SBA Cleveland District Office

SBA Lending UpdateBurton D. Morgan Series

Hudson Public Library

Mark Hansel, Cleveland SBAmark.hansel@sba.gov

216-522-4191

Entrepreneurship & SBA

• The three “Cs”• Credit, counseling and contracting

• Start-ups, purchases, franchises• Venture capital• Tech transfer

SBA Cleveland District Office

About SBA

• Guaranty loans for banks and CDCs• Over 60K and over $30B for FY’11• 1,400 and $360M for Cleveland District

• Two loan programs: 7(a) and 504

• About 90% of volume under 7(a)

SBA Cleveland District Office

SBA Loan Limits

• $5 M for 7(a)

• $350 K for Express• $500 K for Patriot Express

• $5-$5.5 M for 504

SBA Cleveland District Office

Types of 7(a) Loans

• Regular • SBA approves

• Preferred (PLP) and Express• Bank approves with nod from SBA• About 80% of volume for ‘11

SBA Cleveland District Office

SBA Cleveland District Office

Loan Uses

• Working capital• Equipment• Real estate and leaseholds• Refinance• Buy-outs

SBA Cleveland District Office

Eligible Businesses

• For profit• Based in US • Active, not passive• Some types not eligible

• Like gambling or banking

SBA Cleveland District Office

Eligible Owners

• Good character

• Satisfactory credit

• US or LPR status

SBA Cleveland District Office

Eligible Transactions

• Arm’s length

• No partial buy-outs

• No payment to an “associate”

• No “passive” investments

Eligible Transactions

• Can refinance debt

• Can buy used equipment

• Can do eligible franchises

• Can do change of ownerships

SBA Cleveland District Office

Franchises

• Franchise registry• www.franchiseregistry.com• Clear or “repaired”

• May not be on registry• But still eligible

SBA Cleveland District Office

SBA Cleveland District Office

SBA Usual Limits• 7 years usually for working capital

• 10 years or more for equipment

• 25 years for real estate

• No balloons on SBA notes

SBA Cleveland District Office

SBA Interest Rates

• Base rates of Prime or LIBOR+3• Usually 2.25 or 2.75 over base rates• Fixed or floating• Fixed rate price choice on Colson site• May be higher under Express

Collateral Issues

• “Principals” must guaranty• Joint PFS’s required

• Personal assets may be required

• May be short on collateral

SBA Cleveland District Office

Collateral Issues

• Defer to bank on Express • Bank’s usual policy

• Some CRE requires Phase I

• Assignments of life insurance

SBA Cleveland District Office

SBA Cleveland District Office

Guaranty Fees

• Based on guaranteed amount• 2% to $150K• 3% over $150K to $700K• 3.5% over $700K • .25% surcharge over $1M

Fees in General

• No “origination” fees• Banks may charge “packaging” fee

• “Extraordinary servicing” fee• Permitted for DFP and CAPLines

SBA Cleveland District Office

Revised CAPLines

• Full guaranty up to $5 M

• Easier for bank to manage

• Different programs(1) Working Cap (2) Seasonal

(3) Contract (4) Builders

SBA Cleveland District Office

504 and Refinance

• Regular 504: Bank, CDC and Borrower

• 504 Refinance • New revisions• Up to 90% of appraised value

SBA Cleveland District Office

Floor Planning

• Cars, boats, etc.

• Line of credit

• $500K to $5M

SBA Cleveland District Office

More Information

• www.sba.gov

• Cleveland District Office• 216-522-4180

SBA Cleveland District Office