Presented by

David Tiller-Veterans Business Development OfficerU.S. Small Business Administration TN District Office

David.Tiller@sba.gov – 615-736-7176

Financing for Veterans

the SBA Way

• Why do you want to go into business? • List your reasons, e.g. freedom & dogs• What business is “right for you”?• Identify the niche your business will ‘fill’• Before you start: see the SBDC or

SCORE• WHEN will you “really start” ?

Getting Started

Details on the business you are starting:

What services or products will I sell?

Where will I be located?

What skills and experience do I bring to the business?

What will be my legal structure?

PreBusiness Checklist

• What will I name my business?

• What equipment or supplies will I need?

• What financing will I need?

• What are my resources?

• How will I compensate myself?

PreBusinessContinued

• Sole Proprietorship

• General Partnership

• Limited Partnership

• Corporation

• Limited Liability Company (LLC)

Types of Business Structures

• Personal Savings.

• Friends and relatives.

• Banks/SBA and Credit Unions.

Financing a Business

• Small business people have a difficult time borrowing money. True or False?

• Banks make money by lending money. You must show them their investment in you will pay

• Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: HIGH RISK!

Borrowing Money$$$

To be successful in obtaining a loan, you must be prepared and organized. You must know exactly how much money you need, why you need it and how you will pay it back. Your business plan must convince your lender that you are a good credit risk.

BorrowingMoney$$$ Continued

• What is the opportunity your business presents?

• Business Description

• Management Profile

• Market Information

• Financial Information

Business Plan & Loan Proposal

Purpose of the Loan: Sources and Uses of Capital History of the business Financial statements for 3 years. (existing business) Aging of accounts receivable and payable. (existing business) Projected opening-day balance sheet. (new business) Lease details – copy of the lease or contract for sale Amount of investment in the business by the owner. Projections of income, expenses and cash flow. Signed personal financial statements. Personal resume – bio may be best

What to Taketo the Bank

• Good Character• Management Expertise and Commitment• Sufficient Funds (including loan) to operate• Feasible business plan• Adequate equity investment in the business• Sufficient collateral• Ability to repay the loan

What SBA Looks for

What is considered:

1. Credit Score – 700 or above - good

2. Delinquent Accounts - Judgments

3. Payments over 30 days past due

Free Credit Report: www.annualcreditreport.com

Your Credit Report

1. Character

2. Cash Flow

3. Collateral

4. Capitalization

5. Conditions

How Your LoanRequest is Viewed

The Five “C’s” of Credit

$ MicroLoan Program

$ Micro Loans—up to $50,000$ Patriot Express Loan Initiative$ SBA Community Advantage & Small Loan Advantage

$ 504 Loan Program

$ 7(a) Loan Guaranty Program

$ SBAExpress Loan Program

SBA Financial Programs

$50,000

Microloans

$500,000

Patriot Express

$5.0million

$5.5million If mfg.

504Loans

$5.0million

7(a) Loans

$350,000

SBAExpress

Growth in Business &Changes in Capital Needs

SBA Serves a Wide Variety of Capital Needs

One Micro Lender in

TN—Pathway Lending

(formerly SE Community Capital)

Finan

MICROLOANS

MicroLoans

• Direct loans through nonprofit intermediaries• Loans of up to $50,000• Fast turnaround• Up to six years to repay• Used for —

– Machinery, equipment, fixtures– Leasehold improvements– Inventory– Working capital

• Technical and management assistance available

Financial Assistance

SBAExpress

• Underwriter uses own forms -- not SBA’s• Use bank’s lending policies -- not SBA’s• Loans or revolving lines of credit to $350,000• SBA guaranty is 50%• Interest rate maximums apply

Patriot Express Loan Initiative*Begun June 2007-Now $3.1B in loans since*Loans to $500k—Vets, Spouses, Widows,*Guardsmen, Reservists—interest rate adv.*Loans under $25K-No Collateral Required*SBA TN Success Stories: Dents-R-Us*VOSBs are Veteran Owned Small Businesses—Get used to acronyms

• 504 Certified Development Co. Program

• Long-term, fixed-rate financing

• Up to $5 million in SBA-backed debentures

• SBA debenture guaranty of up to 40% of total loan

• Must create or retain one job for every $50,000 of SBA debenture proceeds

Financial Assistance

Loans for Fixed AssetsSBA 504 Program

Benefits of a SBA 504 Loan

• High-leveraged financing for fixed-asset purchases

• Long-term pay back - 10 or 20 years

• Lower interest rate

Financial Assistance

To Qualify for a 504 Loan*

• Business must be operated for a profit• Tangible net worth of less than $7.5

million• Average net income of less than $2.5

million for the preceding two years

* Business cannot be involved in speculation or rental real estate investment

Financial Assistance

A Typical 504 Project

• A private sector loan covering up to 50%

• A loan from the CDC covering up to 40%

(100% SBA-guaranteed debenture)

• At least 10% equity from the business

• Participating lender has first lien on

assets

Financial Assistance

7(a) Loan Guaranty

All TN SBA 7(a) Lenders are listed at the TN District Office website:

www.sba.gov/tn

Financial Assistance

Basic 7(a) Loan Guaranty Program

• You apply for a loan guaranty with an SBA participating lender

• Interest rates are negotiable

Lender submits application for SBA review and approval

• Loans are centrally processed• After SBA approval, lender disburses funds• You pay the bank, not the SBA

Financial Assistance

Financial Assistance

• 7(a) loans may be used to:– Expand, renovate facilities– Buy machinery, equipment, fixtures, buildings

and land for business– Finance receivables and augment working capital– Refinance existing debt (with compelling reason)– Finance seasonal lines of credit– Construct commercial buildings– Finance direct costs on contracts

Loan Proceeds Eligible for Most Business Uses

Small Loan Advantage

New Loan Program June 2012

• Loans to $25k-prime +3.75%-no collateral• Loans $26k-50k-prime +3.75% + collateral• $26k-50k—may require UCC filing • DUNS number required-free to borrower• Loan payments come from business

checking account• Loan is made in the business’ name

•Thank You! David Tiller-Vets Business Dev.Officer david.tiller@sba.gov 615-736-7176

»Questions