 8,777 $805 million<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, other minorities, veterans, international
\ntrade and rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\ncheck the telephone directory under U.S. Government or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (FAX). For the
\nhearing impaired, call (202) 205-7333 (TDD).<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnon-discriminatory basis.
\nHANDICAPPED ASSISTANCE LOANS<\/p>\n
THE PROGRAM<\/p>\n
Handicapped individuals and public or private non-profit organizations for
\nthe employment of the handicapped can get U.S. Small Business Administration
\n(SBA) financing for starting, acquiring or operating a small business. The
\nloans are available under the Handicapped Assistance Loan Program.<\/p>\n
ELIGIBILITY<\/p>\n
Public or Private Non-profit Organizations (HAL-1)<\/p>\n
Financial assistance is available to state- and federal-chartered
\norganizations that operate in the interest of handicapped individuals.
\nEligibility rules specify that the applying organization’s net income cannot
\nbenefit any stockholder or other individual, and that at least 75 percent of
\nthe direct work involved must be done by handicapped persons. <\/p>\n
To establish HAL-1 eligibility, applicants must provide evidence that the
\nbusiness is operated in the interest of handicapped individuals. The
\nevidence may consist of copies of by-laws, incorporation papers,
\ncertification of tax-exempt status as determined by the Internal Revenue
\nService, or recognition and approval by the U.S. Secretary of Labor or a
\nstate vocational rehabilitation agency.<\/p>\n
Handicapped Individuals (HAL-2)<\/p>\n
To be eligible for loans under the HAL-2 program, handicapped individuals
\nmust provide evidence of the following:<\/p>\n
Their business is a for-profit operation and qualifies as small under the
\nSBA’s size standard criteria. Loans cannot be made to businesses involved in
\ncreating or distributing ideas or opinions — such as newspapers, magazines
\nand academic schools — or businesses engaged in speculation or investment in
\nrental real estate. <\/p>\n
The business must be 100 percent owned by one or more handicapped
\nindividuals. A handicapped individual is a person who has a permanent
\nphysical, mental, or emotional impairment, defect, ailment, disease or major
\ndisability. Applicants must show that their disability keeps them from
\ncompeting on a par with non-handicapped competitors.<\/p>\n
The handicapped owner(s) must actively participate in managing the business.
\nApplications that propose absentee ownership are not eligible.<\/p>\n
Whether the business is organized as a proprietorship, a partnership or a
\ncorporation is not a determining factor with respect to eligibility as a
\nsmall business.<\/p>\n
AMOUNT, TERMS AND INTEREST RATES<\/p>\n
The SBA can guarantee up to $750,000 of a loan made by a private lending
\ninstitution. Direct loans from the SBA are limited to $150,000. Interest
\nrates on direct loans are three percent per year. Interest rates on
\nguaranteed loans are set by the private lending institution and must be
\nlegal, reasonable and within a maximum allowable rate established by SBA.
\nNo direct loan can be approved if a guaranteed loan is available.<\/p>\n
The SBA will not provide financial assistance if funds are otherwise
\navailable from the applicant’s own resources, from a private lending
\ninstitution or through financing by a government entity other than the SBA.<\/p>\n
HAL-1 loan proceeds may be used for most business purposes. They may not be
\nused for supportive services.<\/p>\n
Supportive services refers to expenses incurred by HAL-1 organizations to
\nsubsidize wages of low producers, health and rehabilitation services,
\nmanagement, training, education and housing of handicapped workers and other
\nsuch uses.<\/p>\n
BASIS FOR LOAN APPROVAL<\/p>\n
Nonprofit organizations must have the capability and experience to
\nsuccessfully produce or provide marketable goods and services. <\/p>\n
An evaluation of the experience, competency and ability of the owners and
\noperators of the small business must indicate that they can operate it
\nsuccessfully and can repay the loan from business earnings.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans,international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (FAX). For the
\nhearing impaired, call (202) 205-7333 (TDD)<\/p>\n
All of SBA’s programs and services are extended to the public on a non-
\ndiscriminatory basis.INTERNATIONAL TRADE LOAN PROGRAM<\/p>\n
THE PROGRAM<\/p>\n
The International Trade Loan Program helps small businesses that are engaged
\nor preparing to engage in international trade, as well as small businesses
\nadversely affected by competition from imports. Loans are made by lending
\ninstitutions with the U.S. Small Business Administration (SBA) guaranteeing
\na portion of the loan.<\/p>\n
ELIGIBILITY<\/p>\n
The applicant must establish either of the following:<\/p>\n
The loan proceeds will significantly expand existing export markets or
\ndevelop new export markets. The applicant must submit a business plan,
\nincluding sufficient information to reasonably support the likelihood of
\nexpanded export sales. The plan must include both a profit and loss
\nprojection and a narrative rationale.<\/p>\n
The applicant is adversely affected by import competition. Injury
\nattributable to increased competition with foreign firms must be
\ndemonstrated. A narrative explanation and financial statements must show
\nthat directly competitive imported products have made an important
\ncontribution to a decline in the firm’s competitive position. This can be
\ndemonstrated by factors such as a decline in sales, production, and
\nunderutilization of capacity, decreased profitability, or the threat of (or
\nactual) loss of production employees.<\/p>\n
AMOUNT OF LOAN<\/p>\n
The SBA can guarantee up to $1.25 million, less the amount of SBA’s
\nguaranteed portion of other loans outstanding to the borrower under the SBA’s
\nregular lending program. The SBA’s guaranteed portion of loans for facilities
\nand equipment is limited to $1 million, and SBA’s share of loans for
\nworking capital is limited to $250,000. The working capital portion of
\nthe loan will be administered according to the provisions of the SBA’s
\nExport Revolving Line of Credit (ERLC).<\/p>\n
USE OF PROCEEDS<\/p>\n
Proceeds may be used for:<\/p>\n
Working capital.<\/p>\n
Facilities or equipment, including purchasing land and building(s); building
\nnew facilities; renovating, improving or expanding existing facilities;
\npurchasing or reconditioning machinery, equipment, and fixtures; and making
\nother improvements that will be used within the United States for producing
\ngoods or services.<\/p>\n
Proceeds may not be used for debt payment.<\/p>\n
COLLATERAL<\/p>\n
Only collateral located in the United States (including its territories and
\npossessions) is acceptable for a loan made under this program. The lender
\nmust take a first lien position (or first mortgage) on the items financed
\nunder this section. Additional supportive collateral may be required as
\nappropriate, including personal guaranties, subordinate liens or items which
\nare not financed by loan proceeds.<\/p>\n
MATURITY<\/p>\n
Maturities of loans for facilities or equipment may extend to the 25-year
\nmaximum applicable to most SBA loan programs. The working capital portion of
\nloans, under ERLC provisions, have a three-year maturity.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications,
\nfinancial programs and contract assistance. The Agency also offers
\nspecialized programs for women, minorities, veterans and rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-U ASK SBA.<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnondiscriminatory basis.CONTRACT LOAN
\nPROGRAM<\/p>\n
THE PROGRAM<\/p>\n
The Contract Loan Program (COL) is a short-term line of credit designed to
\nfinance the estimated costs of labor and materials needed to perform a
\nspecific contract. The loans are guaranteed by the U.S. Small Business
\nAdministration (SBA) and do not allow revolving account access to funds
\nguaranteed by the Agency. <\/p>\n
These loans are available only under SBA’s guaranty program. Eligible
\nbusinesses may have more than one COL outstanding at any given time as long
\nas SBA’s total exposure does not exceed $750,000.<\/p>\n
ELIGIBILITY<\/p>\n
To be eligible, a business must be for-profit and qualify as small under the
\nSBA’s size standard criteria, with an exception for sheltered workshops under
\nthe Handicapped Assistance Loan Program. Businesses involved in creating or
\ndistributing ideas or opinions — such as newspapers, magazines, and academic
\nschools — and businesses engaged in speculation or investment in rental real
\nestate are not eligible.<\/p>\n
Also, the business must have been in continuous operation for 12 months
\nimmediately preceding the application date. <\/p>\n
Contractors and subcontractors in the construction, manufacturing and service
\nindustries may apply. Applicants must provide a specific product or service
\nunder an assignable contract. The program is not intended to provide money
\nto finance receivables or inventory on-hand.<\/p>\n
AMOUNT, TERMS AND INTEREST RATES<\/p>\n
SBA can guarantee as much as 85 percent of the loan up to $750,000. For
\nloans up to $155,000, the maximum guaranty is 90 percent. Under the program,
\nloan maturity usually will be 12 months or less from the date of the first
\ndisbursement by the SBA. For larger contracts, the Agency may permit loan
\nmaturities of up to 18 months. Any request for any maturity longer than 18
\nmonths requires special approval from the director of the SBA Loan Policy and
\nProcedures Branch.<\/p>\n
COLLATERAL<\/p>\n
Collateral includes an assignment of contract proceeds, although the Agency
\nusually requires a pledge of outside assets and secured personal guaranties.<\/p>\n
TAX REQUIREMENTS<\/p>\n
All applicants must be current on payroll taxes and provide a depository plan
\nfor payment of future withholding taxes. <\/p>\n
Special Program Requirements<\/p>\n
Applicants must submit a proposed schedule of draws against the loan and
\npayments on it. They must also submit a projected cash flow for all business
\noperations over the term of the contract and the loan.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (FAX). For hearing
\nimpaired, call (202) 205-7333.<\/p>\n
All of SBA’s programs and services are extended to the public on a non-
\ndiscriminatory basis.<\/p>\n
SEASONAL
\nLINE OF CREDIT PROGRAM<\/p>\n
THE PROGRAM<\/p>\n
The Seasonal Line of Credit Program offers short-term loans to help small
\nbusinesses get past cash crunches attributable to seasonal changes in
\nbusiness volume. The loans are guaranteed by the U.S. Small Business
\nAdministration (SBA) and are used to finance increases in trading assets,
\nsuch as receivables and inventory, required as a result of seasonal upswings
\nin business. These loans are available only under the guaranty loan program.<\/p>\n
ELIGIBILITY
\nEligible businesses must be for-profit operations. They also must qualify as
\nsmall according to the criteria set by the SBA’s size standards, although an
\nexception is provided for sheltered workshops qualifying under the
\nHandicapped Assistance Loan Program. Loans cannot be made to businesses
\ninvolved in the creation or distribution of ideas or opinions — such as
\nnewspapers, magazines, and academic schools — or those engaged in
\nspeculation or investment in rental real estate.<\/p>\n
In addition, businesses must have been in operation continuously for one year
\nimmediately preceding the application date. They also must have established
\na definite pattern of seasonal activity.<\/p>\n
Applicants who are eligible under the Contract Loan Program are not eligible
\nunder this loan program.<\/p>\n
AMOUNT OF LOAN<\/p>\n
The SBA can guarantee as much as 85 percent of the loan up to $750,000. For
\nloans of up to $155,000, the Agency can guarantee up to 90 percent of the
\nprincipal. The loan amount is determined by the increased working capital
\nneeded to meet the seasonal increase in business.<\/p>\n
MATURITY<\/p>\n
The term of the Seasonal Line of Credit loan cannot be more than 12 months
\nfrom the date of the SBA’s first disbursement. <\/p>\n
Only one Seasonal Line of Credit loan can be outstanding at any one time and
\neach loan must be followed by an out-of-debt period of at least 30 days.
\nThese restrictions do not apply to agricultural enterprises.<\/p>\n
COLLATERAL<\/p>\n
The collateral required for the loans is primarily liens on all inventory and
\n accounts receivable. Additional collateral, including the pledge
\nof outside assets and personal guaranties, also may be required.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (FAX). For the
\nhearing impaired, call (202) 205-7333 (TDD).<\/p>\n
All of SBA’s programs and services are extended to the public on a non-
\ndiscriminatory basis. SOLAR ENERGY
\nAND CONSERVATION LOAN PROGRAM<\/p>\n
THE PROGRAM<\/p>\n
Small firms in the energy conservation business can get financial help under
\nthe U.S. Small Business Administration’s Small Business Solar Energy and
\nConservation Loan Program. <\/p>\n
Financing is available for small businesses engaged in engineering,
\nmanufacturing, distributing, marketing, installing or servicing products or
\nservices designed to conserve the nation’s energy resources.<\/p>\n
Loans can also be used to buy land for plant construction; convert or expand
\nexisting facilities; purchase machinery, equipment, furniture, fixtures,
\nfacilities, supplies and materials; or provide working capital for entry or
\nexpansion into eligible conservation project areas.<\/p>\n
Firms installing or undertaking energy conservation measures in their own
\nplants or offices are not eligible under this program, although they can
\napply for financing under the SBA’s regular business loan program.<\/p>\n
Up to 30 percent of loan proceeds can be used for research and development if
\nthe business plan shows strong repayment ability or when a product or service
\nalready being marketed needs further development.<\/p>\n
ELIGIBILITY<\/p>\n
Small firms engaged in the following energy production or conservation
\nactivities are eligible:<\/p>\n
Wind energy conversion equipment;<\/p>\n
Solar thermal energy equipment;<\/p>\n
Photovoltaic cells and related equipment;<\/p>\n
Hydroelectric power equipment;<\/p>\n
Equipment primarily used to produce energy from wood, biological waste, grain
\nor other biomass sources;<\/p>\n
Equipment for industrial cogeneration of energy, heating or production of
\nenergy for industrial waste;<\/p>\n
Products or services that use devices that increase the energy efficiency of
\nexisting equipment, or improve operation of systems that use fossil fuels and
\nare on the Energy Conservation Measures List of the Secretary of Energy or
\napproved by the SBA. These include insulation procedures and procedures
\ninvolving heating, cooling and lighting in residential, commercial and
\nindustrial buildings; and<\/p>\n
Engineering, architectural, consulting or other professional services that
\nare necessary or appropriate to help citizens use any of the conservation
\nresources described above.<\/p>\n
AMOUNT, TERMS AND
\nINTEREST RATES<\/p>\n
An SBA loan guaranty can cover up to 85 percent of loans up to $750,000. The
\nmaximum guaranty for loans up to $155,000 is 90 percent. Both direct and
\nimmediate participation (IP) loans, when funds are available, are limited to
\n$150,000 of SBA participation.<\/p>\n
The maturity of a Small Business Energy Loan is set according to the
\nborrower’s ability to repay and the proposed use of proceeds. The maximum
\nmaturity is 25 years, but maturities of that length are used to finance fixed
\nassets. Lenders may charge 2.25 or 2.75 percentage points above the New York
\nprime rate, depending on the maturity of the loan. <\/p>\n
COLLATERAL<\/p>\n
Applicants must pledge adequate collateral and provide personal guaranties if
\nrequired by the Agency. Refusal to pledge available collateral may be
\nsufficient reason for declining the loan. <\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-U ASK SBA.<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnondiscriminatory basis.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a SECONDARY \u0e1a
\n \u0e1a MARKET \u0e1a
\n \u0e1a PROGRAM \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n THE PROGRAM<\/p>\n
Lenders who hold business loans
\n guaranteed by the U.S. Small Business
\n Administration (SBA) may be able
\n to profit by selling the guaranteed
\n portions of those loans in the active
\n secondary market. Banks, savings
\n and loan associations, credit unions,
\n pension funds and insurance compa-
\n nies are frequent buyers.<\/p>\n
U.S. Small Business
\n Administration<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a WHY WOULD I WANT TO SELL \u0e1a
\n \u0e1a MY LOANS? \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n Lenders sell loans to improve liquidity
\n and profits.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a LIQUIDITY \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n The SBA guarantee can be converted
\n to cash, and the whole process can be
\n completed in as little as two weeks.
\n The lender and buyer sign an agreement
\n describing the rights and responsibilities of
\n both parties (SBA Form 1086, Secondary
\n Participation Guarantee and Certification
\n Agreement). This agreement is sent to the
\n fiscal and transfer agent (FTA), who
\n reviews the documents for completeness and
\n contacts both parties to arrange a settlement.<\/p>\n
On the settlement date, the buyer wires
\n money to the FTA. The FTA receives the
\n money, issues a certificate to the buyer and
\n wires the money to the seller.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a PROFITS \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n The profits from selling a loan come
\n from three areas: a premium at the time of
\n sale, a servicing fee during the life of the
\n loan, and the float on the borrower’ s loan
\n payment. Variable rate SBA loans usually
\n sell at a premium. The premium varies
\n with market conditions and the servicing
\n fee retained by the lender. SBA requires
\n that an originating lender retain a servicing
\n fee of at least one percent, although they are
\n free to retain a larger fee. This fee consists
\n of the cash flow from the portion of the loan
\n retained by the lender to cover the cost of
\n borrower visits, financial statement analysis,
\n and other items necessary to service small
\n business loans. The payment flow from the
\n borrower to the investor allows the lender to
\n hold the loan payment until the end of the
\n month in which it was received. If the
\n borrower pays at the beginning of each
\n month, the lender receives about one month’s
\n float on each payment. This additional float
\n increases the yield.<\/p>\n
For example, assume that a $100,000,
\n 90 percent guaranteed loan with a 10.5
\n percent note rate and a seven-year maturity is
\n sold to an investor at a net coupon rate of
\n 8.375 percent, and that the lender retains a
\n two percent servicing fee. (The remaining
\n 0.125 percent is the FTA fee.)<\/p>\n
The borrower’s payment date is the first
\n of each month. The approximate first year
\n cash flow to the lender would be $1,050 (10.5
\n percent) on the $10,000 unguaranteed portion
\n and $1,800 (two percent) on the $90,000
\n guaranteed portion, for a total of $2,850.<\/p>\n
In addition, the $1,357 float that must be
\n paid to the FTA each month would earn six
\n percent, about $80 per year. Applied to the
\n $10,000 investment of the lender, the gross
\n yield before servicing expenses is almost 30
\n percent. The gross yield is further increased
\n by any premium received because the
\n premium will lower the lender’s investment in
\n the loan.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a HOW BIG IS THE SECONDARY \u0e1a
\n \u0e1a MARKET? \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n About $1.7 billion in new loans enter
\n the secondary market each year. An
\n additional $1.0 billion of previously sold
\n loans are traded.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a HOW DO I GO ABOUT \u0e1a
\n \u0e1a SELLING MY LOANS? \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n While there is no requirement that a
\n broker\/dealer be used, a good first step is
\n to call a few and get price quotes. These
\n people are familiar with the paperwork
\n and the selling process and make a market
\n in the securities. After the deal is made,
\n SBA Form 1086 is signed by all parties
\n and, along with other required documents,
\n is sent to the fiscal and transfer agent.
\n The SBA has a list of broker\/dealers and
\n other entities that have been approved as
\n loan pool assemblers.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a WHAT DOCUMENTATION IS \u0e1a
\n \u0e1a NEEDED? \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n The sale is accomplished on SBA
\n Form 1086, Secondary Participation
\n Guarantee and Certification Agree-
\n ment. A copy of the Note (SBA Form
\n 147) also is required.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a WHAT ARE MY \u0e1a
\n \u0e1a RESPONSIBILITIES \u0e1a
\n \u0e1a AFTER THE SALE? \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n The lender remains responsible for all
\n loan servicing activities. After the sale, the
\n lender must forward the borrower’s monthly
\n payment to the FTA, along with a complete
\n accounting of the funds (using SBA Form
\n 1502, Standard Remittance Form).
\n Furthermore, with the exception of one
\n three-month payment deferment, any servic-
\n ing action that would affect the payment
\n flow must be approved by the investor
\n before implementation.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a WHAT ARE THE \u0e1a
\n \u0e1a RESPONSIBILITIES \u0e1a
\n \u0e1a OF THE FTA? \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n The Secondary Market Improvements
\n Act of 1984 requires central registration of
\n all transactions. The FTA facilitates the set-
\n tlement of the first sale of a loan. On all
\n subsequent sales, the buyer gives the money
\n directly to the seller who in return gives the
\n buyer the certificate. The new owner must
\n forward the certificate to the FTA so that a
\n new certificate can be issued in his or her
\n name, and the sale can be recorded on the
\n FTA’s books. The FTA also receives bor-
\n rower payments from lenders each month
\n and forwards them to investors.<\/p>\n
The FTA eliminates the need for lenders
\n to keep track of the owners of the loans and
\n permits lenders to write just one check each
\n month to cover all loans that have been sold.
\n From the investor’s standpoint, the FTA<\/p>\n
keeps track of which lenders made a monthly
\n payment, sends one check to the investor and
\n includes an accounting of the funds. The
\n also forwards all servicing requests from
\n lenders to investors and forwards the response
\n to the lender.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n \u0e1a ADDITIONAL INFORMATION \u0e1a
\n \u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\n For further information, please write to the
\n Office of Secondary Market Activities, SBA,
\n 409 – 3rd Street, S.W., 8th Floor, Washington,
\n D.C. 20416, or call 202\/205-6493.<\/p>\n
The SBA has a number of programs and
\n services available. They include training and
\n educational programs, advisory services,<\/p>\n
publications, financial programs and contract
\n assistance. The Agency also offers special-
\n ized programs for women business owners,
\n minorities, veterans, international trade and
\n rural development.<\/p>\n
The SBA has offices located around the
\n country. For the one nearest you, consult the
\n telephone directory under U.S. Government,
\n or call the Small Business Answer Desk at
\n 1-800-U ASK SBA.<\/p>\n
All of SBA’s programs and services are extended to the
\n public on a nondiscriminatory basis.SECTION 504 CERTIFIED DEVELOPMENT COMPANY PROGRAM<\/p>\n
the Program<\/p>\n
The U.S. Small Business Administration (SBA) provides long-term financing to
\nsmall businesses through its Certified Development Company Program. The
\nprogram makes loans available for acquiring land, buildings, machinery and
\nequipment, and for building, modernizing, renovating or restoring existing
\nfacilities and sites.<\/p>\n
WHAT IS A 504 CERTIFIED DEVELOPMENT COMPANY? <\/p>\n
A Certified Development Company (CDC) is a private, public sector nonprofit
\ncorporation that is set up to contribute to the economic development of its
\ncommunity or region. It must:<\/p>\n
Operate in a defined area;<\/p>\n
Be composed of 25 or more members who are geographically representative of
\nthe CDC’s area of operation and who include representatives from government
\nagencies in the area of operation, private sector lending institutions,
\nbusinesses and community organizations;<\/p>\n
Provide a full-time professional staff who can market the program and
\nprocess, close and service its loan portfolio;<\/p>\n
Have the ability to sustain its operations on a continuous basis from
\nreliable sources of funds;<\/p>\n
Have five or more directors who meet quarterly. At least one director must
\nhave commercial lending experience; and<\/p>\n
Have incorporated within its bylaws and articles that its chief purpose is to
\n“promote and assist the growth and development of business concerns in its
\noperation area.”<\/p>\n
A CDC is responsible for assisting at least two small businesses a year,
\ninjecting 10 percent of the funds necessary to complete each project, and
\nensuring that the debentures are correctly closed and secured. It must
\nmaintain a place of business that is open to the public during business hours
\nand listed under a separate phone number. The CDC is also responsible for
\nsubmitting an annual report containing financial statements, management
\ninformation, a full activity report and an analysis of its assistance to
\nsmall businesses.<\/p>\n
HOW DOES A CDC WORK?<\/p>\n
CDCs can sell 100 percent SBA-guaranteed debentures to private investors in
\namounts up to 40 percent of a project or $750,000, whichever is less (in some
\ncases, the maximum SBA portion may be $1 million). In addition, a CDC’s
\nportfolio must create or retain one job for every $35,000 worth of debenture
\nfinancing.<\/p>\n
Debenture proceeds must be used for permanent financing. Interim financing
\nmay be required in order to bridge the gap between the loan approval date and
\nreceipt of funding from the debentures.<\/p>\n
A typical finance structure for a CDC project would include a first mortgage
\nfrom a private sector lender covering 50 percent of the cost, a second
\nmortgage from the CDC (100 percent SBA-guaranteed debenture) covering 40
\npercent, and a contribution of at least 10 percent by either the CDC or the
\nsmall business being helped.<\/p>\n
AMOUNT of Loan<\/p>\n
Although the total size of projects using CDC financing is unlimited, the
\nmaximum amount of CDC participation in any individual project is $750,000 (or
\n$1 million for some projects). Typical projects range in size from $500,000
\nto $2 million. The average is about $1 million. <\/p>\n
The minimum amount of CDC participation is $50,000. A $25,000 debenture may
\nbe approved in special cases.<\/p>\n
USE OF PROCEEDS<\/p>\n
Proceeds may be used for the following fixed asset projects:<\/p>\n
Purchasing existing buildings;<\/p>\n
Purchasing land and land improvements such as grading, street improvements,
\nutilities, parking lots and landscaping;<\/p>\n
Construction;<\/p>\n
Modernizing, renovating or converting existing facilities;<\/p>\n
Purchasing machinery and equipment;<\/p>\n
Financing a construction contingency fund, which cannot exceed 10 percent of
\ntotal construction costs;<\/p>\n
Paying interest on interim financing; and<\/p>\n
Paying professional fees directly attributable to the project, such as
\nsurveying, engineering, architectural, appraisal, legal and accounting fees.<\/p>\n
Terms<\/p>\n
Interest rates are based on the current market rate for 5- and 10-year U.S.
\nTreasury issues, plus an increment above the Treasury rate, based on market
\nconditions. Maturities of 10 and 20 years are available. Repayment is made
\nin monthly, level-debt installments.<\/p>\n
Collateral may include a mortgage on the land and the building being
\nfinanced; liens on machinery, equipment and fixtures, and lease assignments.
\nPrivate sector lenders are secured by a first lien on the project. The SBA
\nis secured by a second lien. <\/p>\n
The Agency also requires personal guarantees from all persons who own 20
\npercent or more of a company that is financed by a CDC. <\/p>\n
FEES<\/p>\n
SBA regulations specify limits on fees that must be paid in connection with
\nSBA funding. The development company fee cannot exceed the 1.5 percent
\nprocessing fee on the SBA’s debenture and a monthly service fee of not less
\nthan 0.5 percent nor more than 2.0 percent per annum on the unpaid debenture
\nbalance. Development company legal fees related to loan closing cannot
\nexceed $2,500 without prior approval by the SBA. <\/p>\n
A funding fee of 0.25 percent to cover the cost of public issuance of
\nsecurities and a reserve deposit of 0.5 percent are required, as is an
\nunderwriting fee of 0.625 percent of the total debenture amount.<\/p>\n
ELIGIBility<\/p>\n
An eligible business must be a for-profit corporation, partnership or
\nproprietorship. The business’ net worth cannot exceed $6 million, and
\naverage net profit after taxes cannot exceed $2 million for the previous two
\nyears.<\/p>\n
CDC investment funds cannot be used for working capital or inventory,
\nconsolidating or repaying debt, refinancing, or financing a plant not located
\nin the U.S. or its possessions.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The Agency also offers specialized
\nprograms for women business owners, minorities, veterans, international trade
\nand rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-U ASK SBA.<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnondiscriminatory basis.GUARANTEED LOANS
\nTO QUALIFIED EMPLOYEE TRUSTS<\/p>\n
THE PROGRAM<\/p>\n
The U.S. Small Business Administration (SBA) provides financial assistance to
\neligible employee trusts for two purposes: to allow the trust to reloan
\nfunds to the employer company for growth and development or to permit the
\nemployees to purchase the employer company.<\/p>\n
ELIGIBILITY<\/p>\n
The employee trust must be part of a plan sponsored by the employer company
\nand qualified under regulations set by either the Internal Revenue Service
\nCode (as an Employee Stock Ownership Plan or ESOP), or the Department of
\nLabor (the Employee Retirement Income Security Act or ERISA). <\/p>\n
Applicants covered by the ERISA regulations must also secure an exemption
\nfrom Department of Labor (DOL) regulations prohibiting certain loan
\ntransactions.<\/p>\n
The SBA requires that the employee trust must:<\/p>\n
Exist at the time of application;<\/p>\n
Be maintained by the employer concern;<\/p>\n
Include at least 51 percent of all employees of the employer concern;<\/p>\n
Have as its primary purpose lending to or investing in the employer
\n concern;<\/p>\n
Provide that participating employees may direct the trust on how to vote
\n employer securities allocated to the employee’s account; and<\/p>\n
Provide written evidence that the trust has been qualified either as an
\n ESOP or as an ERISA with the necessary DOL exemption.<\/p>\n
In addition to those eligibility requirements, the employer company must
\nqualify as small under the SBA size standards and meet the other eligibility
\ncriteria applicable to all SBA loans.<\/p>\n
USE OF PROCEEDS<\/p>\n
The employer concern must agree to use SBA loan proceeds it receives from the
\nemployee trust solely for the following purposes:<\/p>\n
Growth and Development Loans, in which the trust reloans the proceeds to
\n the employer (by the purchase of qualifying employer securities but not
\n necessarily voting stock). The employer can use these funds for a
\n variety of worthwhile business purposes, including working capital,
\n expansion, plant construction or purchase of equipment.
\n Change of Ownership Loans, in which employees acquire a controlling
\n interest in the employer company. Voting control (a minimum of 51
\n percent ownership) must be acquired with loan proceeds and pass to the
\n employees no later than the loan repayment date.<\/p>\n
AMOUNT OF LOAN<\/p>\n
SBA can guarantee up to $750,000 to any one borrower. The maximum
\nincludes the total SBA loan exposure in the trust, plus any other SBA loan
\noutstanding to the employer or its affiliates.<\/p>\n
REPAYMENT ABILITY<\/p>\n
The SBA determines whether the company can repay the loan by evaluating
\nwhether it can generate sufficient cash flow to meet repayment obligations
\nand the other fixed obligations of the business. The employer company must
\nagree to provide the necessary funds to repay loan principal and interest.<\/p>\n
MATURITY<\/p>\n
The loan maturity depends on the employer company’s ability to repay, subject
\nto the requirements of prudent lending practices and the SBA’s regulatory
\nmaximums. Machinery and equipment cannot be financed for periods longer than
\nits conservative economic life. Real estate and construction loan
\nmaturities generally cannot exceed 25 years. Working capital maturities
\ngenerally cannot exceed seven years.<\/p>\n
INTEREST RATES<\/p>\n
Interest rates are set through negotiations between the applicant and the
\nparticipating lender, subject to maximums specified by SBA. For maturities
\nof less than seven years, the interest rate may not exceed 2.25 percentage
\npoints above the New York prime rate. <\/p>\n
For maturities of seven years or more, the interest rate cannot exceed 2.75
\npercentage points above the prime rate. Variable rate loans are permitted. <\/p>\n
HOW TO APPLY<\/p>\n
Loans under this program are available only under SBA’s guaranty plan.
\nProspective applicants should review their financing needs with their banks.<\/p>\n
COLLATERAL<\/p>\n
The assets of the employer company will be the primary collateral.
\nPrincipals of the company who are not participating in the employee trust may
\nbe asked to guarantee growth and development loans. Personal guaranties of
\nemployee trust participants are not required.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications,
\nfinancial programs and contract assistance. The agency also offers
\nspecialized programs for women business owners, minorities, veterans,
\ninternational trade and rural development.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (FAX). For the
\nhearing impaired, call (202) 205-7333 (TDD).<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnon-discriminatory basis.<\/p>\n
The SBA does not discriminate against applicants or recipients on the basis
\nof race, color, religion, sex, age, marital status, handicap or national
\norigin.
\nEXPORT REVOLVING
\nLINE OF CREDIT LOAN PROGRAM<\/p>\n
THE PROGRAM<\/p>\n
The U.S. Small Business Administration’s (SBA) Export Revolving Line of
\nCredit Program (ERLC) is designed to help small businesses obtain short-term
\nfinancing to sell their products and services abroad. The program guarantees
\nrepayment to a lender in the event an exporter defaults. By reducing a
\nlender’s risks, the ERLC provides an incentive for lenders to finance small
\nbusiness exporters’ working capital needs. The ERLC protects only the lender
\nfrom default by the exporter; it does not cover the exporter should a foreign
\nbuyer default on payment. Lenders and exporters must determine whether
\nforeign receivables need credit risk protection.<\/p>\n
ELIGIBILITY<\/p>\n
Applicants must qualify as small businesses under the SBA’s size standards
\nand meet the other eligibility criteria applicable to all SBA loans.
\nApplicants must also have been in business for at least one year before
\nfiling an application. Applicants must be current on all payroll taxes and
\nhave an operating depository plan to ensure payment of future withholding
\ntaxes.<\/p>\n
USE OF PROCEEDS<\/p>\n
Loan proceeds can be used only to finance labor and materials needed for
\nmanufacturing, to purchase goods or services for export, to develop foreign
\nmarkets or to finance foreign accounts receivable.<\/p>\n
If the primary purpose is to develop or penetrate foreign markets, a
\ntraditional SBA 7(a) guaranteed loan may be more appropriate.<\/p>\n
Funds may not be used to pay existing obligations or to purchase fixed
\nassets, although other SBA programs can be used for these purposes. <\/p>\n
AMOUNT OF LOAN<\/p>\n
The SBA can guarantee 85 percent of the loan up to a limit of $750,000. The
\nmaximum guaranty for loans up to $155,000 is 90 percent. Applicants can have
\nother SBA loans in addition to an ERLC, but the SBA cannot guarantee more
\nthan $750,000 in loans to any one borrower, unless the borrower has also
\nsecured an international trade loan. In that case, the limit is $1 million,
\nplus $250,000 in working capital. The loan amount also can increase if a
\nco-guaranty is secured from the Export-Import Bank of the United States.<\/p>\n
MATURITY<\/p>\n
ERLC loan maturity is based on the applicant’s business cycle, but cannot —
\ntogether with all renewals — exceed 36 months. Maturities are usually for
\none year with options to renew at the discretion of SBA and the lender.
\nRequests for renewals must be made through the lender not more than 45 nor
\nless than 30 days prior to maturity. They must be accompanied by current
\nfinancial data and an additional guaranty fee.
\nINTEREST RATES<\/p>\n
Interest rates are set through negotiations between the applicant and the
\nparticipating lender, subject to maximums specified by SBA. <\/p>\n
FEES<\/p>\n
Guaranty fees must be paid to SBA as follows:<\/p>\n
For maturities of 12 months or less, the fee is 0.25 percent of the
\n guaranteed portion of the loan. <\/p>\n
For each renewal of 12 months or less, the fee is 0.25 percent of the
\n guaranteed portion of the original loan amount.<\/p>\n
For maturities exceeding 12 months, the fee is 2 percent of the
\n guaranteed portion of the loan, and no additional fees are needed to
\n obtain renewals.<\/p>\n
Initial guaranty fees must be paid by the lender but may be charged to the
\nborrower upon approval of the ERLC by SBA. Additional guaranty fees are paid
\nby the borrower at the time a renewal is requested.<\/p>\n
Lenders may charge a commitment fee equal to 0.25 percent of the loan amount
\n($200 minimum). This fee cannot be levied until SBA approves the ERLC. In
\naddition, the normal fees permitted on all SBA loans may also be assessed on
\nERLC loans.<\/p>\n
COLLATERAL<\/p>\n
Collateral may include accounts receivable, inventory, assignment of contract
\nproceeds, bank letters of credit, and appropriate personal guarantees. Only
\ncollateral that is located in the United States, its territories and
\npossessions, or other assets under the jurisdiction of U.S. Courts is
\nacceptable (receivables generated from sales to foreign buyers are considered
\ndomestic assets for ERLC purposes).<\/p>\n
SPECIAL PROGRAM
\nREQUIREMENTS<\/p>\n
Applicants must submit a cash flow projection showing anticipated monthly
\nactivity and cash balances for the entire term of the ERLC. After the SBA
\napproves the ERLC, borrowers must also submit monthly progress reports to the
\nlender.<\/p>\n
ERLC loans are available only under SBA’s guaranty program. Prospective
\napplicants should review their export financing with their lenders.
\nApplicants should request that lenders seek SBA participation if the lender
\nis unable or unwilling to make the loan directly.<\/p>\n
ADDITIONAL INFORMATION<\/p>\n
The SBA has a number of programs and services available. They include
\ntraining and educational programs, advisory services, publications, financial
\nprograms and contract assistance. The agency also offers specialized
\nprograms for women, minorities, veterans, international trade and rural
\ndevelopment.<\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-U ASK SBA or (202) 205-7064 (FAX). For the
\nhearing impaired, call (202) 205-7333.<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnon-discriminatory basis.
\nCERTIFIED AND PREFERRED LENDERS<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a SBA BUSINESS LOAN GUARANTEES \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nThe U.S. Small Business Administration (SBA) has been
\nguaranteeing loans to small businesses since its creation
\nby Congress in 1953. These guarantees cover up to 90
\npercent of the loan value and allow entrepreneurs to get
\ncredit that otherwise would not be available on reasonable
\nterms and conditions.<\/p>\n
Most lenders who participate in SBA loans do so through the
\n7(a) program, which requires a thorough analysis of loan
\napplications and a decision by SBA staff. It takes about
\ntwo weeks to process a request, but that can vary according
\nto the completeness and complexity of the application.
\nAbout 8,000 lenders have made at least one SBA loan in the
\npast five years.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a CERTIFIED LENDERS PROGRAM (CLP) \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nLenders who are more heavily involved in the SBA guaranty
\nprogram and who meet the Agency’s criteria can participate
\nthrough the Certified Lenders Program. <\/p>\n
Certified lenders get a partial delegation of authority
\nthat allows the local SBA office to process loan guaranty
\napplications in three days, assuming everything is in
\nproper order. <\/p>\n
There are about 600 certified lenders across the country.
\nAbout 25 percent of all business loan guarantees are made
\nthrough the CLP process. CLP lenders also follow regular
\nprocessing procedures in some cases. <\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a PREFERRED LENDERS PROGRAM (PLP) \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nThe SBA delegates wider authority to lenders who
\nparticipate in the Preferred Lenders Program. PLP lenders
\ncan commit the Agency to guarantee eligible business loans,
\nand decide the level of SBA participation up to the 80
\npercent limit. The program is meant to reduce processing
\ntime on strong credit applications and to use the resources
\nof the SBA’s best lenders to the maximum.<\/p>\n
Such a wide delegation of authority is permitted under
\nSection 7(a)(2) of the Small Business Act, which authorizes
\nthe Agency to permit certain lending institutions to
\ndetermine eligibility, creditworthiness, loan structuring,
\nloan monitoring, loan collection\/servicing and loan
\nliquidation actions, and to make necessary decisions at
\neach stage of the guaranteed loan application process
\nwithout, in most instances, the SBA’s prior review or
\nconsent. <\/p>\n
PLP loans have a maximum SBA guaranty of 80 percent. The
\nlower maximum guaranty requires lenders to accept more of
\nthe lending risks in exchange for giving them the
\nunilateral right to put government funds at risk. Despite
\nthe greater risks, lending institutions like the PLP
\nbecause it lets them offer faster service to their most
\ncredit-worthy clients.<\/p>\n
The Agency examines the PLP lender’s SBA portfolio
\nperiodically to ensure it meets SBA requirements. A
\nlender’s PLP authority must be renewed every two years.<\/p>\n
There are 160 preferred lenders. About 15 percent of all
\nbusiness loan guarantees are made through the PLP process.
\nPLP lenders also follow regular and CLP processing
\nprocedures in some cases. <\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a PROGRAM BENEFITS \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nEveryone — lenders, borrowers and the SBA — benefits from
\nthe Certified Lender and Preferred Lender programs. The
\nexpert lenders who participate now account for 60 percent
\nof all 7(a) loan guarantees. <\/p>\n
These programs are part of an effort by the SBA to switch
\nfrom retailing its services to wholesaling. Loan guaranty
\nactivity by certified and preferred lenders requires less
\nstaff time and paperwork by the SBA, allowing Agency staff
\nto handle a greater volume of loan applications. At the
\nsame time, it gives them more time and resources to deal
\nwith portfolio management and other Agency
\nresponsibilities.<\/p>\n
\u0e29\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1b
\n\u0e1a ADDITIONAL INFORMATION \u0e1a
\n\u0e28\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e2d\u0e1c
\nThe SBA has a number of programs and services available.
\nThey include training and educational programs, advisory
\nservices, publications, financial programs and contract
\nassistance. The Agency also offers specialized programs
\nfor women business owners, minorities, veterans,
\ninternational trade and rural development.<\/p>\n
Interested borrowers or financial institutions can contact
\nthe SBA Office of Financial Institutions at 409 Third
\nStreet, SW., Washington, DC 20416, or call their local
\nSBA office. The SBA has offices located around the
\ncountry. For the one nearest you, consult the telephone
\ndirectory under U.S.
\nGovernment, or call the Small Business Answer Desk at
\n1-800-U ASK SBA.<\/p>\n
All of SBA’s programs and services are extended to the
\npublic on a nondiscriminatory basis.<\/p>\n
INTERNATIONAL TRADE ASSISTANCE<\/p>\n
The U.S. Small Business Administration (SBA) provides financial and business
\ndevelopment assistance to encourage and help small businesses in developing
\nexport markets. <\/p>\n
FINANCIAL ASSISTANCE<\/p>\n
The SBA assists businesses in securing the capital needed to explore,
\nestablish or expand international markets. SBA’s export loans are available
\nunder SBA’s guaranty program. As a prospective applicant, you should request
\nthat your lender seek SBA participation if the lender is unable or unwilling
\nto make the loan directly.<\/p>\n
The financing staff of each SBA district and branch office administers the
\nfinancial assistance programs. You can contact the finance division of your
\nnearest SBA office for a list of participating lenders.<\/p>\n
Borrowers can use different SBA loan programs and types of loan guarantees
\nsimultaneously, as long as the total SBA-guaranteed portion does not exceed
\nthe agency’s $750,000 statutory loan guaranty limit to any one borrower.<\/p>\n
The lender may charge a maximum interest rate of 2.75 percentage points above
\nthe New York prime interest rate, or 2.25 percentage points above New York
\nprime if the maturity is less than seven years.<\/p>\n
REGULAR BUSINESS LOAN PROGRAM<\/p>\n
The SBA can guarantee up to 90 percent of a bank loan up to $155,000. For
\nlarger loans, the maximum guaranty is 85 percent or $750,000 whichever is
\nless. <\/p>\n
Use of Proceeds<\/p>\n
Small businesses that need money for fixed assets and for working capital may
\nbe eligible for the SBA’s regular 7(a) business loan guarantee program. Loan
\nguarantees for fixed-asset acquisition have a maximum maturity of 25 years.
\nGuarantees for general purpose working capital loans have a maximum maturity
\nof seven years. Export trading companies (ETCs) and export management
\ncompanies (EMCs) also may qualify for the SBA’s business loan guarantee
\nprogram.<\/p>\n
Eligibility<\/p>\n
To be eligible, the applicant’s business generally must be operated for
\nprofit and fall within size standards set by SBA. Loans cannot be made to
\nbusinesses involved in creation or distribution of ideas or opinions, such as
\nnewspapers, magazines and academic schools. Other types of ineligible
\nborrowers include businesses engaged in speculation or investment in rental
\nreal estate.<\/p>\n
EXPORT REVOLVING LINE
\nOF CREDIT PROGRAM<\/p>\n
The Export Revolving Line of Credit (ERLC) Program offers a credit line up to
\n36 months. Any number of withdrawals and repayments can be made as long as
\nthey don’t exceed the dollar limit of the credit line and the disbursements
\nare made within the stated maturity period. Loan maturities are generally
\nfor 12 months, with options to renew. <\/p>\n
Use of Proceeds<\/p>\n
Loans can be used to finance labor and materials for manufacturing or
\nwholesaling for export, to develop foreign markets, or to finance foreign
\naccounts receivable. Foreign business travel and participation in trade
\nshows are also among the eligible uses, but a regular 7(a) business loan may
\nbe more appropriate for these purposes.<\/p>\n
Eligibility<\/p>\n
Applicants must satisfy eligibility criteria established for all SBA loans.
\nAlso, applicants must have been in business — not necessarily exporting —
\nfor at least 12 months continuous operation before filing an application.
\nThe 12-month requirement may be waived by the SBA regional office if the
\nfirm’s management has sufficient export experience or enough management
\nability to warrant an exception. <\/p>\n
INTERNATIONAL TRADE LOANS<\/p>\n
The International Trade Loan Program provides long-term financing to help
\nsmall businesses compete more effectively and to expand or develop export
\nmarkets.<\/p>\n
Loan maturities cannot exceed 25 years, excluding the working capital portion
\nof the financing. The SBA’s guaranty cannot exceed 85 percent of the loan
\namount, thus precluding loans of $155,000 or less. The agency’s maximum share
\nfor facilities or equipment loans is $1 million, plus $250,000 for working
\ncapital. <\/p>\n
Use of Proceeds<\/p>\n
Proceeds may be used to purchase or upgrade facilities or equipment, and to
\nmake other improvements that will be used within the United States to produce
\ngoods or services. <\/p>\n
No debt payment is allowed. Proceeds can be used to buy land and
\nbuilding(s); build new facilities; renovate, improve or expand existing
\nfacilities; purchase or recondition machinery, equipment and fixtures. The
\nworking capital portion of the borrowing could be in the form of either an
\nERLC or a portion of the term loan.<\/p>\n
Eligibility<\/p>\n
Applicants must establish either of the following to meet eligibility
\nrequirements:
\n Loan proceeds will significantly expand existing export markets, or
\n develop new ones. <\/p>\n
The applicant’s business is adversely affected by import competition. <\/p>\n
SMALL BUSINESS INVESTMENT COMPANY (SBIC) FINANCING<\/p>\n
A Small Business Investment Company (SBIC), approved and licensed by the SBA,
\nmay also provide equity capital or working capital exceeding the agency’s
\n$750,000 statutory maximum. Unlike the SBA, SBICs can invest in export
\ntrading companies in which banks have equity participation as long as other
\nSBIC requirements are met.<\/p>\n
BUSINESS DEVELOPMENT ASSISTANCE<\/p>\n
The SBA provides business development assistance to exporters, including
\ntrade counseling, training, legal assistance and publications. <\/p>\n
Counseling<\/p>\n
Counseling is available through SBA’s resource partners, the Service Corps of
\nRetired Executives (SCORE) and the Small Business Development Centers
\n(SBDCs). SCORE is an organization of retired executives who volunteer their
\ntime to provide management and technical assistance to small businesses. A
\nSCORE counselor also can assist you in developing an international business
\nplan. Your local SBA office can match you with a SCORE volunteer experienced
\nin exporting.<\/p>\n
SBDCs, located on college and university campuses, provide a wide variety of
\ninformation and guidance in easily accessible locations, SBDC services
\ninclude, but are not limited to, financial guidance, marketing, production,
\norganizational development, engineering and feasibility studies and technical
\nassistance. Some SBDCs have designated international trade centers; all
\nSBDCs provide export counseling, referral and\/or training.<\/p>\n
Training<\/p>\n
SBA district offices sponsor export training programs, often in conjunction
\nwith SCORE, SBDCs and other public and private trade groups. Offering
\nsomething for the beginner to the more advanced exporter, topics range from
\nexport financing to joint ventures. You also can learn how to do business
\noutside our borders through the various market- and region-specific workshops
\noffered.<\/p>\n
Women executives and business owners can take advantage of a conference
\nseries offered under SBA’s “Women Going International” program. A joint
\neffort of the Offices of International Trade and Women’s Business Ownership,
\nthe program is designed to encourage more women to export and to provide the
\nbasic, “how-to” training necessary to get started.<\/p>\n
Publications<\/p>\n
The SBA publishes books and fact sheets on international trade, including the
\n“Exporter’s Guide to Federal Resources for Small Business,” which describes
\ninternational trade services available from the federal government. Other
\nSBA publications also are available.<\/p>\n
Legal Assistance<\/p>\n
Your local SBA office can arrange a free initial consultation with an
\nattorney to discuss international trade questions, under an agreement between
\nthe Federal Bar Association and the SBA. Such questions may include contract
\nnegotiation, agent\/distributor agreements, export licensing requirements,
\ncredit collection procedures, documentation and others. <\/p>\n
ADDITIONAL INFORMATION <\/p>\n
The SBA has offices located around the country. For the one nearest you,
\nconsult the telephone directory under U.S. Government, or call the Small
\nBusiness Answer Desk at 1-800-8-ASK-SBA or (202) 205-7064 (FAX). For the
\nhearing impaired, call (202) 205-7333 (TDD).<\/p>\n
All of SBA’s programs and services are extended to the public on a
\nnon-discriminatory basis.<\/p>\n
