Hartman Blitch & Gartside-Tax Tip-SBA Loans

SBA Loans/Business Plans

7(a) loan guaranty	Section 7(a) of the Small Business Act authorizes the SBA to guarantee loans to small businesses that cannot obtain financing on reasonable terms through normal lending channels. The program is designed to promote small business formation and growth by guaranteeing long-term loans to qualified companies. Loans are available, for many purposes, such as real estate, expansion, equipment, working capital or inventory. The SBA can guarantee 75% of the loan amount up to $750,000. For loans of $100,000 or less, the guaranty rate is 80%. The interest rate is not to exceed 2.75% over the prime rate. Maturities are up to 10 years for working capital and up to 25 years for fixed assets.	Small businesses	Commercial lending institutions
Low documentation loan (LowDoc), a 7(a) loan program	The purpose of this program is to reduce the paperwork in loan requests of $150,000 or less. Under LowDoc, the SBA uses a one-page application and relies on the strength of the individual applicant's character and credit history. The applicant must first satisfy the lender's requirements. The lender may then request a LowDoc guaranty of 80% on loans up to $100,000 and 75% on loans over $100,000.	Small businesses	Commercial lending institutions
CAPLines, a 7(a) loan program	CAPLines finances small business short-term, cyclical needs for working capital. Under CAPLines, there are five distinct short-term working capital loans: the seasonal, contract, builder's, standard asset-based and small asset-based lines. For the most part, the SBA regulations governing the 7(a) program also govern this program. Under CAPLines, the SBA generally can guarantee up to $750,000.	Small businesses	Commercial lending institutions
SBA Express, a 7(a) loan program	The SBA Express is a new loan program, which replaces the FASTRAK pilot program that encourages lenders to make more small loans to the small business community. Participating banks are permitted to use their own documentation and procedures, to approve, service and liquidate loans of up to $150,000. In return, the SBA agrees to guarantee up to 50% of each loan. This loan program provides a rapid response from the SBA--within 36 hours. Loan maturities are the same as those for the regular 7(a) loan program.	Small businesses	Commercial lending institutions
Export working capital program (EWCP), a 7(a) loan program	Replaces the export revolving line of credit program. Under the EWCP, the SBA guarantees up to 90% of a secured loan or $750,000, whichever is less. Loan maturities are the same as those for the regular 7(a) loan guaranty program. Loans can be for single or multiple export sales and can be extended for preshipment working capital and postshipment exposure coverage or a combination of the two. Proceeds can be used only to finance export transactions.	Export-ready small businesses	Commercial lending institutions
International trade loan (ITL), a 7(a) loan program	The ITL offers long-term financing to small businesses engaged or preparing to engage in international trade, as well as those businesses adversely affected by import competition. The SBA can guarantee up to $1.25 million for a combination of fixed-asset and working capital financing. The working capital portion cannot exceed $750,000.	Export-ready small businesses	Commercial lending institutions

Source: U. S. Small Business Administration, SBA Profile: Who We Are & What We Do, 1996, with updates to May 1999.

Note: Only six of the nine SBA guaranty 7(a) programs are described in this table. Other 7(a) programs include minority prequalification loans, women's prequalification pilot loans and defense loan and technical assistance.

EXHIBIT 2: SUGGESTED OUTLINE FOR A BUSINESS PLAN

Cover sheet. List the name, address and telephone number of the business and any names of principals involved in the business. Statement of purpose. Explain why the business plan has been developed.

Table of contents

A. The business

1. Description of the business.

2. Marketing.

3. Competition.

4. Location of the business.

5. Management and personnel.

6. Operating procedures.

7. Business insurance.

8. Application and expected effect of the loan.

B. Financial data

1. Loan application.

2. Capital equipment and supplies list.

3. Current balance sheet for business.

4. Break-even analysis.

5. Pro forma income statements (projections of profit and loss).

Three-year summary.

Detail by month for first year.

Detail by quarters and second and third years.

Notes explaining how projections were made.

6. Pro forma cash flow statement (also called either a cash forecast or cash budget).

Follow guidelines for 5 above.

7. Historical financial data for an existing business, not a new business.

Balance sheets on business for the past three years.

Income statements on business for the past three years.

Tax returns on business for the past throe yearn.

C. Supporting documents

1. Personal tax returns of principals for the last three years.

2. Personal balance sheets (banks may have these forms).

3. Copy of proposed lease or purchase agreement for building space.

4. Copy of licenses and other legal documents.

5. Copy of resumes of all participants.

Source: U. S. Small Business Administration, SBA Loan Information, an in-house information sheet for the Anchorage, Alaska, SBA field office, 1996.