The following are the major federal funding sources.
Many of these programs can work in conjunction with each other, BLDC programs,
and private banks to meet financial requirements.
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SBA 7A
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SBA 504
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-
Rural Development Business & Industry
Guarantee Program
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| BORROWER |
Must be a small business by SBA standards
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Must be a small business by
SBA standards
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Any legal entity or business
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| FUNDING LIMIT |
SBA loan limit is $750,000 for FY 2004
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Up to 40% of the project with limit of $1 million
(up to $1.3 million for special public goals)
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Up to 80% guarantee on traditional lender
loans, 90% guarantee for special circumstances; $25 million maximum
loan to one borrower
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| USE OF FUNDS |
Can be used for most business purposes although
some restrictions apply
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Real property and long term equipment (fixed assets)
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Real estate, equipment, working capital, some
agricultural production, tourism, and recreational facilities
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| INTEREST RATE |
Negotiated, but maximums are pegged to prime rate
and are determined by amount of loan
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Fixed rate determined at closing via secondary
market sale
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Negotiated by lender and borrower
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| TERM |
Working capital: 7 yrs
Equipment: 10 yrs
Real Estate: 25 yrs
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10 or 20 yrs
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Working Capital: 7yrs
Equipment: 15 yrs or useful life
Real Estate: 30 yrs
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| COLLATERAL |
First lien preferred, based on lender requirements
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Second lien position
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Adequate collateral is required for all loan guarantees
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| EQUITY |
Reviewed on a case by case
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Minimum 10% of the total projected costs; Additional
equity required if a new business or special purpose building
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Minimum of 20% tangible book equity for new businesses
and, at least 10% for existing businesses
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| PERSONAL GUARANTEES |
Yes, required for all who own more than 20% of
the corporation
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Yes
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Yes, required for all who own more than 20% of
the corporation
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| CREDIT CRITERIA |
Based on borrower and project
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Based on borrower and project
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Credit analysis required
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| LEVERAGE |
Not required
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Only 40% of project can be funded with SBA 504
funds - rest from equity and commercial lender
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N/A
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| TIME |
10-15 days after bank submission
to SBA
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2-3 weeks
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Preapplication - 1-3 days
Application - 1-3 weeks
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| QUALIFICATIONS |
Must meet SBA small business standards
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Must be used to create or retain jobs
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Must be used to create or retain jobs.
Must be in rural area of 50,000 or less population.
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| BENEFITS |
75% to 85% guarantee to local lender based upon
loan size
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Low down payment, fixed interest rate, long term
loan
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Guaranty 80-90% of debt, Guarantee can be sold
to others such as BOI, with interest rate reduction
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| FEES |
SBA guarantee fees
1% of guaranteed portion for loans $150,000 or less, 2.5% of guaranteed
portion for loans more than $150,000 but less than $700,000, 3.5%
of guaranteed portion for loans more than $700,000
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Some
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2% of the guaranteed portion of the loan
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