Small Business Administration Loans

7a Loan Program

The largest SBA loan program, whereby loans to assist small businesses are made by private lenders under guarantees from the Small Business Administration. These loans may be for short term and/or long term financing needs. The borrower works with the lender, who arranges with the SBA for the guarantee.

The Small Business Administration was established by Congress in 1953 to foster economic development and to assist entrepreneurs. SBA loans give borrowers two main advantages over normal bank loans: longer term and lower down payment or equity requirement.

Contrary to rumor the SBA is not a lender of last resort! Last year alone, the SBA guaranteed over $8 billion in loans to small businesses The bank will use similar criteria to those it uses to approve and process a conventional loan.

Eligibility

GENERAL ELIGIBILITY

Management must be experienced and of good character. There must be demonstrable cash flow to repay the loan, and the debt to equity ratio must be reasonable for the industry. Adequate collateral must be obtained.

LOANS ALLOWED TO

• Buy machinery and equipment
• Expand your business
• Purchase an existing business
• Augment working capital
• Refinance debt and balloon payments
• Start a franchise
• Make leasehold improvements
• Remodel/renovate
• Increase your inventory
• Purchase owner-occupied commercial real estate
• Start a new business

TYPE OF BUSINESS

Most independently owned businesses are eligible for SBA loan assistance. (It is estimated that 95% of all US businesses meet the basic criteria.) The business must be for profit and not dominant in its field. Excluded are certain industries such as sellers and publishers of adult material, speculative ventures, lending and/or investment companies, and gambling (limited gambling permissible). There are some exclusions regarding some types of clubs, some types of schools, some types of insurance companies, and non-transient hotels, motels, and trailer parks.

CITIZENSHIP

U.S. Citizens and resident aliens are eligible.

SIZE OF BUSINESS

Size criteria by industry:

• Manufacturing-Average employment over the past twelve months cannot exceed 500-1500, depending on industry
• Wholesale-Average employment cannot exceed 100.
• Service-Maximum varies by industry but cannot exceed from $2.5 million to $14.5 million in average annual revenues over the past three years
• Retail-Maximum from $3.5 million to $13.5 million in average annual revenues, depending on segment.
• Construction-Maximum varies from $7.0 million to $17.0 million in average revenues, depending on sector
• Agriculture-Maximum varies from $.5 million to $7 million in average annual revenues, depending on segment.

These size maximums must include any "affiliates" which have common ownership or control.

REFINANCINGS, BUYOUTS, AND RELOCATIONS

There are numerous regulations concerning the eligibility of transactions which involve refinancing of existing debt, ownership transfers, and relocations of businesses. Call us for details.

JOB CREATION REQUIREMENT

None

Loan Structure

MAXIMUM LOAN

Loans to $ 2,000,000. A borrower can have more than one SBA loan, but the total of all guarantees cannot exceed $1,500,000.

EQUITY REQUIREMENTS/MINIMUM DOWN PAYMENT

Depending on the equity investment in the business, the SBA loan can provide up to 100% financing of the project.

COLLATERAL

Sufficient assets must be pledged to adequately secure the loan to the extent they are available. The collateral may be in the form of business assets (receivables, inventory, equipment, real property, etc.) or may be personal assets (deposits, real property, etc.).

LOAN MATURITIES

• Working capital, receivables, inventory: usually 5 to 7 years.
• Machinery, equipment, and fixtures: usually 7 to 10 years.
• Real estate: up to 25 years.

INTEREST RATES and FEES

• Usually 1% to 2.75% over prime
• Monthly variable, tied to lowest WSJ prime rate
• An SBA fee of approximately 2% - 2.5% is charged on the loan amount. This fee can be financed as part of the loan and is paid to the SBA upon closing the loan.
• Packaging fee of $500 to $2,500 depending on size of loan.

REPAYMENT

• Monthly payments based on simple interest
• No balloons
• No prepayment penalties, except on loans with a maturity of 15 years or more.
• Loans for startup businesses can be interest only for up to 6 months

PERSONAL GUARANTEES

Personal guarantees are required from all owners of 20% or more of the company. The personal guarantee may require a pledge of personal property.

OCCUPANCY REQUIREMENT

On existing buildings being financed, business must occupy at least 51%. On newly constructed buildings being financed, business must occupy 60%. The business may lease out 20% of the space permanently.

SILVER STATE BANK

is an experienced SBA lender. This means a faster answer and loan commitment for you. Our SBA specialists would like to talk to you about how we can assist you in building your business. They will meet with you at your office, and your request will be given specialized, individual attention. You will get an answer without wasted time and unnecessary delays.

Silver State Bank is a full service bank. Our officers are experienced in all areas of business finance, including construction and real estate loans. If you are looking for an SBA loan, we are looking for you.

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Important Information About Procedures for Opening a New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

What this means to you: When you open an account, we will ask for your name, date of birth, and other information that will allow us to identify you. We may ask to see your driver's license or other identifying documents.

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