Discover New Possibilities Through SBA Financial Assistance Programs

U.S. Small Business Administration
Championing America’s Entrepreneurs

Small Businesses:
Discover New Possibilities Through SBA Financial Assistance Programs

Small business is big business: it account for more than half of the
private work force in the country and more than half of all sales. Small
business also has the highest potential for growth of any sector of our
economy, creating roughly 60 percent of all new jobs.

To fund that growth, small businesses need access to capital in the form
of both long- and short-term loans or investment capital. Yet small firms
often don’t have the collateral or credit history to qualify for financing
through normal lending channels.

That’s where the SBA comes in. We have loan programs and services to meet
most of your business needs, as this brochure will show.

To find out how our programs and services can work for you, just give us
a call. For the district office nearest you, consult the list at the end
of this brochure, look in the telephone book under “U.S. Government,” or
call (800) 8-ASK-SBA.

SBA Financial Assistance:

The 7(a) Loan Guaranty Program can satisfy the requirements of almost any
new or growing small business. In addition to general long- and short-term
7(a) loans, we offer a number of specialized loan and lender delivery

* CAPLines – Short-term lending for short-term needs;
* Export Working Capital and International Trade Loans – Short- and
long-term financing for exporters;
* DELTA – Loans to fund defense conversion;
* Prequalified Loans for Minorities and Women – Loan packaging support
and the SBA’s commitment before going to a lender;
* LowDoc – A one-page application with fast turnaround;
* FA$TRAK – Increased lender authority to provide an SBA guaranty on
small loans – no extra paperwork, no waiting for SBA approval; and
* The Certified and Preferred Lenders Program – Faster service through
licensed lenders.

The 7(m) MicroLoan Program makes very small loans to small businesses.

The 504 Certified Development Company Program enables lenders to make
larger, long-term loans to small businesses through the use of
SBA-guaranteed debentures.

Under the Small Business Investment Company Program, venture capitalists
licensed by the SBA make capital available to small businesses through
investments or loans.

The Surety Bond Program guarantees bonds for small contractors.

SBA Financial Assistance Programs

The 7(a) Loan Guaranty Program

The 7(a) Loan Guaranty Program is the SBA’s primary loan program. The SBA
reduces risk to lenders by guaranteeing major portions of loans made to
small businesses. This enables the lenders to provide financing to small
businesses when funding is otherwise unavailable on reasonable terms.

The eligibility requirements and credit criteria of the program are very
broad in order to accommodate a wide range of financing needs.

When a small business applies to a lending institution for a loan, the
lender reviews the application and decides if it merits a loan on its own
or if it requires additional support in the form of an SBA guaranty. SBA
backing on the loan is then requested by the lender. In guaranteeing the
loan, the SBA assures the lender that, in the event the borrower does not
repay the loan, the government will reimburse the lender for its loss.
By providing this guaranty, the SBA helps tens of thousands of small
businesses every year get financing they would not otherwise obtain.

To qualify for an SBA guaranty, a small business must meet the 7(a)
criteria, and the lender must certify that it could not provide funding on
reasonable terms except with an SBA guaranty. The SBA can then guarantee
as much as 80 percent on loans of up to $100,000 and 75 percent on loans
of more than $100,000. In most cases, the maximum guaranty is $750,000 (75
percent of $1 million). Exceptions are the International Trade, DELTA and
504 loan programs, which have higher loan limits.

How It Works

You submit a loan application to a lender for initial review. If the
lender approves the loan subject to an SBA guaranty, a copy of the
application and a credit analysis are forwarded by the lender to the
nearest SBA office. After SBA approval, the lending institution closes the
loan and disburses the funds; you make monthly loan payments directly to
the lender. As with any loan, you are responsible for repaying the full
amount of the loan.

There are no balloon payments, prepayment penalties, application fees or
points permitted with 7(a) loans. Repayment plans may be tailored to each
individual business.

Use of Proceeds

You can use a 7(a) loan to –

* expand or renovate facilities;
* purchase machinery, equipment, fixtures and leasehold improvements;
* finance receivables and augment working capital;
* refinance existing debt (with compelling reason);
* finance seasonal lines of credit;
* construct commercial buildings; and/or
* purchase land or buildings.

Terms, Interest Rates and Fees

The length of time for repayment depends on the use of the proceeds and the
ability of your business to repay:

* usually five to 10 years for working capital, and
* up to 25 years for fixed assets such as the purchase or major
renovation of real estate or purchase of equipment (not to exceed the
useful life of the equipment).

Both fixed and variable interest rates are available. Rates are pegged at
no more than 2.25 percent over the lowest prime rate* for loans with
maturities of less than seven years and up to 2.75 percent for seven years
or longer. For loans under $50,000, rates may be slightly higher.

The SBA charges the lender a nominal fee to provide a guaranty, and the
lender may pass this charge on to you. The fee is based on the maturity
of the loan and the dollar amount that the SBA guarantees. On any loan
with a maturity of one year or less, the fee is just 0.25 percent of the
guaranteed portion of the loan. On loans with maturities of more than one
year where the portion that the SBA guarantees is $80,000 or less, the
guaranty fee is 2 percent of the guaranteed portion. On loans with
maturities of more than one year where the SBA’s portion exceeds $80,000,
the guaranty fee is figured on an incremental scale, beginning at 3

* All references to the prime rate refer to the lowest prime rate as
published in the Wall Street Journal on the day the application is
received by the SBA.


You must pledge sufficient assets, to the extent that they are reasonably
available, to adequately secure the loan. Personal guaranties are required
from all the principal owners of the business. Liens on personal assets of
the principals also may be required. However, in most cases a loan will
not be declined where insufficient collateral is the only unfavorable


Your business generally must be operated for profit and fall within the
size standards set by the SBA. The SBA determines if the business qualifies
as a small business based on the average number of employees during the
preceding 12 months or on sales averaged over the previous three years.
Loans cannot be made to businesses engaged in speculation or investment.

Maximum Size Standards

* Manufacturing – from 500 to 1,500 employees
* Wholesaling – 100 employees
* Services – from $2.5 million to $21.5 million in annual receipts
* Retailing – from $5 million to $21 million
* General construction – from $13.5 million to $17 million
* Special trade construction – average annual receipts not to exceed
$7 million
* Agriculture – from $0.5 million to $9 million

What You Need to Take to the Lender

Documentation requirements may vary; contact your lender for the
information you must supply. Common requirements include the following:

* Purpose of the loan
* History of the business
* Financial statements for three years (existing businesses)
* Schedule of term debts (existing businesses)
* Aging of accounts receivable and payable (existing businesses)
* Projected opening day balance sheet (new businesses)
* Lease details
* Amount of investment in the business by the owner(s)
* Projections of income, expenses and cash flow
* Signed personal financial statements
* Personal rÇsumÇ(s)

What the SBA Looks For

* Good character
* Management expertise and commitment necessary for success
* Sufficient funds, including the SBA-guaranteed loan, to operate the
business on a sound financial basis (for new businesses, this includes
the resources to withstand start-up expenses and the initial operating
* Feasible business plan
* Adequate equity or investment in the business
* Sufficient collateral
* Ability to repay the loan on time from the projected operating cash

Specialized Programs Under 7(a)

In addition to the standard loan guaranty, the SBA has targeted programs
under 7(a) that are designed to meet specialized needs. Unless otherwise
indicated, they are governed by the same rules, regulations, interest
rates, fees, etc. as the regular 7(a) loan guaranty.

Financing For Specific Needs

The SBA has programs to help meet your specific financing needs.

CAPLines Program

CAPLines is the program under which the SBA helps small businesses meet
their short-term and cyclical working-capital needs. A CAPLines loan can
be for any dollar amount (except for the Small Asset-Based Line), and the
SBA will guarantee 75 percent up to $750,000 (80 percent on loans of
$100,000 or less).

There are five short-term working-capital loan programs for small
businesses under CAPLines:

Seasonal Line: This line advances funds against anticipated inventory and
accounts receivables for peak seasons and seasonal sales fluctuations. It
can be revolving or nonrevolving.

Contract Line: This line finances the direct labor and material costs
associated with performing assignable contract(s). It can be revolving or

Builders Line: If you are a small general contractor or builder
constructing or renovating commercial or residential buildings, this line
can finance your direct labor and material costs. The building project
serves as the collateral, and loans can be revolving or nonrevolving.

Standard Asset-Based Line: This is an asset-based revolving line of credit
that provides financing for cyclical, growth, recurring and/or short-term
needs. Repayment comes from converting short-term assets into cash, which
is remitted to the lender. Businesses continually draw, based on existing
assets, and repay as their cash cycle dictates. This line generally is
used by businesses that provide credit to other businesses. Because these
loans require continual servicing and monitoring of collateral, additional
fees may be charged by the lender.

Small Asset-Based Line: This is an asset-based revolving line of credit of
up to $200,000. It operates like a standard asset-based line except that
some of the stricter servicing requirements are waived, providing the
business can consistently show repayment ability from cash flow for the
full amount.

Use of Proceeds

CAPLines may be used to –

* finance seasonal working-capital needs;
* finance direct costs needed to perform construction, service and
supply contracts;
* finance direct costs associated with commercial and residential
building construction without a firm commitment for purchase;
* finance operating capital by obtaining advances against existing
inventory and accounts receivable; or
* consolidate short-term debt.

Terms, Interest Rates and Fees

Each of the five lines of credit has a maturity of up to five years, but,
because each is tailored to your individual needs, a shorter initial
maturity may be established. You may use CAPLines funds as needed through-
out the term of the loan to purchase assets, as long as sufficient time is
allowed to convert the assets into cash by maturity.

Interest rates are negotiated with your lender, up to 2.25 percent over the
prime rate. The guaranty fee is the same as for any standard 7(a) loan.

The SBA places no servicing-fee restrictions on the lender for the Standard
Asset-Based Line but requires full disclosure to ensure that fees are
reasonable. On all other CAPLines, the servicing fee is restricted to 2
percent based on the average outstanding balance.


The primary collateral will be the short-term assets financed by the loan.

The International Trade Loan Program

The International Trade Loan Program helps small businesses that are –

* engaged in international trade,
* preparing to engage in international trade, or
* adversely affected by competition from imports.

The SBA can guarantee as much as $1.25 million in combined working-capital
and fixed-asset loans. The working-capital portion of the loan may be made
according to the provisions of the Export Working Capital Program (see
below) or other SBA working-capital programs.

Use of Proceeds

Proceeds may be used for —
* working capital; and/or
* purchasing land and buildings, building new facilities; renovating,
improving or expanding existing facilities; purchasing or recondi-
tioning machinery, equipment and fixtures; and making other improve-
ments that will be used within the United States to produce goods or
services for export.

Proceeds may not be used to repay existing debt.

Terms, Interest Rates and Fees

Loans for facilities or equipment can have maturities of up to 25 years.
The working capital portion of a loan under Export Working Capital Program
provisions has a maximum maturity of three years. Rates and fees are the
same as for the general 7(a) loan.


The lender must take a first-lien position (or first mortgage) on items
financed under an international trade loan. Only collateral located in the
United States, its territories and possessions is acceptable as collateral
under this program. Additional collateral may be required, including
personal guaranties, subordinate liens or items that are not financed by the
loan proceeds.

The Export Working Capital Program

The Export Working Capital Program was developed in response to the needs
of exporters seeking short-term working capital.

The SBA guarantees 90 percent of the principal and interest, up to $750,000.
The EWCP uses a one-page application form and streamlined documentation, and
turnaround is usually within 10 days. You may also apply for a letter of
prequalification from the SBA.

You may have other current SBA guaranties, as long as the SBA’s exposure
does not exceed $750,000 for all of your loans. When an EWCP loan is com-
bined with an international trade loan, the SBA’s exposure can go up to
$1.25 million.

Terms, Interest Rates and Fees

Typically, EWCP loan maturities either match a single transaction cycle or
support a line of credit, generally with a term of 12 months. Unlike other
7(a) programs, interest rates and fees are negotiated between you and your
lender. The SBA charges the lender a nominal guaranty fee, which may be
passed on to you.

Targeted Assistance

Several SBA programs provide targeted financial and technical assistance.


Defense Loan and Technical Assistance Program

If you own a defense-dependent small firm adversely affected by defense
cuts, DELTA can help you diversify into the commercial market. The DELTA
Program provides both financial and technical assistance. A joint effort
of the SBA and the Department of Defense, it offers about $1 billion in
gross lending authority.

The SBA processes, guarantees and services DELTA loans through the
regulations, forms and operating criteria of the 7(a) Program and the 504
Certified Development Company Program.

Maximum Loan Amount

The maximum gross loan amount under 7(a) is $1.25 million for a DELTA loan.
The maximum guaranty under 504 is $1 million. If both types of loans are
used or if there is an existing SBA loan, the combined total may not exceed
$1.25 million.


DELTA loans may not be typical 7(a) or 504 loans and may require special
handling because of complicated credit analyses. While you may have signi-
ficant collateral, you may not be able to show the ability to repay based
on past operations because of your firm’s state of transition. New revisions
to the law allow the SBA to resolve reasonable doubts in your favor.


If seeking a DELTA loan, you will be required to certify that your company
meets DELTA eligibility standards as well as 7(a) criteria.

To be eligible, your business must —

* meet SBA size standards; and
* have derived at least 25 percent of total company revenues during the
preceding fiscal year from DoD contracts, defense-related contracts
with the Department of Energy, or subcontracts in support of defense-
related prime contracts.

In addition, your business must —

* be adversely impacted by reductions in defense spending and use the
loan to retain jobs of defense workers; or
* be located in an adversely impacted community and create new economic
activity and jobs; or
* modernize or expand your plant so it can diversify operations while
remaining in the national technical and industrial base.

Technical Assistance

You may also require technical assistance to make the transition to the
commercial market. This will be provided through small business develop-
ment centers, the Service Corps of Retired Executives, other federal
agencies, and other technical and management assistance providers.

Minority Prequalification Loan Program and
Women’s Prequalification Loan Program

If you are a woman or minority who owns or wants to start a business,
these programs can help. Intermediaries assist you in developing a viable
loan application package and securing a loan. On approval the SBA provides
a letter of prequalification you can take to a lender. The women’s program
uses only nonprofit organizations as intermediaries; the minority program
uses for-profit intermediaries as well.

Once your loan package is assembled, the intermediary submits it to the SBA
for expedited consideration; a decision usually is made within three days.
If your application is approved, the SBA issues a letter of prequalification
stating the agency’s intent to guarantee the loan. The intermediary will
then help you locate a lender offering the most competitive rates.

The maximum amount for loans under the women’s program is $250,000; under
the minority program, it is generally the same, although some district
offices set other limits. With both programs, the SBA will guarantee up to
75 percent (80 percent on loans of $100,000 or less).

Intermediaries may charge a reasonable fee for loan packaging. These
programs are available through a number of SBA district offices nationwide.
To find out if these programs are available in your area, contact your
nearest SBA district office.


* Businesses at least 51 percent owned, operated and managed by people
of ethnic or racial minorities, or by women
* Businesses with average annual sales for the preceding three years
that do not exceed $5 million
* Businesses that employ fewer than 100, including affiliates
* Businesses that are not engaged in speculation or investment

Loan Repayment Guide
(monthly payment plus interest — based on $1,000)

* Divide the loan amount by $1,000
* Using the chart below, find the interest rate on your loan in
the first column, then go across the row to the column denoting
the term of your loan to find the factor. Example: a seven-year
loan at 8.75% has a factor of 15.96.
* Multiply the amount from step 1 by the factor in step 2.
* The result is your monthly payment. Make sure you consult with
your lender for the actual terms.


Rate 1 yrs 2 yrs 3 yrs 4 yrs 5 yrs 6 yrs
8.00% 86.99 45.23 31.34 24.41 20.28 17.53
8.25% 87.10 45.34 31.45 24.53 20.40 17.66
8.50% 87.22 45.46 31.57 24.65 20.52 17.78
8.75% 87.34 45.57 31.68 24.77 20.64 17.90
9.00% 87.45 45.68 31.80 24.88 20.76 18.03
9.25% 87.57 45.80 31.92 25.00 20.88 18.15
9.50% 87.68 45.91 32.03 25.12 21.00 18.27
9.75% 87.80 46.03 32.15 25.24 21.12 18.40
10.00% 87.92 46.15 32.27 25.36 21.25 18.53
10.25% 88.03 46.26 32.38 25.48 21.37 18.65
10.50% 88.15 46.38 32.50 25.60 21.49 18.78
10.75% 88.27 46.49 32.62 25.72 21.62 18.91
11.00% 88.38 46.61 32.74 25.85 21.74 19.03
11.25% 88.50 46.72 32.86 25.97 21.87 19.16
11.50% 88.62 46.84 32.98 26.09 21.99 19.29
11.75% 88.73 46.96 33.10 26.21 22.12 19.42
12.00% 88.85 47.07 33.21 26.33 22.24 19.55
12.25% 88.97 47.19 33.33 26.46 22.37 19.68
12.50% 89.08 47.31 33.45 26.58 22.50 19.81
12.75% 89.20 47.42 33.57 26.70 22.63 19.94
13.00% 89.32 47.54 33.69 26.83 22.75 20.07
13.25% 89.43 47.66 33.81 26.95 22.88 20.21
13.50% 89.55 47.78 33.94 27.08 23.01 20.34
13.75% 89.67 47.90 34.06 27.20 23.14 20.47
14.00% 89.79 48.01 34.18 27.33 23.27 20.61
14.25% 89.90 48.13 34.30 27.45 23.40 20.74
14.50% 90.02 48.25 34.42 27.58 23.53 20.87
14.75% 90.14 48.37 34.54 27.70 23.66 21.01
15.00% 90.26 48.49 34.67 27.83 23.79 21.14
15.25% 90.38 48.61 34.79 27.96 23.92 21.28
15.50% 90.49 48.72 34.91 28.08 24.05 21.42
15.75% 90.61 48.84 35.03 28.21 24.19 21.55
16.00% 90.73 48.96 35.16 28.34 24.32 21.69

Rate 7 yrs 8 yrs 9 yrs 10 yrs 15 yrs 20 yrs 25 yrs
8.00% 15.59 14.14 13.02 12.13 9.56 8.36 7.72
8.25% 15.71 14.26 13.15 12.27 9.70 8.52 7.88
8.50% 15.84 14.39 13.28 12.40 9.85 8.68 8.05
8.75% 15.96 14.52 13.41 12.53 9.99 8.84 8.22
9.00% 16.09 14.65 13.54 12.67 10.14 9.00 8.39
9.25% 16.22 14.78 13.68 12.80 10.29 9.16 8.56
9.50% 16.34 14.91 13.81 12.94 10.44 9.32 8.74
9.75% 16.47 15.04 13.94 13.08 10.59 9.49 8.91
10.00% 16.60 15.17 14.08 13.22 10.75 9.65 9.09
10.25% 16.73 15.31 14.21 13.35 10.90 9.82 9.26
10.50% 16.86 15.44 14.35 13.49 11.05 9.98 9.44
10.75% 16.99 15.57 14.49 13.63 11.21 10.15 9.62
11.00% 17.12 15.71 14.63 13.77 11.37 10.32 9.80
11.25% 17.25 15.84 14.76 13.92 11.52 10.49 9.98
11.50% 17.39 15.98 14.90 14.06 11.68 10.66 10.16
11.75% 17.52 16.12 15.04 14.20 11.84 10.84 10.35
12.00% 17.65 16.25 15.18 14.35 12.00 11.01 10.53
12.25% 17.79 16.39 15.33 14.49 12.16 11.19 10.72
12.50% 17.92 16.53 15.47 14.64 12.33 11.36 10.90
12.75% 18.06 16.67 15.61 14.78 12.49 11.54 11.09
13.00% 18.19 16.81 15.75 14.93 12.65 11.72 11.28
13.25% 18.33 16.95 15.90 15.08 12.82 11.89 11.47
13.50% 18.46 17.09 16.04 15.23 12.98 12.07 11.66
13.75% 18.60 17.23 16.19 15.38 13.15 12.25 11.85
14.00% 18.74 17.37 16.33 15.53 13.32 12.44 12.04
14.25% 18.88 17.51 16.48 15.68 13.49 12.62 12.23
14.50% 19.02 17.66 16.63 15.83 13.66 12.80 12.42
14.75% 19.16 17.80 16.78 15.98 13.83 12.98 12.61
15.00% 19.30 17.95 16.92 16.13 14.00 13.17 12.81
15.25% 19.44 18.09 17.07 16.29 14.17 13.35 13.00
15.50% 19.58 18.24 17.22 16.44 14.34 13.54 13.20
15.75% 19.72 18.38 17.37 16.60 14.51 13.73 13.39
16.00% 19.86 18.53 17.53 16.75 14.69 13.91 13.59

Streamlined Applications and Approvals

There are several options available to lenders that help streamline
delivery of the SBA’s guaranty.


Low Documentation Loan Program

LowDoc is one of the SBA’s most popular programs. Once you have met your
lender’s requirements for credit, LowDoc offers a simple, one-page SBA
application form and rapid turnaround on approvals for loans of up to
$100,000 (for loans over $50,000, you must also provide a copy of U.S.
Income Tax Schedule C or the front page of the corporate or partnership
returns for the past three years). The SBA will guarantee up to 80 percent
of the loan amount. Completed applications are processed quickly by the
SBA, usually within two or three days. Proceeds may not be used to repay
certain types of existing debt.


* Businesses with average annual sales for the past three years not
exceeding $5 million and with 100 or fewer employees, including
affiliates, or
* Business start-ups


FA$TRAK makes capital available to businesses seeking loans of up to
$100,000 without requiring the lender to use the SBA process.

Lenders use their existing documentation and procedures to make and
service loans. The SBA guarantees up to 50 percent of a FA$TRAK loan.
Your local SBA office can provide you with a list of FA$TRAK lenders.


Like most 7(a) loans, maturities are usually five to seven years for
working capital and up to 25 years for real estate or equipment. For
revolving credits, you may take up to five years after the first dis-
bursement to repay the loan.

Certified and Preferred Lenders Program

The most active and expert lenders qualify for SBA’s Certified and
Preferred Lenders Program. Participants are delegated partial or full
authority to approve loans, which results in faster service.

Certified lenders are those that have been heavily involved in regular SBA
loan-guaranty processing and have met certain other criteria. They receive
a partial delegation of authority and are given a three-day turnaround on
their applications (they may also use regular processing). Certified
lenders account for 10 percent of all SBA business loan guaranties.

Preferred lenders are chosen from among the SBA’s best lenders and enjoy
full delegation of lending authority. This authority must be renewed at
least every two years, and the lender’s portfolio is examined by the SBA
periodically. Preferred loans account for 18 percent of SBA loans. A list
of participants in the Certified and Preferred Lenders Program may be
obtained from your local SBA office.

The 7(m) MicroLoan Program

The MicroLoan Program provides small loans ranging from under $100 to
$25,000. Under this program, the SBA makes funds available to nonprofit
intermediaries; these, in turn, make the loans. The average loan size is
$10,000. Completed applications usually are processed by the intermediary
in less than one week. This is a pilot program available at a limited
number of locations.

Use of Proceeds

Microloans may be used to finance machinery, equipment, fixtures and
leasehold improvements. They may also be used to finance receivables
and for working capital. They may not be used to pay existing debts.

Terms, Interest Rates and Fees

Depending on the earnings of your business, you may take up to six years
to repay a microloan. Rates are pegged at no more than 4 percent over the
prime rate. There is no guaranty fee.


Each nonprofit lending organization will have its own requirements, but
must take as collateral any assets purchased with the microloan. In most
cases, the personal guaranties of the business owners are also required.


Virtually all types of for-profit businesses that meet SBA eligibility
requirements qualify.

The 504 Certified Development Company Program

The 504 Certified Development Company Program enables growing businesses
to secure long-term, fixed-rate financing for major fixed assets, such as
land and buildings. A certified development company is a nonprofit corpo-
ration set up to contribute to the economic development of its community
or region. CDCs work with the SBA and private-sector lenders to provide
financing to small businesses. There are about 290 CDCs nationwide.

The program is designed to enable small businesses to create and retain
jobs; the CDC’s portfolio must create or retain one job for every $35,000
of debenture proceeds provided by the SBA.

Typically, a 504 project includes —

* a loan secured with a senior lien from a private-sector lender
covering up to 50 percent of the project cost,
* a second loan secured with a junior lien from the CDC (a 100 percent
SBA-guaranteed debenture) covering up to 40 percent of the project
cost, and
* a contribution of at least 10 percent equity by the borrower.

The maximum SBA debenture generally is $750,000 (up to $1 million in some

Use of Proceeds

Proceeds from 504 loans must be used for fixed-asset projects such as —

* purchasing land and improvements, including existing buildings,
grading, street improvements, utilities, parking lots and landscaping;
* construction, modernizing, renovating or converting existing
facilities; and
* purchasing machinery and equipment.

The 504 Program cannot be used for working capital or inventory,
consolidating or repaying debt, or most refinancing.

Terms, Interest Rates and Fees

Interest rates on 504 loans are based on the current market rate for
five-year and 10-year U.S. Treasury issues plus an increment above the
Treasury rate, based on market conditions. Only maturities of 10 and
20 years are available. Fees total approximately 3 percent of the
debenture and may be financed with the loan.


Generally the project assets being financed are used as collateral.
Personal guaranties of the principal owners are also required.


To be eligible, the business generally must be operated for profit and
fall within the size standards set by the SBA. Under the 504 Program, a
business qualifies as small if it does not have a tangible net worth in
excess of $6 million and does not have an average net income in excess
of $2 million after taxes for the preceding two years, or if it meets
standard 7(a) criteria. Loans cannot be made to businesses engaged in
speculation or investment.

When Business Problems Arise

When a small business encounters difficulties, the SBA is ready to help
with expert business counseling and assistance. In the event that a
borrower is unable to meet the obligations of an SBA loan, the SBA works
closely with the lender and/or borrower to negotiate a feasible solution.
Only if a loan workout is not possible will the SBA work to liquidate
the loan.

Small Business Investment Company Program

There are a variety of alternatives to bank financing for small businesses,
especially business start-ups. The Small Business Investment Company
Program fills the gap between the availability of venture capital and the
needs of small businesses that are either starting or growing. Licensed
and regulated by the SBA, SBICs are privately owned and managed investment
firms that make capital available to small businesses through investments
or loans. They use their own funds plus funds obtained at favorable rates
with SBA guaranties and/or by selling their preferred stock to the SBA.

SBICs are for-profit firms whose incentive is to share in the success of
a small business. In addition to equity capital and long-term loans, SBICs
provide debt-equity investments and management assistance.

The SBIC Program provides funding to all types of manufacturing and service
industries. Some investment companies specialize in certain fields, while
others seek out small businesses with new products or services because of
the strong growth potential. Most, however, consider a wide variety of
investment opportunities.

Surety Bond Program

By law, prime contractors to the federal government must post surety bonds
on federal construction projects valued at $100,000 or more. Many state,
county, city and private-sector projects require bonding as well. The SBA
can guarantee bid, performance and payment bonds for contracts up to $1.25
million for small businesses that cannot obtain bonds through regular
commercial channels. Bonds may be obtained in two ways:

* Prior Approval – Contractors apply through a surety bonding agent.
The guaranty goes to the surety.
* Preferred Sureties – Preferred sureties are authorized by the SBA to
issue, monitor and service bonds without prior SBA approval.

Business Counseling and Training

The SBA provides a variety of business counseling and training services
to current and prospective small business owners.

The Service Corps of Retired Executives —

The collective experience of SCORE counselors spans the full range of
American enterprise. SCORE volunteers provide free management and
technical expertise and are available at SBA district offices, business
information centers and some small business development centers.

Small Business Development Centers —

SBDCs offer a broad spectrum of business information and guidance, as
well as assistance in preparing loan applications. The program is a
cooperative effort of the private sector; the educational community;
and federal, state and local governments.

Business Information Centers —

BICs provide the latest in high-tech hardware, software and telecom-
munications to help small businesses get started and grow strong.
Supported by local SBA offices, BICs also offer expert counseling by
SCORE volunteers.

One-Stop Capital Shops —

OSCSs are the SBA’s contribution to the Empowerment Zones/Enterprise
Communities Program, an interagency initiative that provides resources
to economically distressed communities. The shops provide a full range
of SBA lending and technical-assistance programs.

SBA Online, the SBA’s Internet Home Page and the U.S. Business Advisor —

An electronic bulletin board, SBA Online offers current business information
around the clock. Via the Internet, the SBA Home Page offers a wealth of
information on starting and building a small business. The U.S. Business
Advisor is currently being developed with users to provide interactive
access to all federal business information and services.

Quick Reference to SBA Loan Programs

PROGRAM: 7(a) Loan Guaranty Program, the SBA’s primary loan program
Maximum Amount Guaranteed: $750,000 in most cases
Percent of Guarantee (Max.): 75% (80% if total loan is $100,000 or less)
Use of Proceeds: Expansion or renovation; construction of new facility;
purchase land or buildings; purchase equipment, fixtures, leasehold
improvements; working capital; refinance debt for compelling reasons;
seasonal line of credit; inventory acquisition
Maturity: Depends on ability to repay; generally working capital is 5-10
years; machinery/equipment, real estate, construction, up to 25 years
(not to exceed life of equipment)
Maximum Interest Rates: Negotiable with lender: loans under 7 years, max.
Prime + 2.25%; 7 years or more, max. 2.75% over prime; under $50,000,
rates may be slightly higher
Guaranty and Other Fees: Paid by lender (usually passed onto borrower).
Based on maturity, amount of SBA exposure: 1 year or less, 0.25%; over
1 year, SBA share $80,000 or less, 2%; over 1 year, SBA share more than
$80,000, figured on incremental scale
Eligibility: Must be operated for profit; meet SBA size standards; show
good character, management expertise and commitment, and always show
ability to repay; may not be involved in speculation or investment

PROGRAM: CAPLines, Short-term and RLCs; Seasonal, Contract, Builders,
Standard Asset-Based, Small Asset-Based
Maximum Amount Guaranteed: $750,000 (except Small Asset-Based); Small
Asset-Based $200,000 (total loan amount)
Percent of Guarantee (Max.): 75%, see 7(a)
Use of Proceeds: Finance seasonal working-capital needs; costs to
perform; construction costs; advances against existing inventory and
receivables; consolidation of short-term debts possible
Maturity: Up to 5 years
Maximum Interest Rates: 2.25%
Guaranty and Other Fees: See 7(a); Under Standard Asset-Based, no
restrictions on servicing fees
Eligibility: Existing businesses, see 7(a)

PROGRAM: International Trade Loan Program, Short- and long-term financing
Maximum Amount Guaranteed: $1.25 million
Percent of Guarantee (Max.): 75%, see 7(a)
Use of Proceeds: Working capital; improvements in U.S. for producing goods
or services; may not be used to repay existing debt
Maturity: Up to 25 years
Maximum Interest Rates: See 7(a)
Guaranty and Other Fees: See 7(a)
Eligibility: Small businesses engaged or preparing to engage in inter-
national trade or adversely affected by competition from imports;
see 7(a) for other qualifications

PROGRAM: Export Working Capital Program, 1-page application, fast
turnaround; may apply for prequalification letter
Maximum Amount Guaranteed: $750,000 (may be combined with International
Trade Loan)
Percent of Guarantee (Max.): 90%, see 7(a)
Use of Proceeds: Short-term working-capital loans to finance export
Maturity: Matches single transaction cycle or generally 1 year for line
of credit
Maximum Interest Rates: No cap
Guaranty and Other Fees: See 7(a); no restrictions on servicing fees
Eligibility: Small business exporters who need short-term working capital;
see 7(a) for other qualifications

PROGRAM: DELTA, Defense Loan and Technical Assistance Program, provides
financial and technical assistance to help defense-dependent firms
diversify into commercial market; effort of SBA and DoD
Maximum Amount Guaranteed: 7(a) or combined with 504: $1.25 million (total
loan amount).
504: $1 million SBA share (up to 40% of project)
Percent of Guarantee (Max.): Depends on whether done under 7(a) or 504;
see both
Use of Proceeds: Defense conversion; see 7(a), 504
Maturity: See 7(a), 504
Maximum Interest Rates: See 7(a), 504
Guaranty and Other Fees: See 7(a), 504
Eligibility: Defense-dependent small firms adversely affected by defense
cuts; see 7(a), 504 for qualifications (program authority will expire

PROGRAM: Minority Prequalification Loan Program and
Women’s Prequalification Loan Program,
Help to prepare application and secure loan; SBA prequalification
letter; pilot programs, limited sites
Maximum Amount Guaranteed: Minority Prequalification Loan Program
$250,000 generally (total loan amount); Women’s Prequalification Loan
Program $250,000 (total loan amount)
Percent of Guarantee (Max.): 75%, see 7(a)
Use of Proceeds: See 7(a)
Maturity: See 7(a)
Maximum Interest Rates: See 7(a)
Guaranty and Other Fees: See 7(a); plus minority program may use for-profit
intermediaries; women’s program uses nonprofits only; both may charge
Eligibility: Must be at least 51% owned and operated by racial/ethnic
minority or women; $5 million or less annual sales for past 3 years;
employ 100 or fewer, focus on credit history, ability to repay,
probability of success

PROGRAM: LowDoc, One-page SBA application to obtain guaranty, quick
turnaround after applicant meets lender requirements
Maximum Amount Guaranteed: $100,000 (total loan amount)
Percent of Guarantee (Max.): 80%
Use of Proceeds: Same as 7(a) except may not be used to repay certain
types of existing debt
Maturity: See 7(a)
Maximum Interest Rates: See 7(a)
Guaranty and Other Fees: See 7(a)
Eligibility: Start-ups and businesses with $5 million or less annual sales
for past 3 years; employ 100 or fewer; program relies on applicant’s
character and credit history

PROGRAM: FA$TRAK, Lender approves loan, no additional paperwork for SBA;
pilot program, limited sites
Maximum Amount Guaranteed: $100,000 (total loan amount)
Percent of Guarantee (Max.): 50%
Use of Proceeds: Same as 7(a); limitations on real estate and construction;
may be used for term loans or revolving credits
Maturity: Term loan same as 7(a); no more than 5 years on revolving line of
Maximum Interest Rates: See 7(a)
Guaranty and Other Fees: See 7(a)
Eligibility: See 7(a)

PROGRAM: 7(m) MicroLoan Program, Loans made through non-profit lending
organizations; technical assistance also provided; pilot program,
limited sites
Maximum Amount Guaranteed: $25,000 (total loan amount)
Percent of Guarantee (Max.): NA
Use of Proceeds: Purchase equipment, machinery, fixtures, leasehold
improvements; finance increased receivables; working capital; may not
be used to repay existing debt
Maturity: Shortest term possible, not to exceed 6 years
Maximum Interest Rates: Negotiable with intermediary
Guaranty and Other Fees: No guaranty fee
Eligibility: Same as 7(a)

PROGRAM: 504 Certified Development Company Program, Long-term, fixed-asset
loans through nonprofit development companies; must create or retain 1
job per $35,000 of debenture proceeds
Maximum Amount Guaranteed: Limit on SBA portion of project is $750,000 to
$1 million
Percent of Guarantee (Max.): 40% of project (100% SBA-backed debenture);
private lender unlimited
Use of Proceeds: Purchase of major fixed assets such as land, buildings,
improvements, long-term equipment, construction, renovation
Maturity: 10 or 20 years only
Maximum Interest Rates: Based on current market rate for 5- and 10-year
Treasury issues, plus an increment above Treasury rate
Guaranty and Other Fees: Fees related to debenture, approx. 3%
Eligibility: For-profit businesses that do not exceed $6 million in
tangible net worth and did not have average net income over $2 million
for past 2 years

SBA Customer-Service Standards

As one of the first initiatives of this administration, President Clinton
and Vice President Gore challenged us to “reinvent” the SBA, to create an
agency that not only works better, but is smaller and costs less. The
best possible customer service is a key element of reinventing government,
and we at the SBA are committed to providing quality service at all our
service delivery points and to all our customers – small businesses,
lenders and resource partners, among others. We are establishing
“benchmarks” from the best of the business community and applying these
standards to our programs, monitoring our success and eliciting regular
feedback from our customers on our performance.

Specifically, we are committed to the following customer-service principles:

1. We will provide prompt, courteous and accurate responses to requests
for information received by telephone, in writing or in person.
2. We will continue to look for cost-effective and user-friendly ways
to make information easily accessible to the small business community.
3. We will continue to streamline and reinvent processes to make conduct-
ing business with the SBA easier for both our resource partners and
small business owners.
4. We will provide the small business owner with specialized technical
assistance through a variety of programs in a variety of locations.
5. We will continue to work to relieve the regulatory burden on small
6. We will continue to facilitate and strengthen working relationships
between small contractors and federal procuring agencies.

Some Facts About The SBA And Small Business

Did You Know The SBA …

* Has a portfolio guaranteeing over $27 billion in loans to
185,000 small businesses that otherwise would not have had
such access to capital?
* Guaranteed over 60,000 loans totaling $9.9 billion to America’s
small businesses in fiscal year 1995?
* Last year extended management and technical assistance to nearly
one million small businesses through its 950 Small Business
Development Centers and 13,000 Service Corps of Retired Executives
* Provided more than 45,000 loans totaling $1.2 billion to disaster
victims for residential, personal property, as well as business
losses in fiscal year 1995?
* Has 7,000 private sector lenders as partners providing their
capital to small business?
* Has increased its venture capital program with more private capital
in the past two years than in the previous 15 years combined?
* Provides loan guaranties and technical assistance to small business
exporters through U.S. Export Assistance Centers in 15 cities?
* Can respond to written small business questions through the U.S.
Business Advisor on the Internet (

Did You Know That America’s 22 Million Small Businesses …

* Employ more than 50 percent of the private workforce,
* Generate more than half of the nations’s Gross Domestic Product, and
* Are the principal source of new jobs?

For More Information

The SBA has offices located throughout the United States. For the one
nearest you, look under “U.S. Government” in your telephone directory,
or call the SBA Answer Desk at (800) 8-ASK-SBA. To send a fax to the
SBA, dial (202) 205-7064. For the hearing impaired, the TDD number is
(704) 344-6640.

To access the agency’s electronic public information services, you may
call the following:

SBA Online:
electronic bulletin board – modem and computer required
(800) 697-4636 (limited access)
(900) 463-4636 (full access)
(202) 401-9600 (D.C. metro area)

using uniform resource locators (URLs)
SBA Home Page:
SBA gopher:
File transfer protocol:
U.S. Business Advisor

You also may request a free copy of The Resource Directory for Small
Business Management, a listing of for-sale publications and videotapes,
from your local SBA office or the SBA Answer Desk.

Other Sources
* State economic development agencies
* Chambers of commerce
* Local colleges and universities
* Libraries
* Manufacturers and suppliers of small business products and services
* Small business or industry trade associations

All of the SBA’s programs and services are provided to the public on a
nondiscriminatory basis.

SBA field offices listed alphabetically by state & city:

AK Anchorage
AL Birmingham
AR Little Rock
AZ Phoenix

CA Fresno
San Diego
San Francisco
Santa Ana
CO Denver
CT Hartford
DC Washington, D.C.
DE Wilmington
FL Coral Gables
GA Atlanta
HI Honolulu
IA Cedar Rapids
Des Moines
ID Boise
IL Chicago
IN Indianapolis
KS Wichita
KY Louisville
LA New Orleans
MA Boston
MD Baltimore
ME Augusta
MI Detroit
MN Minneapolis
MO Kansas City
St. Louis
MS Gulfport
MT Helena
NC Charlotte
ND Fargo
NE Omaha
NH Concord
NJ Newark
NM Albuquerque
NV Las Vegas
NY Buffalo
New York City
OH Cincinnati
OK Oklahoma City
OR Portland
PA Harrisburg
King of Prussia
PR Hato Rey
RI Providence
SC Columbia
SD Sioux Falls
TN Nashville
TX Corpus Christi
El Paso
Fort Worth
San Antonio
UT Salt Lake City
VA Richmond
VT Montpelier
WA Seattle
WI Madison
WV Charleston
WY Casper

In addition to the above listing of SBA field offices, there are over 900
small business development center locations and nearly 400 SCORE offices
to help you start and/or strengthen your business.

CO 0004 10/96

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SMB Reviews
SMB Reviews 473 posts

SMBReviews is committed to providing small and mid-sized business owners with the information and resources they need to select the best service or product for their company.

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