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Posts Tagged ‘SBA loans’


Temporary SBA 504 Loan Program Provides Working Capital for Small Businesses

July 19th, 2012 ::

By Maria Valdez Haubrich

Are you looking for cash or working capital to grow your small business? Then you should know about a temporary Small Business Administration (SBA) program that could help. As part of the Small Business Jobs Act passed in 2010, the SBA started a temporary program enabling small businesses to refinance eligible fixed assets through its 504 loan program without having to expand their businesses. This temporary refinancing program will expire on September 27, 2012, so now is the time to see if it can help your business.

Here are some of the benefits of the temporary 504 program:

  • Eligible small businesses can get below-market pricing and long term, fully amortizing fixed rate loans.
  • You can finance up to 90 percent of the property’s current appraised value.
  • In some cases, you can “cash out” proceeds from the refinancing to pay eligible business expenses, including payroll, inventory and accounts payable.

Eligible applicants for the 504 refinancing program must:

  • Show that their loans are current
  • Have made all required payments in the last year with no payments more than 30 days past due.
  • Debt to be refinanced must have been incurred at least two years before the date of the loan application

The temporary program is structured like SBA’s traditional 504 loan program (although it’s separate from that program). Small business borrowers work with third-party lending institutions and SBA-approved Certified Development Companies (CDCs) to get financing. The loan is typically made up of three parts:

  • A loan (or first mortgage) secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost,
  • A second mortgage secured with a junior lien from an SBA-approved CDC covering up to 40 percent of the cost, and
  • A contribution of at least 10 percent equity from the small business owner.

For more details about the temporary 504 loan program, visit the SBA website and the 504 FAQs page.

Image by Flickr user vxla (Creative Commons)

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Posted in Capital Access, Raising Capital, Small Business, small business, Uncategorized | 3 Comments »

SBA 504 Loan Refinancing Program Offers Small Businesses Working Capital

December 20th, 2011 ::

By Karen Axelton

Do you have an existing business loan you’d like to refinance? Changes to the SBA’s 504 loan program can help. As part of the Small Business Jobs Act of 2010, the 504 Loan Refinancing Program was put in place to let small businesses refinance loans and use equity to get working capital loans.

Here’s how it works: Borrowers can finance up to 90 percent of the appraised value of available collateral, which can include fixed assets such as commercial or residential property. This allows borrowers that have more than 10 percent equity to get additional working capital to pay for eligible business expenses.

The program is structured like SBA’s traditional 504 loan program, which means borrowers work with third-party lending institutions and SBA-approved Certified Development Companies (CDCs) to get financing, in a traditional 10 percent/50 percent/40 percent split.  However, instead of requiring the third party lender to contribute 50 percent of the project, now the third party lender simply has to contribute an amount equal to or greater than the SBA amount.

This is a temporary program intended to benefit small businesses that have loans maturing—in particular, commercial mortgage loans for properties whose value may have declined due to the recession. The goal is to help small companies lessen the amount of money they have to commit to paying mortgages and make more money available for ongoing business expenses, helping to keep businesses afloat and preserving jobs.

In order for your business to be eligible for the program, the debt must have been incurred at least two years prior to the date of your refinancing application. The program will end September 27, 2012 but loans do not have to mature before that date; in fact, the SBA has expanded the program to include loans maturing after December 31, 2012.

The SBA estimates that as many as 8,000 small businesses will take advantage of the refinancing program in the current fiscal year. For more details on the program, visit the SBA website and read FAQs here.

Image by Flicker user Woodley Wonderworks (Creative Commons)

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Posted in Capital Access, Raising Capital, Small Business, small business, Uncategorized | No Comments »

Small Businesses Get New Loan Source From SBA Pilot Program

August 23rd, 2011 ::

By Maria Valdez Haubrich

As the economy bumps along on the road to recovery, one fact holds true: Small businesses are still having a tough time getting financing to grow. That’s especially so for businesses in areas that are hard-hit by the lingering effects of the recession or regions that have never offered many capital sources.

Now there’s some help for those businesses in the form of a new financing option—the SBA’s new Intermediary Lending Pilot (ILP) Program, which has recently funded 20 community organizations authorized to start making loans up to $200,000 to qualifying small businesses.

Part of the Small Business Jobs Act of 2010, this three-year pilot program provides direct loans to eligible nonprofit intermediaries so they can make loans to small businesses in areas suffering from a lack of credit due to poor economic conditions or changes in the financial market.

The goal of the program is to address gaps in the credit market including:

  • Lack of availability of commercial loans of $200,000 or less
  • Borrowers who have declining collateral values or lower credit scores due to the economic downturn
  • Commercial lenders such as banks having tighter underwriting standards, greater concerns about risk and less money to lend
  • Certain populations in economically distressed areas remaining underserved

ILP loans can be used for working capital, real estate, or to buy materials, supplies and equipment. The loans are made through nonprofit intermediaries, such as Community Development Financial Institutions (CDFIs), Community Development Corporations and SBA Certified Development Companies (CDCs).

Although 20 have been chosen for this year, the ILP is seeking 20 more to join the pilot program for 2012. So far, the ILP pilot has funding to make loans in 2011 and 2012, but if funds are approved for an additional year, 20 more intermediaries will be chosen to make loans in 2013.

Visit the SBA website for a list of the first 20 ILP lenders authorized to make loans in 2011. For more information on applying for ILP and other SBA loans, contact your nearest SBA District Office, which you can find at http://www.sba.gov/about-offices-list/2.

Image by Flickr user Cliff 1066 (Creative Commons)

 

 

 

 

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Posted in Capital Access, Raising Capital, Small Business, small business, Uncategorized | 1 Comment »

What You Need to Know About SBA Loans

November 18th, 2010 ::

By Maria Valdez Haubrich

Is your business looking for growth capital in a tight economy? A Small Business Administration (SBA) guaranteed loan could be the answer to your problems. The SBA doesn’t directly make loans to small companies, but it guarantees a certain percentage of a loan that is made by participating lenders. This guarantee makes lenders more willing to take a chance on your business.

In fiscal year 2010, demand for SBA loans grew, and so did the number and dollar volume of loans. The SBA guaranteed more than $22 billion (54,833 loans) in loans to small businesses, compared to more than $17 billion (47,897 loans) in fiscal year 2009.

Businesses that have a track record of success, are looking to grow and have collateral to put up against a loan are good candidates for SBA loans. Here’s a closer look at the types of loans available.

7(a) Loans: The SBA’s biggest loan program, 7(a) provides financing for a variety of purposes. Under the recently passed Small Business Jobs Act, limits for 7(a) loans increased to $5 million. Within the 7(a) program are these specialized loan programs:

  • Express Programs: These streamline the financing application process and include SBA Express, Community Express (for businesses in disadvantaged communities) and Patriot Express (for businesses owned by military veterans). The Small Business Jobs Act temporarily increased the cap on SBA Express loans from $350,000 to $1 million for one year.
  • Export Loan Programs: Programs to boost small-business exporting include the Export Working Capital Program, the International Trade Loan Program and Export Express. The Small Business Jobs Act raised the limit on Export Express loans to $500,000, and raised the cap on International Trade and Export Working Capital loans to $5 million.
  • Rural Lender Advantage Program: For companies outside major urban areas, this program streamlines the application process to help small rural lenders make loans.
  • Special Purpose Loans Program: This encompasses business loans for small businesses with a wide range of specialized needs.

CDC/504 Loan Program: Offers long-term financing to buy fixed assets such as equipment and real estate. Loans are made by nonprofit organizations called Certified Development Companies (CDCs). The Small Business Jobs Act boosted the cap on 504 loans to $5 million; for manufacturers and certain energy-related projects, the cap is $5.5 million.

To find out more about SBA loan programs and learn how to prepare to seek financing, visit the SBA website.

 DISCLAIMER: The information posted in this blog is provided for informational purposes. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. The information presented here is not to be construed as legal or tax advice. Network Solutions recommends that you consult an attorney or tax consultant if you want professional assurance that the information posted, and your interpretation of it, is appropriate to your particular business.

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Posted in Capital Access, Raising Capital | No Comments »

Good News for Small Business: SBA Loan Numbers, Limits Rise

October 21st, 2010 ::

By Rieva Lesonsky

The Small Business Administration (SBA), whose fiscal year ended September 30, reports some surprising news: Despite a tough economy, the number of SBA loans rose by some 30 percent in 2010.

The SBA approved $16.84 billion in loans (54,826 loans) in the past 12 months—an increase from $13.03 billion in fiscal 2009. (By comparison, in 2007, before the recession hit, the SBA approved $20.61 billion in loans.)

The stimulus enacted in February 2009 is responsible for much of the growth. It eliminated fees and increased the maximum loan guarantee from 75-85 percent to 90 percent. Between February 2009 and May 2010, the average weekly dollar volume was $330 million—much larger than the $172 million weekly average for the seven weeks before the stimulus, The Wall Street Journal reported.

The increase in lending is especially impressive in light of the obstacles borrowers faced. During fiscal 2010, the stimulus provisions had to be extended four times by congressional vote. This led to lengthy delays where borrowers who hadn’t received approval had to get into a “queue” and wait until Congress approved the stimulus extension. The longest wait took place this summer; the provisions expired in May and weren’t extended until the Small Business Jobs Act was signed September 27. Within one week of that signing, the SBA reported that $970 million in loans or 1,939 loans that had been sitting in the queue had been cleared.

As part of the Small Business Jobs Act, effective October 8, the SBA also officially increased the cap on various types of loans:

  • The cap on SBA Express loans temporarily increased from $350,000 to $1 million.
  • The cap on 7(a) and 504 limits permanently increased from $2 million to $5 million; for manufacturers and certain energy-related projects seeking 504 loans, the cap is now $5.5 million.
  • The cap on International Trade and Export Working Capital loans has been permanently increased from $2 million to $5 million.
  • The cap on microloans has been permanently increased from $35,000 to $50,000.
  • The cap on Export Express loans has been permanently increased from $250,000 to $500,000.

These measures should make it easier for small businesses to get the loans they need—at least, until the stimulus provisions expire again at the end of calendar year 2010.

Image by Flickr user Kevin Dooley (Creative Commons)

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Posted in Capital Access | 2 Comments »

Will An ARC Loan Help Your Business?

January 11th, 2010 ::

The stimulus plan created for small businesses the America’s Recovery Capital or ARC loan program. With $255 million of funds, it is geared to help businesses who have an existing loan with their loan payments.

1. The business seeking an ARC loan must have outstanding business debt.

The ARC loan program was designed to help “viable” as defined, small businesses who are suffering “immediate financial hardship” also defined. In order to be considered viable, the business must show that at least one of the last two years the company was profitable. It further requires that the outstanding loan(s) from a credit institution may not have any payments more than 60 days past due.

2. The ARC loan is not for start ups or change of ownership scenarios

The requirement of immediate financial hardship would need to be fully documented for these kinds of financial conditions; trouble making personnel payroll, slowdown of sales, bank refuses additional credit on loans, trouble paying debts etc. Evidence of these conditions must be shown in excruciating detail. So it is necessary that the borrower has very good accounting in place in order to run the necessary financial reports.

3. An ARC loan can be made up to $35,000

The Small Business Administration (SBA) is running the ARC program and an SBA preferred Lender, a bank, will be making the actual loan. A borrower needs to find a bank that is offering the ARC loan program. The bank will be looking for the SBA (US Government) to guarantee 100% of the loan. Proceeds of the loan can only be used to make payments on existing loans, like; secured or unsecured lines of credit, business related credit card debt, capital leases, and term debt.

4. This is an interest free loan, guaranteed by the SBA

The loan may be dispersed in up to 6 payments that go directly to paying off loans. After the last disbursement, there are no payments by the borrower due on this loan for 12 months. After the 12 months, the balance of the loan is amortized over 5 years (60 months) for full repayment of the principal. Again, there is no interest due on this loan, but any older existing loans must still have regular payments.

5. Will the bank require additional collateral for the loan?

This requirement is based on the individual SBA 7a Lender. Some will only require a signature from the business owner who is personally guarantying the loan. But in this case the personal credit of the owner will be scrutinized. Because the size of the loan is small enough and the SBA is guarantying 100% of the risk, if the business owner still has fair credit there is a chance no additional collateral will be required.

6. How do I apply?

Find a local bank who is participating in the ARC loan program. There will be a multipage comprehensive loan application. With the application a loan package including 2 years of tax returns, both personal and for the business, historical financial accounting, documentation for the existing loans, 2 years of Performa financial projections to show the business can make the necessary loan payments. The entire loan application will be packaged by the Lender and submitted to the SBA for approval. Once approved, a loan closing will occur and the disbursements commence. Many businesses are finding the application process so onerous they are turning to business consultants and SCORE volunteers for assistance, which is highly recommended. Do not be taken in by individuals who claim to guarantee approval if you pay them an up front fee.

Bottom Line

So in the end, if you have a business that has been around for a few years, and you have meticulous accounting records, and you have a loan with a bank in which you are struggling to make loan payments – the ARC loan is designed to provide interest free funds where for the first year you do not have to make any payments in order to help stimulate your business. For additional details contact the SBA.

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Posted in Capital Access, Raising Capital | 15 Comments »