SBA L SBA endi ding Program Overview

SBA L di

SBA Lending

Program Overview

SBA Loans

SBA Loans

h S S ll d S

• The U.S. Small Business Administration (SBA)

offers numerous loan programs to assist small

b i

businesses.

• The SBA is primarily a guarantor of loans made

by banks and non-bank lenders and does not

offer loans directly to small businesses.

The SBA guaranty DOES NOT make bad loans good!

The SBA guaranty DOES NOT make bad loans good!

SBA Loans Benefits

SBA Loans Benefits

For Borrowers:

• Longer terms

• Lower equity requirementsq y q

• Lower debt service coverage requirements

• Less restrictive collateral parameters

SBA Loans Uses

SBA Loans Uses

• Purchase owner‐occupied real estate

• Construction and expansion of business premises Construction and expansion of business premises

• Leasehold improvements

• Purchase machinery and equipment furniture

• Purchase machinery and equipment, furniture 

and fixtures 

B i i iti

• Business acquisition

• Debt refinance/consolidation

• Working capital / inventory purchase

Ineligible SBA Borrowers

Ineligible SBA Borrowers gg

• Businesses that do not occupy at least 51% of the property for  which they are requesting financing

I t t P t

• Investment Property

• Non‐Profit Entities

O i h li id di f h f ll i

• Owners with liquid assets exceeding one of the following  formulas:

Loan Amount Formula*

< $250,000 2x project cost or $100,000

$250 001 to $500 000 1 5x project cost or $750 000

$250,001 to $500,000 1.5x project cost or $750,000

> $500,001 project cost or $750,000

* Whi h i t

* Whichever is greater.

SBA Loan Programs

SBA Loan Programs gg

At Founders Bank we offer two prominent SBA

At Founders Bank, we offer two prominent SBA 

loan programs:

• _7(a)

• ₅₀₄

7(a) Loans

Overview

7(a) Loans

Overview

Overview

Overview

• Helps qualified small businesses obtain financing when they 

might not be eligible for business loans through normal lending  channels

• Financing available for a variety of general business purposes  including:

ki it l hi d i t f it d

– working capital, machinery and equipment, furniture and  fixtures, land and building (including purchase, renovation  and new construction), leasehold improvements and debt 

fi i ( d i l diti )

refinancing (under special conditions) 

• CUSTOMERS:  Start‐up and existing for‐profit small businesses  that are owner‐operated.p

• Equity requirements generally range between 20%‐30%.

7(a) Loans

Terms & Conditions

7(a) Loans

Terms & Conditions

Terms & Conditions

Terms & Conditions

Terms

R l E N i 25 E i i b ildi 20

• Real Estate: New construction – up to 25 years; Existing building ‐ up to 20 years 

• Machinery & Equipment – up to 10 years

• Working Capital – up to 10 years

• Business Acquisitions up to 10 years

• Business Acquisitions – up to 10 years

Interest Rates

• Loan > $50 000 Term < 7 years: Maximum rate Prime + 2 25%

• Loan > $50,000, Term < 7 years: Maximum rate = Prime + 2.25%

• Loan > $50,000, Term 7 years or more: Maximum rate = Prime + 2.75%

• Adjusts monthly with any change in Prime

• Variable rates

• Variable rates

Loan Amount

M i $2 illi (SBA t l f 75% $1 500 000)

• Maximum: $2 million (SBA guarantees lesser of 75% or $1,500,000)

• Typically looking for loans of $250,000 or more.

504 Loans

Overview

504 Loans

Overview

Overview

Overview

f d f f h f l h

• Long‐term, fixed‐rate financing for the acquisition of real estate, machinery  or equipment and limited amounts of debt refinance. 

• Typical projects include a loan secured from a private‐sector lender 

(Founders Bank) with a senior lien for no less than 50% of the project cost, a  loan secured from a Certified Development Company (CDC) with a junior lien loan secured from a Certified Development Company (CDC) with a junior lien  covering up to 40 percent of the total cost, and a contribution of at least 10  percent equity from the borrower. 

• Target Customers:  Small businesses requiring “brick and mortar” financing.

504 Loans

Overview

504 Loans

Overview

Overview

Overview

• Available for real estate and equipment financing and limited  amounts of debt refinancing only

( )

• Similar borrower liquidity requirements as any SBA 7(a) loan,  however business size eligibility requirements are relaxed

St t i ti b i

• Start‐ups or existing businesses

• Fixed rate on the CDC 2nd lien 504 loan

U 90% fi i il bl

• Up to 90% financing available

504 Loans

Overview

504 Loans

Overview

Overview

Overview

Typical Structure is 50 – 40 – 10:

• 50% of Project Costs = 1

Lien Lender (FB)

• 40% of Project Costs = CDC 40% of Project Costs = CDC

• 10% of Project Costs = Equity from Borrower

504 Loans

Overview

504 Loans

Overview

Overview

Overview

•

Founders Bank ‐ ‐ Finances 50% of project costs

‐ ‐ Secured by 1 y

Lien DT

‐ ‐ Variable Interest Rate

•

CDC ‐ ‐ Finances up to 40% of project costs

•

CDC ‐ ‐ Finances up to 40% of project costs

‐ ‐ Secured by 2

Lien DT

G t d b SBA

‐‐ Guaranteed by SBA

‐ ‐ Fixed Rate

•

Borrower ‐ ‐ Minimum 10% equity contribution*

*5% additional for start‐ups

*5% additional for single purpose buildings

504 Loans

Overview

504 Loans

Overview

Overview

Overview

Maturities:

• ₁

Lien Lender:  up to 25 years, fully amortizing

• CDC: up to 20 years, fully amortizing

504 Loans

Overview

504 Loans

Overview

Overview

Overview

Eligibility Requirements:

• The 504 program is about economic 

development so applicant’s need to be able to

development so applicant s need to be able to 

create one full‐time job within 2 years of loan’s 

funding for every $65 000 of CDC loan proceeds

funding for every $65,000 of CDC loan proceeds

Ex:  CDC Loan = $500,000/$65,000 = 8 new jobs

504 Loans

Overview

504 Loans

Overview

Overview

Overview

Eligibility Requirements:

• Business must operate for a profit

• ≤ $3 500 000 in taxable income per tax returns

• ≤ $3,500,000 in taxable income per tax returns 

(can be averaged over 2 years)

• ≤ $8,500,000 in net worth

504 Loans

Overview

504 Loans

Overview

Overview

Overview

Eligibility Requirements:

• Working Capital and Inventory are not eligible 

for 504 financing

for 504 financing

504 Loans

Overview

504 Loans

Overview

Overview

Overview

Advantages – borrower:

• Provides growing companies with permanent Provides growing companies with permanent 

fixed asset financing 

• Lower equity injection requirements conserve 

applicant’s operating capital pp p g p

• 20 yr fixed rate financing on CDC 2

lien note

L f ll i i i i

• Long term fully amortizing maturities

• Up to 90% financing available p g

Good SBA Loan Prospects

Good SBA Loan Prospects pp

i i i i

• Business Acquisitions

• Loans to professionals: Doctors, Dentists, Veterinarians 

• Hotels

• Pet Hotels/Boarding Facilities

• Child Care Facilities R l E t t Fi i

• Real Estate Financing

• Franchise Restaurants

• Gas Stations/Convenience Stores

• Car Washes

• General Automotive

• Grocery Stores

• Grocery Stores

• Service Companies

• Manufacturers & Wholesalers

Who We’ve Helped

Who We’ve Helped pp

Since opening our SBA Lending department in the Spring of 2008,  we’ve approved 7a and 504 loans exceeding $21million for the  following types of Houston area small businesses

following types of Houston area small businesses;

– Daycares

– Physicians offices and urgent care centersPhysicians offices and urgent care centers – Veterinary clinics

– Auto collision repair facilities – Law firms

– Gas station/convenience stores C i l R l E t t ffi

– Commercial Real Estate offices – Car washes

– Franchised businessesFranchised businesses

How We’ve Helped

How We’ve Helped pp

Founders Bank SBA loan proceeds have been used for 

a variety of needs, including;

ƒ Debt refinance

ƒ Real Estate acquisition q

ƒ Existing building renovation/expansion

ƒ New building construction

ƒ New building construction

ƒ Business acquisition

ƒ Machinery & equipment purchases

ƒ Start up capital p p

How You Qualify

How You Qualifyyy

Lending is like a jigsaw puzzle ‐ ‐ all the pieces 

have to fit together.  Successful applicants will  g pp

have;

• _Experience

• Experience 

• Repayment ability

• Personal funds to inject into project

• Personal funds to inject into project

• Collateral

• Clean personal credit and repayment history

• Clean personal credit and repayment history

Paul Reade Sr Vice President Sr. Vice President

Founders Bank SBA Lending 4690 Sweetwater Blvd 4690 Sweetwater Blvd Sugar Land, Texas  77479

Office 281 325 5051 Office: 281‐325‐5051

Cell: 713‐203‐1244

l d @f d b kt

[email protected]

follow me at twitter.com/foundersbanksba