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SBA Loans by lender – Utah District Office

Fiscal Year 2014 Totals
7 (a) Loan Guaranty Program

Lender	# Loans	Amount
1^st National Bank of Layton	2	$115,500
AMER Bank of Comm. D/B/A Ambank	14	$13,574,000
AMER United Family of C.U.S	1	$600,000
America First FCU	19	$717,000
American West Bank	6	$1,778,000
BANCFIRST	1	$208,000
Bank of American Fork	17	$9,173,100
Bank of the West	6	$2,249,800
Bank of Utah	1	$25,000
Brighton Bank	5	$895,200
Cache Valley Bank	23	$1,708,400
Capital Community Bank	1	$1,203,200
Celtic Bank Corporation	63	$42,791,900
Central Bank	31	$4,522,900
Community Economic Devel CO.Of	1	$302,000
Cornerstone Bank	2	$2,792,000
Cyprus FCU	2	$57,500
Deseret First FCU	4	$220,800
First Colorado National Bank	1	$1,378.00
First Utah Bank	29	$20,112,600
Glacier Bank	6	$1,257,600
Golden Pacific Bank Natl. Assoc.	1	$25,000
Goldenwest FCU	6	$993,600
Grand Valley Bank	3	$475,000
Grow America Fund Inc	1	$165,000
Holladay Bank & Trust	2	$278,200
Jordan FCU	10	$716,300
JPMorgan Chase Bank Natl Assoc	72	$21,752,500
Keybank National Association	23	$4,330,500
Liberty Bank, INC.	1	$170,000
Live Oak Banking Company	5	$4,475,000
Meadows Bank	10	$16,233,900
Mountain America FCU	117	$19,583,200
Mountain W. Small Bus. Finance	9	$1,317,600
Mountain W. Small Bus. Finance (504)	151	$114,915,000
Noah Bank	1	$1,490,000
Proficio Bank	14	$22,571,800
Rock Canyon Bank	20	$18,084,500
Royal Business Bank	1	$1,612,500
Seacoast Commerce Bank	6	$3,120,500
Security Service DCU	1	$373,500
Spirit of Texas Bank, SSB	3	$199,000
State Bank of Southern Utah	37	$3,305,900
The Bancorp Bank	1	$543,600
Titan Bank Natl Association	1	$383,000
Town & Country Bank	11	$8,656,500
U.S. Bank National Association	73	$25,399,200
United Midwest Saving Bank	1	$1,994,900
University First FCU	29	$1,974,800
Utah Cert. Devel CO.	51	$23,093,000
Utah First FCU	3	$496,500
Wasatch Peaks FCU	8	$388,600
Washington Trust Bank	1	$150,000
Wells Fargo Bank Natl Association	79	$35,240,500
Zion’s First National Bank	265	$39,902,700

Grand Total	1,252	$480,121,3000

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UtahCommercialInsurance.com

Guide to Small Business Insurance

If you own your own business or are a partner in one, you’re probably already familiar with risk. After all, few things in life are riskier than launching and running your own small business. Part of the risk of any small business is the loss of critical tools and property or liability to others—either of which can cause loss of income or even force you to close your doors. Large companies employ full-time risk managers to keep their risk-taking to a minimum. But chances are that as a small-business operator, you are your company’s risk manager, along with its personnel director, office manager and possibly the entire staff all rolled into one.

While juggling all the jobs that need to get done to make your firm profitable operation, you may already be asking yourself, “Who has time to think about insurance?” You do! Keeping risks and losses to a minimum is a cornerstone of business success, especially for small businesses. Take a few minutes now to check your risk factors, find out your insurance needs and learn the many options available to you. And remember choosing the right insurance professional is as important as choosing the right insurance. This guide does not represent the provisions of any particular policy, but it can serve as a starting point to determine a complete package of protection.

Questions To Ask Your Agent

I’m just getting my business started. Do I need insurance right away?
I don’t have any major business assets. Why do I need insurance?
Is insurance coverage different for different businesses?
What types of property do I need to insure?
What types of property insurance should I consider buying?
How much property insurance do I need to buy?
Who decides how much my business property is worth?
What kinds of events does business insurance cover?
Everybody seems to be suing everybody else these days. What if someone sues my business?
What about the cars and truck that I have in my business? Is the coverage like what I have on my personal car?
Will I need to protect my employees in the event they are injured on the job?
I keep one auto strictly for business. Do I need a separate policy?
I just signed a three-year lease to open my business. Why does my insurance agent want to see my lease?
My business requires that I store gasoline on the premises. Do I have to have special insurance?
I run a dry-cleaning business. What happens if fire destroys many of my customers’ clothes that were stored in the building?
What if the clothes I manufacture are damaged in shipment. Does the shipping company reimburse me or do I put in a claim to my insurance company?
I work out of my home. Will my homeowners insurance cover my business?
What is coinsurance all about?
Now that my business is established, I think it is time to offer my employees some benefits. What do I need to know?
As a retailer, do I need to worry about product liability?
Can I do anything to lower my insurance premiums?
Who keeps an eye on the insurance companies?
What should I look for in an agent?

Q: I’m just getting my business started. Do I need insurance right away?

Yes, because the chance that you could suffer a loss begins with the first day of business. You can’t get help after the fact. If you suffer a loss and have no insurance or have improper or insufficient coverage, there is very little, if anything, your insurance agent can do to help you. You must be prepared for the risks that are inherent in any business and the losses, sometimes catastrophic, that they can cause. Also, many states and local jurisdictions require that businesses be insured to begin operating. And if you rent space for your business, your landlord probably requires that you be adequately insured as well.

Q: I don’t have any major business assets. Why do I need insurance?

Every business has some property. And, in essence, your business is your property. Just like your home and your car, your business needs to be protected from loss, damage and liability. In addition, your business is your source of income, so you need protection from the potential loss of that income.

Generally, there are two types of insurance—property and liability. Property insurance covers damage to or loss of the policyholder’s property. And if somebody sued for damages caused by you or your possessions (other than a vehicle covered by your insurance policy), the cost of the suit—both defending it and settling it if necessary—would be covered by your liability insurance.

Q: Is insurance coverage different for different businesses?

It can be. Many small businesses are now insured under package policies that cover the major property and liability exposures as well as loss of income. A common package policy used by many small businesses is called the Business Owner’s Policy (BOP). Generally, these package policies provide the small-business owner more complete coverage at a lower price than separate policies for each type of insurance needed. Your insurance professional can help you decide which policy or policies are right for your business. Additional coverage for property, liability or perils or conditions otherwise excluded (e.g., flood protection) can be purchased as endorsements to a standard policy or as separate policies.

Because businesses vary, it is impossible to have a standard policy to cover all contingencies. Also, some businesses, regardless of their size, do not fit the profile of a standard business owner’s policy. For example, restaurants, wholesalers and garages have special exposures that are not met in the standard business owner’s policy. Your insurance agent can advise you of the best policy (or policies) to protect you and your business.

Q: What types of property do I need to insure?

Your business may not possess all the following types of property, but you can use this list to make sure that you have considered all the property categories and any insurance coverage that may be warranted:

Buildings and other structures (owned or leased)
Furniture, equipment and supplies
Inventory
Money and securities
Records of accounts receivable
Improvements and betterments you made to the premises
Machinery
Boilers
Data processing equipment and media (including computers)
Valuable papers, books and documents
Mobile property such as automobiles, trucks and construction equipment
Satellite dishes
Signs, fences and other outdoor property not attached to a building
Intangible property (goodwill, trademarks, etc.)
Leased equipment

To establish the amount of insurance you need for each one, your insurance agent can help you review the types of property you own and their uses. Some of these items are covered in the basic policies. For others, coverage can be added by an endorsement. And some, like money and securities, may not be covered by a standard commercial policy and may require a second, separate policy.

Q: What types of property insurance should I consider buying?

The best thing to do is to take a complete inventory of all your business property, determine its value and decide if each item is worth insuring. Then check to see that the items on the inventory list are included in the basic business property policy and covered for the correct amount. If not, ask your agent about the cost of purchasing additional coverage to meet your needs. You also need to consider your business situation. Are you planning a major expansion? Does your inventory have a decidedly peak season (like a toy store in December)? Or does it fluctuate throughout the year (like a clothing store)? Is your liability limit high enough in light of the new job contract you just signed? Business policies are designed to be added to fluctuate to meet your needs.

Be sure to discuss changes to your business with your agent so that he or she can be sure your policy still provides adequate coverage. Some common additional coverages for business property include (although this list is by no means all-inclusive): Boiler and Machinery Insurance. Even if you do not own a boiler, you may need this coverage. The term “boiler and machinery insurance” is gradually being replaced with terms such as “equipment breakdown” or “mechanical breakdown” coverage. This insurance provides coverage against the sudden and accidental breakdown of boilers, machinery or equipment, often including computer systems and telephones/communication systems. Coverage usually includes reimbursement for property damage, expediting expenses (e.g., express transportation charges) and business interruption losses.

Q: What types of property insurance should I consider buying? (cont.)

Builders Risk Coverage

Covers buildings in the course of construction. Depending on the policy, this coverage can be for either the building’s value at the time of loss or its full value at the time of completion.

Building Ordinance Coverage

Provides coverage when a community has a building ordinance stating that when a building is damaged to a specified extent, it must be rebuilt in accordance with current building codes. Special attention is required when establishing the amount of insurance.

Business Interruption Insurance

Covers the loss of rent or profits plus any continuing expenses while your business is shut down or curtailed as a result of damage or loss of business property. Also typically covered are extra expenses incurred to get back in business as quickly as possible.

Commercial Crime Coverage

Covers money and securities, stock and fixtures against theft, burglary and robbery both on and off the insured premises and from both employees and outsiders.

Q: What types of property insurance should I consider buying? (cont.)

Excess Debris Removal Coverage

Covers the cost of removing debris after damage from fire or other covered peril that requires debris removal before reconstruction of the damaged building can begin. Many policies limit the amount of coverage for debris removal which is often inadequate and must be increased by endorsement.

Fidelity Bonds

Covers business owners for losses due to dishonest acts by their employees.

Inland Marine Insurance

Primarily covers property in transit such as from warehouse to warehouse or warehouse to retail store, as well as other people’s property left on your business premises, such as clothes left at a dry cleaning business.

Q: How much property insurance do I need to buy?

There is no one answer to this because each business is different. Consult with your insurance professional on the monetary limits needed to cover your potential for loss. Obviously, a one-person accounting firm will need to purchase less insurance than a store with a substantial inventory. But each will need to make sure that all necessary business property is covered, that the limits of liability are sufficient to protect the owner and the employees, and that loss of income is protected. In addition, each business has unique needs and situations that must be handled. If the store happens to be located on a flood-prone area, the owner should invest in flood insurance. The accountant may wish to purchase reconstruction-of-accounts-receivable insurance to cover the loss of accounting records. The costs of reconstructing those records, money borrowed because of delayed payments due to the records being lost and lost payments from those clients whose records cannot be reconstructed may be covered.

Liability protection also will vary from business to business. A retail business may be more at risk for potential suits than a business that is not open to the public. Also, in some states, courts tend to respond more positively to lawsuits, increasing both the likelihood of successful lawsuits and the amount of damages awarded. In today’s lawsuit-conscious society, higher liability limits are extremely important and relatively inexpensive.

Q: Who decides how much my business property is worth?

Property insurance can be purchased on the basis of the property’s actual cash value, on its replacement cost or on an agreed amount. The differences between the three are:

Actual Cash Value

The replacement cost of the item minus depreciation. For example, a new desk may cost $500. If your seven-year-old desk gets damaged in a fire, it might have depreciated 50 percent. Therefore, you would be paid $250 for it.

Replacement Coverage

Replacement coverage is the cost of replacing an item without deducting for depreciation. Today’s cost for a desk of a size and construction similar to the seven -year-old one damaged by fire would determine the amount of compensation. If it costs $500 today, that would be the replacement coverage.

Agreed Amount

Art objects, antiques and other unique items are usually insured at an amount agreed upon when the policy is being written. An appraiser values the goods to be insured and the business owner and the insurer agree upon an amount that the insurer will pay if the goods are destroyed due to a covered peril.

Check your policy. If you prefer replacement coverage and do not already have it, this coverage can be added to your policy.

Q: What kinds of events does business insurance cover?

Basic property insurance policies generally cover losses caused by fire or lightning and the cost of removing property to protect it from further damage (e.g., removing inventory or equipment from a damaged building so it won’t be stolen). “Extended perils,” including windstorm, hail, explosion, riot and civil commotion, and damage caused by aircraft, automobiles or vandalism, are usually covered in a standard policy. Other important perils, often not covered and considered “optional” in almost all standard policies, include earthquake and flood damage. Property insurance can be written as either “named peril” policies or so-called “ named exclusions” policies. A named peril policy provides coverage for those perils specifically named in the policy. A named exclusions policy covers loss by any perils not specifically excluded in the policy. The term “named exclusions” is often referred to as “special form” or “special causes of loss” coverage.

Q: Everybody seems to be suing everybody else these days. What if someone sues my business?

No business can afford to be unprepared for a lawsuit. Liability insurance protects your business assets when the business is sued for something the business did (or failed to do) that contributed to injury or property damage to someone else. Liability coverage extends not only to paying damages but also to the attorneys’ fees and other costs involved in defending against the lawsuit—whether valid or not.

The standard business owner’s policy provides liability coverage, as does a separate policy known as a commercial general liability (CGL) insurance policy. Generally, commercial liability insurance, whether purchased in a separate policy or as part of a standard business owner’s policy, will cover bodily injury, property damage, personal injury or advertising injury. The medical expenses of a person or persons (other than employees) injured at the business or as a direct result of the operations of the business are also typically covered. Usually excluded from both types of liability insurance policies are suits by customers against a business for nonperformance of a contract and by employees charging wrongful termination or racial or gender discrimination or harassment. Many other exclusions, from use of autos to pollution liability, are included, so it is important to carefully review the policy.

Q: What about the cars and truck that I have in my business? Is the coverage like what I have on my personal car?

Yes, the coverage is similar and can be purchased to insure vehicles owned or leased by your business. In addition, your business can be protected against claims arising from the use of vehicles owned by your employees.

Q: Will I need to protect my employees in the event they are injured on the job?

Yes, and in most states there are legal requirements that must be met, and for which you may be responsible. State laws vary, but most states require that you carry some form of workers’ compensation insurance. This protects the employee and also offers you the business owner a degree of immunity from lawsuit by an injured employee.

Q: I keep one auto strictly for business. Do I need a separate policy?

Yes. Whether you have one vehicle or several, you will need a business automobile policy. Such a policy covers any motor vehicle used in your business including cars, vans, trucks and trailers pulled by trucks and offers coverage if they are damaged or stolen. It also covers liability if the business vehicle is in an accident and the driver is at fault. This policy is not for truckers or commercial garages. They have special liabilities and must secure special policies that deal with their different needs. Businesses that have a fleet of vehicles will of course have different needs than a business with one or two, and their policies will reflect these differences.

Q: I just signed a three-year lease to open my business. Do I need to address the insurance requirements with my agent?

Whether the business lease is for a building or for equipment, the agent needs to be advised who is responsible for insuring what leased items—you or the lessor. For leased buildings or building space, there are other factors to consider, such as who is responsible for plate glass or equipment coverage and whether your landlord requires tenants to carry minimum amounts of liability insurance, and the extent of a hold harmless agreement. These and other situations covered in the lease affect the amount and kinds of insurance you need. Therefore, you or your legal counsel should advise your insurance agent as to your insurance requirements.

Q: My business requires that I store gasoline on the premises. Do I have to have special insurance?

Yes, if your business transports, stores or uses toxic materials, you may be required by law to have a special pollution liability policy. If these materials should be discharged accidentally into the water or leak onto the ground due to a covered peril like fire, the cost of extracting the pollutant from the business premises is covered up to the dollar amount set forth in the property section of your policy.

Q: I run a dry-cleaning business. What happens if fire destroys many of my customers’ clothes that were stored in the building?

The standard business owner’s policy contains coverage for loss due to fire, including coverage for property of others the insured business was repairing, storing, or otherwise servicing in order to earn money. Coverage is provided for the perils covered by the policy and for a specified limit that may be increased. There are other policies, called Bailee’s customers policies that provide even broader coverage for your customers’ possessions.

Q: What if the clothes I manufacture are damaged in shipment. Does the shipping company reimburse me or do I put in a claim to my insurance company?

Shipping companies often carry insurance to cover their losses. However, the shipping company’s insurance may be too low, not cover certain losses or you may have difficulty collecting on a claim after signing for the shipment. Therefore, “property in transit” insurance is available to cover your property being transported by truck, rail, ship or other means of shipment. Also, the firm you hire to transport goods and the contract you sign with them may affect your need for coverage.

Q: I work out of my home. Will my homeowners insurance cover my business?

It will only offer protection on a very limited basis. Loss of business property is usually reimbursed only for very small limits. Even if your business is a sideline such as a craft studio, these limits may be too low to cover all the equipment and materials you have accumulated. It’s also important to know that no business liability coverage is included in a standard homeowners policy. Your insurance agent can help you ascertain what, if any, additional coverage you need. This additional coverage may be added to your homeowner’s policy or found in a separate commercial policy.

Q: What is coinsurance all about?

Most business policies include a “coinsurance” clause stipulating what percentage of the total value of your property must be insured in order to be fully reimbursed for a loss, even a partial one. (Most losses are partial.) If you insure for less than that amount, your insurance company may impose a “coinsurance penalty” on your claim. Note that even if you carry that agreed-on percentage of insurance to value, it may be inadequate and you would not be fully compensated for a total loss. For that reason, it is usually a good idea to insure the full replacement value of your property.

Here’s how coinsurance works:

Let’s say you have a building insured that you believe would cost $100,000 to replace and a coinsurance penalty in your policy of 80 percent. You insure the building for $80,000, thinking you have fulfilled the coinsurance clause. A fire loss causes $60,000 worth of damage, so you submit a claim. Your insurance company subsequently determines that the replacement cost of the building is actually $150,000. To determine how much to pay on the claim, the insurer divides the amount of insurance you purchased ($80,000) by the amount you should have purchased (80% of $150,000 or $120,000). The result (two-thirds, or $40,000) is the amount of your claim the insurer will pay.

Thus, even for a partial loss within the monetary limits of your policy, you will receive only two-thirds of the amount claimed. If the building had been insured for at least $120,000, the insurer would have reimbursed you for the amount of the loss.

You should check with your agent to make sure you have adequate coverage. According to studies, many businesses are significantly underinsured. Adding an endorsement to the policy that automatically increases policy limits to keep pace with inflation is a good idea.

Q: Now that my business is established, I think it is time to offer my employees some benefits. What do I need to know?

Employee benefits generally include health insurance (sometimes including dental and vision benefits), term life insurance and possibly a retirement program. Group disability insurance is also available, although employers and employees opt for this benefit less frequently. Employers can provide coverage for their employees alone or for the employees and their families. Cost is usually the determining factor. With the high cost of health insurance in the United States today, employers are more likely to ask employees to pay some or all of the costs of health insurance for their families and sometimes for the employees themselves.

Depending on the size of the group to be insured, the business may serve as the policyholder for the group’s insurance. However, for many small businesses, the insurer will pool them together in a multiple-employer trust. The trust itself, rather than any single employer, is the policyholder. This enables smaller businesses to benefit from the lower premiums and other services enjoyed by large groups. Small businesses can also sometimes obtain employee benefit insurance through their trade or professional association. Your best bet as a small business operator is to find a way to join a larger pool seeking benefits.

Q: As a retailer, do I need to worry about product liability?

Yes. Even if damage or injury is caused by a manufacturing defect, you can (and probably will) be sued. General liability or business owners insurance usually covers this liability, but you should check with your agent to be sure your business is adequately covered. Recognize, too, that your liability policy will pay defense costs, whether or not a judgment is rendered against you.

Q: Can I do anything to lower my insurance premiums?

Remember that all insurance premiums are based on the risks involved. The insurance company evaluates the situation to determine the risks—or potential for losses—and bases its rates on the results. Therefore, deliberate steps you take to lower your risks not only can help safeguard your business but also may make you eligible for lower insurance rates. Consider these steps:

Maintain adequate lighting throughout your business premises.
Keep electrical wiring, stairways, carpeting, flooring, elevators and escalators in good repair.
Install a sprinkler system, smoke and fire alarms and adequate security devices.
Keep only a small amount of cash in the cash register.
Keep good records of inventory, accounts receivable, equipment purchases and the like. Consider keeping a second set of records off-site, such as with your accountant, insurance agent or at home.
Make sure your employees have good driving records.
Make sure your employees know how to lift properly and use all necessary safety equipment, such as goggles, gloves and respirators.
Consider using the services of a risk manager. An outside consultant can advise you of any safety or environmental regulations you may have over looked or not been aware of and talk to your employees about safety practices.
You may also wish to raise your deductible where appropriate to lower your insurance premiums. How high to raise the deductible should be governed by how much you can afford to pay out of pocket. Be careful not to raise it so high that you cannot cover it should a loss occur.
Finally, make sure your agent is familiar with your business and the risks inherent in it. He or she should be able to advise you on risk management techniques and their benefits to both you and the insurer.

Q: Who keeps an eye on the insurance companies?

Insurance is a heavily regulated industry. Every state has some sort of department, administration or agency that regulates and monitors every insurer operating within the state’s borders. In addition to approving rates, your state’s insurance department is involved in all insurance matters on behalf of private citizens and businesses. It also issues operating licenses to insurers and agents, based on their ability to meet the state’s requirements for conduct and knowledge about insurance issues.

Your insurance company and agent work closely with your insurance department to make sure you are getting the best and fairest possible service within the state’s guidelines. If you ever have difficulty settling a claim, work with your agent to resolve the difficulty. However, you can also contact your state’s insurance department if you wish to know more about your options and rights as an insurance consumer.

Q: What should I look for in an insurance agent?

Agents are there to help you. At the most basic level, any agent should be able to answer all of your questions about insurance, provide you a thorough assessment of your insurance needs and offer you a choice of insurance products to meet those needs. Also, any insurance agency should provide you with prompt, quality service in the case of a claim. Just as important is the level of professional confidence and personal comfort you feel with the agent. Many people stick with the same insurance agent for decades, even generations. It helps to find an agent you can get to know and trust.

An important, but sometimes overlooked, factor to keep in mind is that there are two kinds of insurance agents: those who represent only one insurance company and those who represent more than one insurance company. Agents offering through their agencies only the policies of one insurance company often are referred to as “captive agents,” because the company they represent does not allow them to offer their customers competitive alternatives.

By contrast, agents who offer the policies of more than one insurance company are called “independent agents,” because they can shop around for their customers for the best insurance values among a variety of competing companies. Visit UtahCommercialInsurance.com for the best of both worlds.

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How to Land an SBA Loan

With all of the uncertainty around maintaining a predictable flow of capital to businesses, a commercial loan provided by a bank but guaranteed by the federal government almost sounds too good to be true. Standing behind such loans is one of the responsibilities of the U.S. Small Business Administration’s (SBA) Guaranteed Loans Program.

So, why do many businesses intentionally bypass the SBA and take their chances through the normal commercial bank underwriting process? This article examines the pros and cons of major SBA loan programs and helps CPAs determine if an SBA loan is the best alternative.

UNDERSTANDING SBA LOAN PROGRAMS

The SBA offers several primary loan programs geared toward supporting different aspects of the small business community. To qualify as a small business under current law, a business must demonstrate that it has less than $15 million in tangible net worth and two years’ net income after taxes of less than $5 million. From this point, various SBA programs have other qualification criteria. Here are summaries of the most popular programs:

7(a) LOAN PROGRAM

This is the SBA’s primary and most flexible loan program, with financing guaranteed for a variety of general business purposes. Under this program, the SBA guarantees loans made by participating commercial lending institutions. Possible loan maturities are available up to 10 years for working capital and generally up to 25 years for fixed assets.

504 LOAN PROGRAM

This program provides long-term, fixed-rate financing for expansion or modernization. It is backed by the SBA but delivered by Certified Development Companies (CDCs)—private, nonprofit corporations set up to contribute to the economic development of their communities.

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.
Constructing new facilities or modernizing, renovating or converting existing facilities.
Purchasing long-term machinery and equipment.

The 504 program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing. Interest rates on 504 loans are pegged to an increment above the current market rate for five-year and 10-year U.S. Treasury issues. Maturities of 10 years or 20 years are available. Fees total approximately 3% of the debenture and may be financed with the loan. Generally, the project assets being financed are used as collateral. Personal guarantees from the principal owners are required.

MICROLOAN PROGRAM

This program provides small, short-term loans for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. It is designed for small businesses and nonprofit child care centers and is delivered through specially designated intermediary lenders (nonprofit organizations with experience in lending and technical assistance).

Loan terms vary according to the size of the loan, the planned use of the funds, the requirements of the intermediary lender, and the needs of the small business borrower. The maximum term allowed for a microloan is six years. Interest rates vary, depending on the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally, these rates will be between 8% and 13%. Each intermediary lender has its own lending and credit requirements. Generally, intermediaries require some type of collateral and the personal guarantee of the business owner.

In recognition of the important role small business plays in a healthy economy, lawmakers passed the Small Business Jobs Act of 2010 (PL 111-240), which expands loan programs through the SBA, strengthens small business preference programs for federal government projects, provides incentives for exporters, offers a variety of small business tax breaks, and includes some revenue raisers. For more on the changes resulting from the bill, see the JofA articles “Act 2 for Business Tax Incentives” (this issue, page 28) and “Highlights of the Small Business Stimulus Act” (Dec. 2010, page 26).

WHY CONSIDER AN SBA LOAN?

For many businesses, the benefits of an SBA-guaranteed loan include having access to capital where traditional commercial loans may not be available. Startups and young businesses without a sustained history of financial performance may find an SBA-guaranteed loan especially attractive. For businesses with cash flow issues, an SBA loan can restructure debt at better terms by providing longer loan maturities and lower payments. Businesses without sufficient collateral to obtain a traditional commercial loan may find an SBA loan particularly useful.

“It is very difficult at this time for lenders to underwrite the strength and long-term viability of a borrower’s ability to repay the proposed debt. In this unusually challenging economic cycle where real estate values are declining, it is also difficult to ascertain the future value of collateral,” said Jan Roberts of Capital Solutions, a firm based in Birmingham, Ala., specializing in SBA loan advisory services. “SBA provides the backup ‘insurance’ in order to be able to service the borrower’s loan needs.” Capital Solutions is managed by Roberts, Nicole Reed and Mike Vance, who are loan originating agents for Foundation Capital and other SBA CDCs.

According to Roberts, the “SBA can also entice a lender to stretch out the terms of a loan. For permanent working capital, for instance, lenders normally do not want to offer longer-term loans. Under the SBA 7(a) program, however, the lender may be comfortable with a seven-to-10-year term. This serves to lower monthly payments, which benefits the borrower.”

WHAT ARE THE DRAWBACKS?

If the federal government is willing to guarantee a substantial portion of a company’s debt at favorable terms, why choose traditional commercial lending over an SBA loan? In general, an SBA loan requires more information than a commercial alternative and more time. Also, there is a perception of complexity in maneuvering through the various SBA loan programs. “The real difference between an SBA loan and a conventional bank loan is paperwork,” Roberts said.

The SBA process can be time-consuming, said Rachel Zippwald, a California Bank & Trust vice president and SBA lender. For planning purposes, applicants can request a time estimate from the SBA for consideration of the loan.

Roberts cautioned that it is important to remember that SBA loan guarantees are not automatic. SBA loans are underwritten the same way as conventional loans. “We often tell borrowers and lenders that an SBA guarantee does not make a bad loan good.

“Companies experiencing financial distress may be eligible for assistance, but may not be approved for the financing due to lack of reasonable assurance of repayment ability,” she said. “SBA can decline loans because they are determined to be bad credit risks. Credit history plays a big role in those decisions.”

Also consider that some businesses are ineligible by definition for SBA loans. Nonprofit organizations, lenders, passive businesses (developers and landlords that do not actively use or occupy the assets acquired with SBA loan proceeds), life insurance companies, and private clubs that limit membership are examples of ineligible businesses. Additionally, SBA loans can require guarantee fees that do not apply to conventional commercial loans. Depending on the amount borrowed, these fees can be significant.

WHAT YOU’LL NEED TO APPLY

Many businesses first discuss the pros and cons of an SBA loan with a loan officer at a commercial bank. Dan Bundy, a vice president at Regions Bank who has specialized in SBA lending during his 25-year career, suggested approaching SBA financing in the same manner as any other loan request. Be proactive with your banker and provide as much information as possible. Educate your banker on the product or service for which you need funding. Discuss the market, the competition and the risks, as well as the mitigating factors involved in your business.

“It goes a long way in giving some comfort to the fact that the project has been thoroughly researched,” Bundy said. He suggests including a presentation on available collateral, debt schedules and projections broken out on a monthly basis for the first year and at least two more year-ends.

Detailed assumptions should be given for the projections, Roberts added. Include a cash budget, especially when considering a line of credit. “This allows a banker to understand the flow of funds and the timing of cash drains or surpluses,” Bundy said, adding that financial statements with notes “give a level of confidence in the numbers” and speak to the effort that the borrower has gone to seek outside financial advice. “Knowing my borrower is interested in help and has been willing to invest in a good CPA for that help tells me that the borrower is not afraid to ask for advice and wants to use every tool to succeed,” he said.

The SBA will review a minimum of three years of business tax returns, three years of personal returns for each owner with an ownership stake of 20% or more (for personal guarantee requirements), current business and personal financial statements, and resumes on borrowers as well as key managers.

Zippwald suggested that for key positions that have not been filled, applicants include a thorough job description listing the skill set and experience of the candidate the company is seeking. “This will confirm for the lender that you have analyzed your needs and have determined the requirements of the position,” she said.

Business plans are critical, and Roberts added that a well-constructed business plan should include a clear statement of the total capital requirements of the business. It should “explain the source of the equity contribution for the business and the uses of the requested loan proceeds. The business plan should have supporting information such as a feasibility study, or demographic analysis and defined target markets with a marketing plan for how to achieve sales.”

The SBA requires collateral to fully secure a loan, to the extent that it is available. “If you own a home, you will likely be asked to pledge it,” Zippwald said. The SBA may also request a lien on business assets and may require life insurance on sole owners of a business. “Most loans made by banks are secured loans, and therefore approval may be contingent on a guarantor who is willing to offer collateral,” she said.

LANDING THE LOAN

Once you have gathered the information required for SBA loan processing, the next step is to determine the financial institutions that have an appetite for SBA loans. Some banks are more reluctant than others when it comes to SBA loans. Try to find out which banks underwrite the most SBA loans in your area and make a short list of potential lenders. Next, make an appointment with a commercial loan officer, and be sure to tell him or her that you would like to discuss an SBA loan.

Selling the bank on the viability of your proposal is the most important aspect of securing an SBA loan. Without the bank’s approval, there can be no SBA loan, so rehearse before the meeting.

The bank will have to ensure that all SBA conditions and required documents are in order, otherwise its SBA guarantee claim may be denied. If the bank believes that the extension of credit is not a sound decision, the process will go no further. This is why you need to develop a short list of SBA-friendly banks early in your research. Another financial institution may see the matter differently.

Once the bank approves the underwriting and ensures that all SBA requirements have been met, the package is sent to the SBA for review. If the SBA approves the bank’s request for a loan guarantee, the funds will be disbursed as soon as possible.

SHOULD YOU CHOOSE SBA?

The decision to pursue an SBA credit application is not necessarily an easy one. There are many factors to consider, including which programs to pursue, eligibility, fees, loan limits, collateral and other fundamental issues. An SBA loan could be beneficial to your business or a client’s business, and CPAs should be well-informed about how to analyze each program’s benefits and drawbacks. For specific information, see your commercial lender’s SBA group or a firm that provides SBA advisory services. In these times of uncertain credit, you may find that an SBA loan could make the difference between life or death for a business.

EXECUTIVE SUMMARY

Approach SBA financing the way you would any other loan request. Be proactive with your banker and provide as much information as possible.

Educate your banker on the product or service for which you need funding. Discuss the market, the competition, the risks, as well as the mitigating factors involved in your business.

The SBA will want to see at least three years of business tax returns and personal returns for each owner with an ownership stake of 20% or more (for personal guarantee requirements), current business and personal financial statements, and resumes on borrowers as well as key managers.

Develop a short list of SBA-friendly banks early in your research. If one bank rejects an application, another financial institution may see the matter differently.

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5 things you should know about SBA loans

The SBA backs loans, they don’t lend money. Understanding a little more about loans backed by the Small Business Administration can help you decide whether they’re right for your business.

The SBA does not engage in direct lending The SBA offers a variety of loan programs for very specific purposes. When you apply for an SBA loan, though, you do so through a bank, not through the SBA itself. While the bank is providing the actual loan, the SBA is guaranteeing a portion of that loan. In effect, the SBA is serving as a co-signer, which in turn helps banks provide more flexible terms to borrowers.
Not all banks offer the same SBA programs The SBA has several loan programs, including 7(a) for general small business loans, 504 for real estate and equipment, microloans and disaster loans. An SBA loan must first be approved by the issuing bank, which may choose which programs to offer. Also, the lending requirements for any given SBA loan may vary from bank to bank, depending on specific bank policies.
SBA loan programs are not just for new businesses The SBA exists to provide small businesses with financial assistance programs that have been specifically designed to meet key financing needs, including debt financing, surety bonds and equity financing. While many entrepreneurs and new businesses look to the SBA for financing, many established business take advantage of SBA-backed lending each year.
An SBA loan means additional paperwork Applying for an SBA loan means you need to provide paperwork to both the bank and the SBA. In addition to the documentation a bank will typically require the SBA requirements (some of which may also be bank requirements) typically include an SBA loan application, a business plan, a personal financial statement, 3 years of business financial statements, 3 years of federal business tax returns, a one-year cash flow projection, information about all owners and an explanation of how a loan will help the business; and a copy of the business lease or proposed terms. By the way, that’s not a complete list; other documentation and information may be requested.
You can get better terms with an SBA loan SBA loans are designed to help borrowers who may not meet the lending standards set by most banks. These can include issues such as a recent change in business ownership, a shortfall in collateral to secure the loan, business principals who have a low net worth or the need for extended payment terms.

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If you are running a small home-based business, you will have to comply with many local, state and federal regulations. Avoid the temptation to ignore regulatory details. Doing so may avert some red tape in the short term, but could be an obstacle as your business grows. Taking the time to research the applicable regulations is as important as knowing your market. Bear in mind that regulations vary by industry. If you’re in the food-service business, for example, you will have to deal with the health department. If you use chemical solvents, you will have environmental compliances to meet. Carefully investigate the regulations that affect your industry. Being out of compliance could leave you unprotected legally, lead to expensive penalties and jeopardize your business.

BUSINESS LICENSES

There are many types of licenses, both state and local as well as professional. Depending on what you do and where you plan to operate, your business may be required to have various state and/or municipal licenses, certificates or permits.

Licenses are typically administered by a variety of state and local departments. Consult your state or local government for assistance.

FICTITIOUS BUSINESS NAME

Search to determine if the name of your proposed business is already in use. If it is not used, register the name to protect your business. For more information, contact the county clerk’s office in the county where your business is based. If you are a corporation, you’ll need to check with the state.

Division of Corporations

& Commercial Code

Heber Wells Bldg.

160 E. 300 S.

Salt Lake City, UT 84114

801-530-4849

General: www.corporations.utah.gov

BUSINESS INSURANCE/WWW.UTAHCOMMERCIALINSURANCE.COM

Like home insurance, business insurance protects your business against fire, theft and other losses. Contact your insurance agent or broker. It is prudent for any business to purchase a number of basic types of insurance. Some types of coverage are required by law, others simply make good business sense. The types of insurance listed below are among the most commonly used and are merely a starting point for evaluating the needs of your business.

Liability Insurance – Businesses may incur various forms of liability in conducting their normal activities. One of the most common types is product liability, which may be incurred when a customer suffers harm from using the product. There are many other types of liability, which are frequently related to specific industries. Liability law is constantly changing. An analysis of your liability insurance needs by a competent professional is vital in determining an adequate and appropriate level of protection for your business.

Property – There are many different types of property insurance and levels of coverage available. It is important to determine the property insurance you need to ensure the continuation of your business and the level of insurance you need to replace or rebuild. You should also understand the terms of the insurance, including any limitations or waivers of coverage.

Business Interruption – While property insurance may pay enough to replace damaged or destroyed equipment or buildings, how will you pay costs such as taxes, utilities and other continuing expenses during the period between when the damage occurs and when the property is replaced? Business Interruption (or “business income”) insurance can provide sufficient funds to pay your fixed expenses during a period of time when your business is not operational.

“Key Man” – If you (and/or any other individual) are so critical to the operation of your business that it cannot continue in the event of your illness or death, you should consider “key man” insurance. This type of policy is frequently required by banks or government loan programs. It also can be used to provide continuity of operations during a period of ownership transition caused by the death, incapacitation or absence due to a Title 10 military activation of an owner or other “key” employee.

Automobile – It is obvious that a vehicle owned by your business should be insured for both liability and replacement purposes. What is less obvious is that you may need special insurance (called “non-owned automobile coverage”) if you use your personal vehicle on company business. This policy covers the business’ liability for any damage which may result from such usage.

ADDITIONAL RESOURCES Officer and Director – Under most state laws, officers and directors of a corporation may become personally liable for their actions on behalf of the company. This type of policy covers this liability.

Home Office – If you are establishing an office in your home, it is a good idea to contact your homeowners’ insurance company to update your policy to include coverage for office equipment. This coverage is not automatically included in a standard homeowner’s policy.

TAXES

Taxes are an important and complex aspect of owning and operating a successful business. Your accountant, payroll person, or tax adviser may be very knowledgeable, but there are still many facets of tax law that you should know. The Internal Revenue Service is a great source for tax information.

Small Business/Self-Employed Tax Center: www.irs.gov/businesses/small/ index.html.

When you are running a business, you don’t need to be a tax expert. However, you do need to know some tax basics. The IRS Small Business/Self-Employed Tax Center gives you the information you need to stay tax compliant so your business can thrive.

For Small Business Forms and Publications visit: www.irs.gov/businesses/small /article.html.

FEDERAL PAYROLL TAX (EIN NUMBERS)

An Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN), is used to identify a business entity. Generally, businesses need an EIN to pay federal withholding tax.

You may apply for an EIN in various ways, one of which is to apply online at www.irs.gov/businesses/small/article/0,,id= 102767,00.html. This is a free service offered by the Internal Revenue Service.

Call 800-829-1040 if you have questions. You should check with your state to determine if you need a state number or charter.

FEDERAL

SELF-EMPLOYMENT TAX

Every employee must pay Social Security and Medicare taxes. If you are self-employed, your contributions are made through the self-employment tax.

The IRS has publications, counselors and workshops available to help you sort it out. For more information, contact the IRS at 800-829-1040 or www.irs.gov.

SALES TAX

EXEMPTION CERTIFICATE

If you plan to sell products, you will need a Sales Tax Exemption Certificate. It allows you to purchase inventory, or materials, which will become part of the product you sell, from suppliers without paying taxes. It requires you to charge sales tax to your customers, which you are responsible for remitting to the state. You will have to pay penalties if it is found that you should have been taxing your products and now owe back taxes to the state. For information on sales tax issues, contact your state government. To register for a Sales and Use Tax License and a Withholding Tax Account for Utah, use Form TC-69, contact:

Utah State Tax Commission

210 N. 1950 West

Salt Lake City, UT 84134

801-297-2200

tax.utah.gov

FEDERAL INCOME TAX

Like the state income tax, the method of paying federal income taxes depends upon your legal form of business.

Sole Proprietorship: You must file IRS Federal Form Schedule C along with your personal Federal Income Tax return (Form 1040) and any other applicable forms pertaining to gains or losses in your business activity. Partnership: You must file a Federal Partnership return (Form 1065). This is merely informational to show gross and net earnings of profit and loss. Also, each partner must report his share of partnership earnings on his individual Form 1040 based on the information from the K-1 filed with the Form 1065.

Corporation: You must file a Federal Corporation Income Tax return (Form 1120). You will also be required to report your earnings from the corporation including salary and other income such as dividends on your personal federal income tax return (Form 1040).

FEDERAL PAYROLL TAX

Federal Withholding Tax: Any business employing a person must register with the IRS and acquire an EIN and pay federal withholding tax at least quarterly. File Form SS-4 with the IRS to obtain your number and required tax forms. Call 800-829-3676 or

800-829-1040 if you have questions.

IRS WEB PRODUCTS

FOR SMALL BUSINESSES

For the most timely and up-to-date tax information, go to www.irs.gov/ businesses/small/index.html.

VIRTUAL SMALL BUSINESS WORKSHOP

www.tax.gov/virtualworkshop/

The Virtual Small Business Tax Workshop is the first of a series of video products designed exclusively for small business taxpayers. This workshop helps business owners understand federal tax obligations. The Virtual Small Business Workshop is available on CD at www.irs.gov/businesses/small/article/0,,id=101169,00.html and online www.irsvideos.gov/virtualworkshop/ if you are unable to attend a workshop in person. Small business workshops are designed to help the small business owner understand and fulfill their federal tax responsibilities. Workshops are sponsored and presented by IRS partners who are federal tax specialists.

Workshop topics vary from a general overview of taxes to more specific topics such as recordkeeping and retirement plans. Although most are free, some workshops have fees associated with them. Fees for a workshop are charged by the sponsoring organization, not the IRS.

The IRS’s Virtual Small Business Tax Workshop is an interactive resource to help small business owners learn about their federal tax rights and responsibilities. This educational product, available online and on CD consists of nine stand-alone lessons that can be selected and viewed in any sequence. A bookmark feature makes it possible to leave and return to a specific point within the lesson. Users also have access to a list of useful online references that enhance the learning experience by allowing them to view references and the video lessons simultaneously.

The Tax Calendar for Small Businesses and Self-Employed (Publication 1518) www.irs.gov/businesses/small/article/0,,id=176080,00.html contains useful information on

ADDITIONAL RESOURCES

general business taxes, IRS and SSA customer assistance, electronic filing and paying options, retirement plans, business publications and forms, common tax filing dates, and federal legal holidays.

SOCIAL SECURITY CARDS

All employees must have a Social Security number and card. It must be signed by its owner, and you should always ask to see and personally record the Social Security number. Failure to do so may cause your employee to lose benefits and considerable trouble for yourself in back tracking to uncover the error.

Each payday, your employees must receive a statement from you telling them what deductions were made and how many dollars were taken out for each legal purpose. This can be presented in a variety of ways, including on the check as a detachable portion or in the form of an envelope with the items printed and spaces for dollar deductions to be filled in.

EMPLOYEE CONSIDERATIONS

Taxes

If you have any employees, including officers of a corporation but not the sole proprietor or partners, you must make periodic payments towards, and/or file quarterly reports about payroll taxes and other mandatory deductions. You may contact these government agencies for information, assistance and forms.

Social Security Administration

800-772-1213

www.ssa.gov

Federal Withholding

U.S. Internal Revenue Service

800-829-1040

www.irs.gov

Utah Department of Workforce Services

Downtown Metro Office

720 S. 200 East

Salt Lake City, UT 84111

801-526-9850

Clearfield Center

1290 E. 1450 South

Clearfield, UT 84015

866-435-7414

Provo Center

1550 N. 200 West

Provo, UT 84604

801-342-2600

http://jobs.utah.gov

Social Security’s Business Services Online

The Social Security Administration now provides free electronic services online at www.socialsecurity.gov/employer/. Once registered for Business Services Online, business owners or their authorized representative can:

file W-2s online; and
verify Social Security numbers through the Social Security Number Verification Service, used for all employees prior to preparing and submitting Forms W-2.

Federal Withholding

U.S. Internal Revenue Service

800-829-1040

www.irs.gov

Health Insurance

Compare plans in your area at

www.healthcare.gov.

Employee Insurance

If you hire employees you may be required to provide unemployment or workers’ compensation insurance. Employers can obtain coverage from a private insurance company or from the Workers’ Compensation Fund.

Utah Labor Commission

160 E. 300 South, 3rd Fl.

Salt Lake City, UT 84114-6610

801-530-6800

WORKPLACE DISABILITY PROGRAMS

Americans with Disabilities Act (ADA): For assistance with the ADA, call 800-669-3362 or visit www.ada.gov.

U.S. CITIZENSHIP AND IMMIGRATION SERVICES

The Federal Immigration Reform and Control Act of 1986 requires employers to verify employment eligibility of new employees. The law obligates an employer to process Employment Eligibility Verification Form I-9. The U.S. Citizenship and Immigration Services Office of Business Liaison offers a selection of information bulletins and live assistance through the Employer Hotline. For forms call 800-870-3676, for the Employer Hotline call 800-357-2099.

E-Verify: Employment Eligibility Verification

E-Verify, operated by the Department of Homeland Security in partnership with the Social Security Administration, is the best — and quickest — way for employers to determine the employment eligibility of new hires. It is a safe, simple, and secure Internet-based system that electronically verifies the Social Security number and employment eligibility information reported on Form I-9. E-Verify is voluntary in most states and there is no charge to use it.

If you are an employer or employee and would like more information about the E-Verify program, please visit

www.dhs.gov/E-Verify or contact

Customer Support staff: 1-888-464-4218 Monday – Friday 8 a.m. – 5 p.m.

E-mail: e-verify@dhs.gov

SAFETY AND HEALTH REGULATIONS

All businesses with employees are required to comply with state and federal regulations regarding the protection of employees. The Occupational Safety and Health Administration provides information on the specific health and safety standards adopted by the U.S. Department of Labor. Call 1-800-321-6742 or visit www.osha.gov.

general business taxes, IRS and SSA customer assistance, electronic filing and paying options, retirement plans, business publications and forms, common tax filing dates, and federal legal holidays.

SOCIAL SECURITY CARDS

EMPLOYEE CONSIDERATIONS

Taxes

Social Security Administration

800-772-1213

www.ssa.gov

Federal Withholding

U.S. Internal Revenue Service

800-829-1040

www.irs.gov

Utah Department of Workforce Services

Downtown Metro Office

720 S. 200 East

Salt Lake City, UT 84111

801-526-9850

Clearfield Center

1290 E. 1450 South

Clearfield, UT 84015

866-435-7414

Provo Center

1550 N. 200 West

Provo, UT 84604

801-342-2600

http://jobs.utah.gov

Social Security’s Business Services Online

file W-2s online; and
verify Social Security numbers through the Social Security Number Verification Service, used for all employees prior to preparing and submitting Forms W-2.

Federal Withholding

U.S. Internal Revenue Service

800-829-1040

www.irs.gov

Health Insurance

Compare plans in your area at

www.healthcare.gov.

Employee Insurance

Utah Labor Commission

160 E. 300 South, 3rd Fl.

Salt Lake City, UT 84114-6610

801-530-6800

WORKPLACE DISABILITY PROGRAMS

Americans with Disabilities Act (ADA): For assistance with the ADA, call 800-669-3362 or visit www.ada.gov.

U.S. CITIZENSHIP AND IMMIGRATION SERVICES

E-Verify: Employment Eligibility Verification

If you are an employer or employee and would like more information about the E-Verify program, please visit

www.dhs.gov/E-Verify or contact

Customer Support staff: 1-888-464-4218 Monday – Friday 8 a.m. – 5 p.m.

E-mail: e-verify@dhs.gov

SAFETY AND HEALTH REGULATIONS

There are many forms and legal ways you may choose for your business. Each legal structure offers organizational options with different tax and liability issues. We suggest you research each legal structure thoroughly and consult a tax accountant and/or attorney prior to making your decision.

The most common organizational structures are sole proprietorships, general and limited partnerships and limited liability companies.

Each structure offers unique tax and liability benefits. If you’re uncertain which business format is right for you, you may want to discuss options with a business counselor or attorney.

Sole Proprietorship

One person operating a business as an individual is a sole proprietorship. It’s the most common form of business organization. Profits are taxed as income to the owner personally. The personal tax rate is usually lower than the corporate tax rate. The owner has complete control of the business, but faces unlimited liability for its debts. There is very little government regulation or reporting required with this business structure.

General Partnership

A partnership exists when two or more persons join together in the operation and management of a business. Partnerships are subject to relatively little regulation and are fairly easy to establish. A formal partnership agreement is recommended to address potential conflicts such as: who will be responsible for performing each task; what, if any, consultation is needed between partners before major decisions, and what happens when a partner dies. Under a general partnership each partner is liable for all debts of the business. Profits are taxed as income to the partners based on their ownership percentage.

Limited Partnership

Like a general partnership, a limited partnership is established by an agreement between two or more persons. However, there are two types of partners.

A general partner has greater control in some aspects of the partnership. For example, only a general partner can decide to dissolve the partnership. General partners have no limits on the dividends they can receive from profit so they incur unlimited liability.
Limited partners can only receive a share of profits based on the proportional amount of their investment, and liability is similarly limited in proportion to their investment.

LLCs and LLPs

The limited liability company or partnership is a relatively new business form. It combines selected corporate and partnership characteristics while still maintaining status as a legal entity distinct from its owners. As a separate entity it can acquire assets, incur liabilities and conduct business. It limits liability for the owners. The limited liability partnership is similar to the LLC,

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PARTICIPATING LENDERS AND LOAN OFFICERS

ALBERMARLE BANK & TRUST, A DIVISION OF WEST TOWN SAVINGS BANK

Riddick Skinner

1335 44th Ave. N., Ste. 103

Myrtle Beach, SC 29577

843-626-7893

riddick@ABTNC.com

AMERICA FIRST CREDIT UNION (EXP,PLP)

Mike Crossley, Jr.

P.O. Box 9339

Ogden, UT 84409-0199

801-827- 8593

mwcrossley@americafirst.com

AMERICAN BANK OF COMMERCE (DBA AMBANK) (EXP)

Roger Preston

3670 N. University Ave.

Provo, UT 84604

801-342-5378

rogerp@myambank.com

AMERICA UNITED FAMILY OF CREDIT UNIONS

Jason Murray

2687 West 7800 S.

West Jordan, UT 84088

801-838-8736

jmurray@amucu.org

AMERICANWEST BANK

Ali Ashton

10757 S. Riverfront Pkwy., Ste. 150

South Jordan, UT 84095

801-208-4081

aashton@awbank.net

BANCFIRST

Michelle Minitre

101 North Broadway, Ste 1050

Oklahoma City, OK 73102

405-270-4746

m.minitre@bancfirst.com

BANK OF AMERICAN FORK (EXP,PLP)

Richard Gray

5824 S. State

Murray, UT 84107

801-838-9871

richard.gray@bankaf.com

BANK OF THE WEST (EXP)

Mark Haslam

142 E. 200 S.

Salt Lake City, UT 84111

801-537-6361

mark.haslam@bankofthewest.com

BANK OF UTAH (EXP,PLP)

Rachel Phillips

2605 Washington Blvd.

Ogden, UT 84401

801-409-5057

rphillips@bankofutah.com

BRIGHTON BANK (EXP,PLP)

Sabrina Erickson

93 West 3300 S.

Salt Lake City, UT 84115

801-467-5411

serickson@brightonbank.com

CACHE VALLEY BANK (EXP)

Lauren Hansen

101 N. Main St.

Logan, UT 84321

435-753-3020

lhansen@cachevalleybank.com

CAPITAL COMMUNITY BANK (EXP)

Chad Christensen

3280 North University Ave.

Provo, UT 84604

801-705-4390

chadc@capitalcombank.com

CELTIC BANK (EXP,PLP)

Brad Bybee

268 S. State St., Ste. 300

Salt Lake City, UT 84111

801-363-6500

bbybee@celticbanking.com

CENTRAL BANK (EXP)

Deborah Lamb

75 N. University Ave.

Provo, UT 84601

801-655-2152

dlamb@cbutah.com

CONTINENTAL BANK (EXP,PLP)

Trevor S. Rawlings

15 W. South Temple, #420

Salt Lake City, UT 84101

801-595-7047

trawlings@cbankus.com

CORNERSTONE BANK

Carolyn Taylor

2060 Mt. Paran Rd. N.W., Ste 100

Atlanta, GA 30327

678-553-1486

ctaylor@cornerstonebankga.com

CYPRUS CREDIT UNION (EXP)

Paul Turner

3876 W. Center View Way W. Jordan, UT 84084

801-260-7600 ext. 5271

pturner@cypruscu.com

DESERT FIRST FEDERAL CREDIT UNION

Brady Smith

143 E. Social Hall Ave.

Salt Lake City, UT 84111

801-456-7063

brady.smith@dfcu.com

EASTERN UTAH COMMUNITY FEDERAL CREDIT UNION

Ken Bishoff

860 S. Main

Moab, UT 84532

435-259-8200

kbishoff@euccu.com

FIRST NATIONAL BANK OF LAYTON (EXP,PLP)

Greg Vidrine

12 S. Main

Layton, UT 84041

801-813-1727

greg@fnbutah.com

FIRST UTAH BANK (EXP,PLP)

Kent Dehart

115 E. 1300 S.

Salt Lake City, UT 84115

801-478- 2304

kdehart@firstutahbank.com

GOLDENWEST CREDIT UNION (EXP,PLP)

David Beckett

5025 S. Adams Ave.

Ogden, UT 84403

801-337-8342

dbeckett@gwcu.org

GRAND VALLEY NATIONAL BANK (EXP)

Jim Linschoten

121 W. Main St.

Vernal, UT 84078

435-781-1001

jlinschoten@grandvalleybank.com

GRANITE FEDERAL CREDIT UNION

Brian Frandsen

3675 South 900 E.

Salt Lake City, UT 84106

801-288-3034

brianf@granite.org

GROW AMERICA FUND, INC.

Diana Sasser

708 Third Ave., Ste. 710

New York, UT 84032

209-483-9863

dsasser@nationaldevelopmentcouncil.org

HOLLADAY BANK AND TRUST

Debra Charleston

2020 East 4800 S.

Salt Lake City, UT 84117

801-272-4275

debra@holladaybank.com

HORIZON UTAH FEDERAL CREDIT UNION

Robert Rose

225 S. 2nd W.

Farmington, UT 84025

801-939-9051

robert@myhorizoncu.com

JP MORGAN-CHASE (EXP,PLP)

Nate Hawes

201 S. Main St., 3rd Fl.

Salt Lake City, UT 84111

801-364-3101

nathan.d.hawes@chase.com

JORDAN CREDIT UNION (EXP,PLP)

Heather Johnson

9260 S. 300 E.

Sandy, UT 84070

801-566-4195

heatherc@jordan-cu.org

KEY BANK OF UTAH (EXP,PLP)

Rachel Clark

2491 Washington Blvd.

Ogden, UT 84401

801-334-2584

rachel_h_clark@keybank.com

LEWISTON STATE BANK

Brian Webster

2190 N. Main

North Logan, UT 84341

435-750-6700

LIBERTY BANK

Joseph Porter

326 S. 500 E.

Salt Lake City, UT 84102

801-355-7411

j.porter@libertybankofutah.com

MEADOWS BANK (EXP,PLP)

Jeff Cromar

9980 S. 300 West, Ste. 200

Sandy, UT 84070

801-432-7371 or 801-573-4158

jcromar@meadowsbank.com

jmcromar@gmail.com

MOUNTAIN AMERICA FED. CREDIT UNION (EXP,PLP)

7181 S. Campus View Dr. W. Jordan, UT 84084

801-325-6280

MOUNTAIN WEST BANK

Susan Rammier

101 Ironwood Dr., Ste 252

Coeur d’ Alene, ID 83814

208-415-5591

srammier@mountainwestbank.com

MOUNTAIN WEST SMALL BUSINESS FINANCE

Jeff Vanchiere

2595 E. 3300 South

Salt Lake City, UT 84109

801-412-3796

jvanchiere@mwsbf.com

NATIONAL JACL CREDIT UNION

Dean Hirabayashi

3776 S. Highland Dr.

Salt Lake City, UT 84106

801-424-5225

dhirabayashi@jaclcu.com

PITNEY BOWES

Mark Wilkinson

1245 E. Brickyard Rd., #250

Salt Lake City, UT 84106

801-832-4443

mark.wilkinson@pb.com

PROFICIO BANK

Brett Smiley

6985 Union Park Center, Ste. 150

Cottonwood Heights, UT 84047

801-947- 6024

bsmiley@proficiobank.com

PRIME ALLIANCE BANK

Ryan Marelli1868 S. 500 W.

Woods Cross, UT 84087

801-296-2200

rmarelli@primealliancebank.com

ROCK CANYON BANK

Larry Darbous

475 East S.R.

Pleasant Grove, UT 84062

801-492-8206

larry@rockcanyonbank.com

SAFE CU

Colin Patterson

3720 Madison Ave.

North Highlands, CA 95660

916-971-2915

SECURITY SERVICE FCU

Yvonne Fernandez

16211 La Canterra Pkwy.

San Antonio, TX 78256

210-476-4449

yfernandez!ssfcu.org

STATE BANK OF SOUTHERN UTAH (EXP)

Clint Penrod

1337 E. 170 S.

St. George, UT 84770

435-652-7070

cpenrod@sbsu.com

SUPERIOR FINANCIAL GROUP

Scott Bradley

165 Lennon Way, Ste. 101

Walnut Creek, CA 94598

sbradley@superiorfg.com

TITAN BANK NATIONAL ASSOCIATION

Eric Wadley

2825 E. Cottonwood Pkwy.,

Ste. 500

Salt Lake City, UT 84121

801-856-2302

ewadley@titanbank.com

TOWN & COUNTRY BANK

Curtis Anderson

405 E. St. George Blvd.

St. George, UT 84770

435-673-1150 or 435-619-2142

canderson@tcbankutah.com

U.S. BANK (EXP,PLP)

Kevin Corless

448 E. 6400 S., Ste 312

Salt Lake City, UT 84107

801-284-5911

kevin.corless@usbank.com

UNITED MIDWEST SAVINGS BANK

Dan Bywater

101 S. Main St.

De Graff, OH 43318

801-949-0021

dbywater@umwsb.com

UNIVERSITY FIRST FEDERAL CREDIT UNION (EXP)

Steven Mathews

490 E. 500 S., Ste. 200

Salt Lake City, UT 84111

801-463-3599

smathews@ucredifu.com

USU CHARTER FEDERAL CREDIT UNION (EXP)

John Russell

198 N. Main

Logan, UT 84321

435-713-1806

jrussell@usucu.org

UTAH CENTRAL CREDIT UNION (EXP)

Paul Fixmer

25 E. 1700 S.

Salt Lake City, UT 84115

801-487-8841

paul@utahcentral.com

UTAH COMMUNITY BANK

Brett Jensen

820 E. 9400 S.

Sandy, UT 84094

801-545-6008

bjensen@utahcommunitybank.com

UTAH COMMUNITY FEDERAL CU (EXP)

Brian Luke

188 West 5200 N.

Provo, UT 84604

801-223-8188

brianl@uccu.com

UTAH FIRST FEDERAL CREDIT UNION

Paul Toller

208 E. 800 S.

UTAH INDEPENDENT BANK

Spencer White

195 N. Main

Beaver, UT 84713

435-438-2433

swhite@utahindependentbank.com

VALLEY BANK

Kevin E. Stocking

2 S. Main

Heber City, UT 84032

435-654-7400

Kevin@hebervalleybank.com

WASATCH PEAKS CREDIT UNION (EXP,PLP)

Curtis Singleton

4723 Harrison Blvd.

Ogden, UT 84403

801-627-8700

curtis@wasatchpeaks.com

WASHINGTON TRUST BANK

Cory Jakobson

717 W. Sprague Ave.

Spokane, WA 99201

208-333-9424

Cjakobson@watrust.com

WELLS FARGO BANK (EXP,PLP)

Ryan Furstenau

1192 E. Draper Pkwy., #304

Draper, UT 84020

801-576-6632

ryan.furslenau@wellsfargo.com

ZIONS FIRST NATIONAL BANK (EXP,PLP)

Cece Mitchell

1 S. Main St., 10th Fl.

Salt Lake City, UT 84133

801-844-7909

cecilia.mitchell@zionsbank.com

PLP = Preferred Lender

Program

EXP = Express Loan Lender

sba5

Loan Program Guide for Businesses

Different ways borrowers can use the money

( 10/15/2014)

Program	Who Qualifies	Use of Proceeds	Maturity	Maximum Loan Amount	Structure	Benefits to Borrower
Basic 7(a)	For profit businesses that can meet SBA’s size standards, nature of business, use of proceeds, credit elsewhere, and other miscellaneous eligibility factors.	Acquire land; purchase existing building; convert, expand or renovate buildings; construct new buildings; acquire and install fixed assets; acquire inventory; purchase supplies and raw materials; purchase a business, start a business, leasehold improvements, term working capital; and, under certain conditions, to refinance certain outstanding debts	Based on the use of proceeds and borrower’s ability to repay. Not based on collateral. Maximum maturity: 10 years for working capital (seven years is common), 10 years for fixed assets,25 years for real estate.	A Basic 7(a) can be for as much as $5 million. SBA’s limit to any one business is $3.75 million so a business can have multiple loans guaranteed by SBA but the guaranteed portion combined cannot exceed$3.75 million.	Term loans with one monthly payment of principal and interest (P&I). Borrower contribution required. Interest rate depends upon how lender applies for guaranty (see lender program chart). Cannot revolve, no balloon or call provisions.	Business can obtain financing not otherwise available, fixed maturity, available when collateral is limited. Can establish or re-affirm relationship with lender.
International Trade Loan (ITL)	Same as Basic 7(a), plus, business must be engaged or preparing to engage in exporting or be adversely affected by competition from imports.	Acquire, renovate, modernize facilities or equipment used in making products or services to be exported, plus, for permanent working capital and to refinance business debts currently on unreasonable terms.	Same as Basic 7(a).	Same as Basic 7(a), but when borrower has both international trade and working capital loans guaranteed by the SBA, the limit to any one business is $4 million.	Same as Basic 7(a).	Same as Basic 7(a). Plus, long-term financing for export-related fixed assets and working capital.
Export Working Capital Loan (EWCP)	Same as Basic 7(a). Plus, must be in business one year and engaged or preparing to engage in exporting.	Short-term working capital to cover the costs of filling export orders, including ability to support an Export Stand-By Letter of Credit.	Can be up to a maximum of 36 months but generally 12 months or less.	Gross loan amount $5.0 million. SBA guaranteed portion $4.5 million	Finance single or multiple transactions. Interest paid monthly, principal paid as payments from items shipped overseas are collected. Can be renewed annually. Extra fees apply. Percentage of guaranty up to 90%. Generally revolving.	Provides U.S. exporters with a line of credit that can be separated from domestic operations line of credit. Can be used to finance 100% of the cost of filling export orders.
Seasonal CAPlines	Same as Basic 7(a). Plus, in business for at least one year and can demonstrate seasonal financing needs.	To finance the seasonal increases of accounts receivable, inventory and labor.	10 years	Same as Basic 7(a).	Short-term financing for seasonal activities to be repaid at the end of the season when payment for the seasonal activity is made to business	Provides opportunity for seasonal businesses to get seasonal financing not otherwise available.
Contract CAPlines	Same as Basic 7(a). Plus, will perform on contract or purchase order for some third-party buyer.	To finance the cost of one or more specific contract, sub-contract, or purchase order, including overhead or general and administrative expenses, allocable to the specific contract(s).	10 years	Same as Basic 7(a).	Short-term financing for performance of approved contract, sub-contract, or purchase order to be repaid when payment for the activity is made to business. Can be revolving or not.	Provides opportunity for contractors and sub-contractors to get financing not otherwise available.
Builders CAPlines	Same as Basic 7(a). Plus, building/renovating residential or commercial structure for re-sale without knowing buyer at time of approval.	For the direct expenses related to the construction and/or “substantial” renovation costs of specific residential or commercial buildings for resale, including labor, supplies, materials, equipment rental, direct fees. The cost of land is potentially eligible.	Maximum of three years to disburse and build or renovate. Extension possible to accommodate sale.	Same as Basic 7(a).	Short-term financing to build or renovate home or building for sale to unknown third party. “Substantial” means rehabilitation expenses of more than one-third of the purchase price or fair market value at the time of application. Can be revolving or not.	Provides opportunity for residential and commercial builders to get financing not otherwise available.

sba4

CAPITAL

Financing Options to Start or Grow Your Business

Many entrepreneurs need financial resources to start or expand a small business and must combine what they have with other sources of financing. These sources can include family and friends, venture-capital financing and business loans.

This section of the Small Business Resource guide discusses SBA’s primary business loan and equity financing programs. These are: the 7(a) Loan Program, the Certified Development Company or 504 Loan Program, the Microloan Program and the Small Business Investment Company Program. The distinguishing features for these programs are the total dollar amounts that can be borrowed, the type of lenders who can provide these loans, the uses for the loan proceeds and the terms placed on the borrower. The SBA does not provide grants to individual business owners to start or grow a business.

SBA BUSINESS LOANS

If you are contemplating a business loan, familiarize yourself with the SBA’s business loan programs to see if they may be a viable option. The SBA has a variety of loan programs which are distinguished by their different uses of the loan proceeds, their dollar amounts, and the requirements placed on the actual lenders. The three principal players in most of these programs are the applicant small business, the lender and the SBA. The Agency does not actually provide the loan, but rather they guaranty a portion of the loan provided by a lender (except for microloans). The lender can be a regulated bank or credit union, or a community based lending organization.

The business applies directly to a lender by providing them the documents they require. Generally an application includes a business plan that explains what resources will be needed to accomplish the desired business purpose including the associated costs, the applicants’ contribution, planned uses for the loan proceeds, a listing of the assets that will secure the loan (collateral), a history of the business and explanation of how the business generates income, and most important, an explanation of how the business will be able to repay the loan in a timely manner.

The lender will analyze the application to see if it meets their criteria and make a determination if they will need an SBA guaranty in order to provide the loan. SBA will look to the lender to do much, if not all, of the analysis before it provides its guaranty to the lender’s proposed loan. The SBA’s business loan guaranty programs provide a key source of financing for viable small businesses that have real potential but cannot qualify for credit on reasonable terms by themselves.

In the case of microlenders, SBA lends monies to intermediaries at favorable rates so they can re-lend to businesses with financing needs up to $50,000.

7(a) LOAN PROGRAM

The 7(a) Loan program is the SBA’s primary business loan program. It is the agency’s most frequently used non-disaster financial assistance program because of its flexibility in loan structure, variety of uses for the loan proceeds and availability. The program has broad eligibility requirements and credit criteria to accommodate a wide range of financing needs.

Congress authorized SBA to provide financial assistance either directly or in cooperation with banks or other financial institutions through agreements to participate in section 7(a) of the Small Business Act. Historically, a 7(a) loan was provided either directly from SBA or from regulated lenders who provided the loan after they obtained a guaranty from SBA. Since 1996, all 7(a) loans have only been provided on a guaranteed basis, meaning from a lender participating in the 7(a) Loan Guaranty Program.

The business loans that SBA guarantees do not come from the Agency, but rather from banks and other approved lenders. The loans are funded by these organizations and they make the decisions to approve or deny the applicants’ request for financial assistance.

The guaranty that SBA provides the lender reduces the lender’s risk of borrower non-payment because the guaranty assures the lender that if the borrower defaults, the lender can request that SBA pay the debt rather than the borrower. SBA only guarantees a portion or percentage of every loan not the whole debt, so in the event of default the lender will only get partially repaid by SBA. This means that if the borrower can’t make the payments and defaults, the lender can recover the guaranteed portion of the defaulted debt from the SBA. The borrower is still obligated for the full amount.

To qualify for an SBA guaranteed loan, a small business must meet the lender’s criteria and the 7(a) program requirements. One of those requirements is that the lender must certify that it would not provide this loan under the proposed terms and conditions without an SBA guaranty. If the SBA is going to provide a lender

What to Take to the Lender

Documentation requirements will vary depending upon the purpose of the loan. Contact your lender for the information you must supply.

Common requirements include the following:

A Business Plan that includes:

Purpose of the loan
History of the business
Projections of income, expenses and cash flow as well as an explanation of the assumptions used to develop these projections
Personal financial statements on the principal owners
Resume(s) of the principal owners and managers.
Amount of investment in the business by the owner(s)
Projected opening-day balance sheet (new businesses)
Lease details
Proposed Collateral

Financial Statements that include:

Balance Sheet and Income Statement (P&L) for three years (existing businesses) (Tax Returns usually suffice)
Interim Financial Statements dated within 180 days of the request for assistance
Schedule of term debts (existing businesses)
Aging of accounts receivable and payable (existing businesses)

How the 7(a) Program Works

Small Business applicants submit their loan application to a lender for the initial review. If the applicant is applying for their first business loan, it is recommended that the lender be the lender who maintains the personal account of the owner(s). The lender will generally review the credit merits of the request before deciding if they will make the loan themselves or if they will need an SBA guaranty. If a guaranty is needed, the lender will also review the application for SBA eligibility. The applicant should be prepared to complete some additional documents, if the only way the lender can approve the loan is to obtain an SBA guaranty. Applicants who feel they need more help with the process should contact their local SBA district office or one of the SBA’s resource partners for assistance.

There are several ways a lender can request a 7(a) Guaranty for a proposed business locan from SBA. The main differences between these different processing methods are related to the experience the lender has in requesting guarantees from SBA, the documentation the lender provides to SBA, the amount of review the SBA conducts after receiving the request, the amount of the loan and the lender responsibilities in case the loan defaults and the business’ assets must be liquidated. The current different processing methods are:

Standard 7(a) Guaranty
Certified Lender Program
Preferred Lender Program
SBA Express
Export Express
Community Advantage

When a lender requests a 7(a) guaranty for a business loan they propose to provide a small business their application consist of two parts. The applicant fills out SBA Form 1919 while the lender completes SBA Form 1920. The Form 1919 is designed for the applicant to explain what they intend to do with the money and how they will repay the loan. The Form 1920 requires the lender to explain their analysis of the eligibility and credit merits of the request.

When the request loan amount is smaller (generally under $350,000) the lender is allowed to provide SBA with less information in their application for guaranty but that does not mean the applicant business can provide the lender with less information. The lender has the ability to ask the applicant for as much detail as they believe is necessary for them to make their decision on the specific request.

When the SBA receives a request for guaranty from a lender they will either re-analyze, review or trust the lender’s eligibility and credit analysis before deciding to approve or reject the request. See the section on 7(a) Loan Processing from Lenders later on in this article for more detail on what SBA does when it receives a request for guaranty from the lender.

By guaranteeing a loan, the SBA assures the lender that, in the event the borrower does not repay the loan, the government will reimburse the lending institution for a percentage of the amount owed. By providing this guaranty, the SBA is able to help tens of thousands of small businesses every year get financing they might not otherwise obtain.

When an SBA guaranty is approved, the lender is notified and they will work with the applicant to make sure the terms and conditions designed for the specific loan are met before closing the loan, disbursing the funds, and assuming responsibility for payment collection and general servicing. The borrower makes loan payments directly to the lender. As with any loan, the borrower is obligated to repay the full amount of the loan in a timely manner.

What the SBA Looks for:

Ability to repay the loan on time from the projected operating cash flow;
Owners and operators who are of good character;
Feasible business plan;
Management expertise and commitment necessary for success;
Sufficient funds, including (but not limited to) the SBA guaranteed loan, to operate the business on a sound financial basis (for new businesses, this includes the resources to meet start-up expenses and the initial operating phase);
Adequate equity invested in the business; and
Enough collateral to fully secure the loan or, all worthwhile available business collateral plus personal real estate if the loan cannot be fully secured.

The Impact of a Credit Score

SBA also credit scores every business that is a potential recipient of a loan guaranteed by SBA. If the loan is for $350,000 or less, the credit score obtained will have a significant impact on the amount of work the lender has to complete when applying for an SBA guaranty. As such it is important for any owner of a potential business loan to be aware of their credit score and correct any discrepancies prior to approaching their lender.

with a guaranty, the applicant must be eligible and creditworthy and the loan structured under conditions acceptable to the SBA.

The 7(a) Program includes ten (10) types of loans which all share certain eligibility requirements but which also have some different requirements so they can accommodate specific business needs and/or give lenders greater flexibility with loan structure. The most popular 7(a) loan type is the Basic 7(a) Loan, which can be used for the most diverse purposes. The other nine 7(a) loan types are variations of the Basic 7(a) Loan with different uses for the loan proceeds and alternative structures.

To be eligible for any of the 7(a) loans, the recipients must be both eligible and creditworthy. In addition the applicant business must:

Be an operating business (except for loans to Eligible Passive Companies);
Be organized for profit;
Be located in the United States;
Be able to demonstrate a need for the desired credit.
Be a business, along with its Affiliates, that meets SBA’s Size Standard Requirements.
Be a business that is not engaged in a prohibited business activity or owned by a non-qualified owner, or located at a prohibited place.
Use the Loan Proceeds for only acceptable purposes, which includes proceeds to start-up a new

business, buy an existing business, acquire machinery & equipment and/or furniture & fixtures,

acquire or renovat a building which the business will occupy, permanent working capital, and refinancing existing business debt under certain conditions. Proceeds from a Basic 7(a) cannot be used to buy investments that are held for their potential appreciation, or to be provided to an associate of the business except under very limited citcumstances.

Be able to demonstrate that it can’t get the proceeds from its own resources or those of its principal owners and the lender must certify that they would only approve

the loan if it is able to obtain a guaranty from SBA.

Have ownership that is of Good Character
Be able to satisfy any

Miscellaneous Eligibility Requirements that may be imposed on a loan request based on the circumstances of the case including, but not limited to the purpose of the loan.

THE BASIC 7(a) LOAN

The Basic 7(a) Loan is the most commonly provided type of SBA business loan based on historical dollars approved. They are the most flexible types of SBA loans because they can help finance such a large variety of business purposes for the largest number of business types, engaged in the widest spectrum of activities.

In the Federal Government’s 2013 Fiscal Year (October 1, 2012 to September 30, 2013) about 80 percent of the dollars and 38 percent of the number of all 7(a) loans guaranteed by SBA were Basic 7(a) Loans. The reciprocal percentages were divided between the nine other 7(a) Programs.

The Basic 7(a) Loan is a term loan usually repaid with one monthly

payment of principal and interest. Interest only repayment periods are permitted when needed, such as for a start-up business that doesn’t achieve breakeven in its initial months of operation. Other repayment structures are also permitted depending upon the borrower’s needs and the flexibility of the lender.

A Basic 7(a) Loan does not revolve so the sum of the disbursements is the loan amount. SBA can guaranty revolving lines of credit, but that is accomplished through some of the nine variations to the Basic 7(a) Loan.

The following aspects of the Basic 7(a) Loan are also applicable to all other 7(a) Loan unless specifically referenced as not applying to a specific Special 7(a) Loan

Percentage of Guarantees and Loan Maximums

SBA only guarantees a portion of any particular 7(a) loan so each loan will have an SBA share and an unguaranteed portion which gives the lender a certain amount of exposure and risk on each loan. The percentage of guaranty depends on either the dollar amount or the program the lender uses to obtain its guaranty. For loans of $150,000 or less the SBA generally guarantees as much as 85 percent and for loans over $150,000 the SBA generally provides a guaranty of up to 75 percent.

The maximum dollar amount of a single 7(a) loan is $5 million and there is no minimum. The maximum dollar amount of the SBA share which can be provided to any one business (including affiliates) is $3,750,000.

Interest Rates

The actual interest rate for a 7(a) loan guaranteed by the SBA is negotiated between the applicant and lender but is subject to the SBA maximums. Both fixed and variable interest rate structures are available. The maximum rate comprises two parts, a base rate and an allowable spread. There are three acceptable base rates (Wall Street Journal Prime*, London Interbank One Month Prime plus 3 percent, and an SBA Peg Rate). Lenders are allowed to add an additional spread to the base rate to arrive at the final rate. For loans with maturities of less than seven years, the maximum spread will be no more than 2.25 percent. For loans with maturities of seven years or more, the maximum spread will be 2.75 percent. The spread on loans under $50,000 and loans processed through Express procedures have higher maximums.

Most 7(a) term loans are repaid with monthly payments of principal and interest. For fixed-rate loans the payments stay the same because the interest rate is constant. For variable rate loans the lender can change the payment amount when the interest rates change. Applicants can request that the lender establish the loan with interest-only payments during the start-up and expansion phases (when eligible) to allow the business time to generate income before it starts making full loan payments.

Guaranty and Other Fees

Loans guaranteed by the SBA are assessed a guaranty fee. This fee is based on the loan’s maturity and the dollar amount guaranteed, not the total dollar amount of the loan. The guaranty fee is initially paid by the lender and then passed on to the borrower at closing. The funds the business needs to reimburse the lender can be included in the overall loan proceeds.

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, the normal guaranty fee is:

2.0 percent of the SBA guaranteed portion on loans up to $150,000; **
3.0 percent on loans over $150,000 but not more than $700,000; and
3.5 percent on loans over $700,000. There is also an additional fee of 0.25 percent on any guaranteed portion over $1 million.

* All references to the prime rate refer to the base rate in effect on the first business day of the month the loan application is received by the SBA.

** For all SBA-guaranteed loans of $150,000 or less that are approved between October 1, 2014 and September 30, 2015, the guaranty fee will be 0%.

The lender may not charge a prepayment penalty if the loan is paid off before maturity but the SBA will charge the borrower a prepayment fee if the loan has a maturity of 15 or more years and is pre-paid during the first three years.

7(a) Loan Maturities

The SBA’s loan programs are generally intended to encourage longer term small-business financing, but actual loan maturities are based on the ability to repay, the purpose of the loan proceeds and the useful life of the assets financed. Maturity generally ranges from 7 to 10 years for working capital, business start-ups, and business acquisition type loans, and up to 25 years if the purpose is to acquire real estate or fixed assets with a long term useful life.

Collateral

The SBA expects every 7(a) loan to be secured first with the assets acquired with the loan proceeds and then with additional business and personal assets, depending upon the loan amount and the way the lender requests their guaranty. However, SBA will not decline a request to guaranty a loan if the only unfavorable factor is insufficient collateral, provided all available collateral is offered. When the lender says they will need an SBA guaranty, the applicant should be prepared for liens to be placed against all business assets. Personal guaranties are required from all the principal owners of the business. Liens on personal assets of the principals may also be required. Loans under $25,000 do not require collateral.

Loan Structure

The structure of a Basic 7(a) Loan is that repayment has to be set up so the loan is paid in full by maturity. Over the term of the loan there can be additional payments or payment relaxation depending on what Is happening with the business. Balloon payments and call provisions are not allowed on any 7(a) term loan.

Eligibility

7(a) loan eligibility is based on a number of different factors, ranging from Size and Nature of Business to Use of Proceeds and factors that are case specific.

Size Eligibility

The first eligibility factor is size, as all loan recipients must be classified as “small” by the SBA. The size standards for all 7(a) loans are outlined below. A more in-depth listing of standards can be found at www.sba.gov/size.

SBA Size Standards have the following general ranges:

Manufacturing — from 500 to 1,500 employees
Wholesale Trades — Up to 100 employees
Services — $2 million to $35.5 million in average annual receipts
Retail Trades — $7 million to $35.5 million in average annual receipts
Construction — $7 million to $33.5 million in average annual receipts
Agriculture, Forestry, Fishing, and Hunting — $750,000 to $17.5 million in average annual receipts

There is an alternate size standard for businesses that do not qualify under their industry size standards for SBA funding. That Alternative is that the applicant business (plus affiliates can’t have a tangible net worth exceeding $15 million and average net income exceeding $5 million for the last two years. This new alternate makes more businesses eligible for SBA loans and applies to SBA non-disaster loan programs, namely its 7(a) Business Loans and Certified Development Company programs.

Nature of Business

The second eligibility factor is based on the nature of the business and the process by which it generates income or the customers it serves. The SBA has general prohibitions against providing financial assistance to businesses involved in such activities as lending, speculating, passive investment, pyramid sales, loan packaging, presenting live performances of a prurient nature, businesses involved in gambling and any illegal activity.

The SBA also cannot make loan guaranties to non-profit businesses, private clubs that limit membership on a basis other than capacity, businesses that promote a religion, businesses owned by individuals incarcerated or on probation or parole, municipalities, and situations where the business or its owners previously failed to repay a federal loan or federally assisted financing, or are delinquent on existing federal debt.

Use of Proceeds

The third eligibility factor is Use of Proceeds. A Basic 7(a) Loan can provide proceeds to purchase machinery, equipment, fixtures, supplies, and to make improvements to land and/or buildings that will be occupied by the subject applicant business.

Proceeds can also be used to:

Expand or renovate facilities;
Acquire machinery, equipment, furniture, fixtures and leasehold improvements;
Acquire businesses;
Start businesses;
Permant Working Capital

Acquire Land and Build a Location

for the applicant business; and

Refinance existing debt under certain conditions.

SBA 7(a) loan proceeds cannot be used:

For the purpose of making investments.
To provide funds to any of the owners of the business except for ordinary compensation for actual services provided.
For Floor Plan Financing
For a purpose that does not benefit the business

Miscellaneous Factors

The fourth factor involves a variety of requirements such as SBA’s credit elsewhere test where the personal resources of the owners need to be checked to see if they can make a contribution before getting a loan guaranteed by the SBA. It also includes the SBA’s anti-discrimination rules and limitations on lending to agricultural

enterprises because there are other agencies of the Federal government with programs to fund such businesses.

Generally, SBA loans must meet the following criteria:

Every loan must be for a sound business purpose;
There must be sufficient invested equity in the business so it can operate on a sound financial basis;
There must be a potential for long-term success;
The owners must be of good character and reputation; and
All loans must be so sound as to reasonably assure repayment.

SPECIAL PURPOSE

7(a) LOAN PROGRAMS

The 7(a) loan program is the most flexible of the SBA’s lending programs. Over time, the Agency has developed several variations of the Basic 7(a) Loan in order to address specific financing needs for particular types of small businesses or to give the lender greater flexibility with the loan’s structure. The general distinguishing feature between these loan types is their use of proceeds. These programs allow the proceeds to be used in ways that are not otherwise permitted in a basic 7(a) loan. These special purpose programs are not necessarily for all businesses but may be very useful to some small businesses. They are generally governed by the same rules, regulations, fees, interest rates, etc., as the basic 7(a) loan. Lenders can advise you of any variations. The Special Purpose Loans include:

International Trade Loan Program

The SBA’s International Trade Loan (ITL) is designed to help small businesses enter and expand into international markets or, when adversely affected by import competition, to make the investments necessary to better compete. The ITL offers a combination of fixed asset, working capital financing and debt refinancing with the SBA’s maximum guaranty–90 percent–on the total loan amount. The maximum loan amount is $5 million.

Guaranty Coverage

The SBA can guaranty up to 90 percent of an ITL up to a maximum of $4.5 million, less the amount of the guaranteed portion of other SBA loans outstanding to the borrower. The maximum guaranty for any working capital component of an ITL is limited to $4 million. Any other working capital SBA loans that the borrower has are counted against the $4 million guaranty limit.

Use of Proceeds

For the facilities and equipment portion of the loan, proceeds may be used to acquire, construct, renovate, modernize, improve or expand facilities or equipment in the U.S. to produce goods or services involved in international trade, including expansion due to bringing production back from overseas if the borrower exports to at least one market.
Working capital is an allowable use of proceeds under the ITL.
Proceeds may be used for the refinancing of debt not structured on reasonable terms and conditions, including any debt that qualifies for refinancing under the standard SBA 7(a) Loan Program.

Loan Term

Maturities on the working capital portion of the ITL are typically limited to 10 years.
Maturities of up to 10 years on equipment unless the useful life exceeds 10 years.
Maturities of up to 25 years are available for real estate.
Loans with a mixed use of fixed-asset and working-capital financing will have a blended-average maturity.

Exporter Eligibility

Applicants must meet the same eligibility requirements as for the SBA’s standard 7(a) Loan Program.
Applicants must also establish that the loan will allow the business to expand or develop an export market or, demonstrate that the business has been adversely affected by import competition and that the ITL will allow the business to improve its competitive position.

Foreign Buyer Eligibility

Foreign buyers must be located in those countries where the Export-Import Bank of the U.S. is not prohibited from providing financial assistance.

Collateral Requirements

Only collateral located in the U.S. (including its territories and possessions) is acceptable.
First lien on property or equipment financed by the ITL or on other assets of the business is required. However, an ITL can be secured by a second lien position if the SBA determines there is adequate assurance of loan repayment.
Additional collateral, including personal guaranties and those assets not financed with ITL proceeds, may be appropriate.

A small business wanting to qualify as adversely impacted from import competition must submit supporting documentation that explains the impact, and a plan with projections that explains how the loan will improve the business’ competitive position.

Export Working Capital Program

The SBA’s Export Working Capital Program (EWCP) assists businesses exporters in meeting their short-term export working capital needs. Exporters can use the proceeds to make the products they will be exporting. They can also apply for such lines of credit prior to finalizing an export sale or contract. With an approved EWCP loan in place, exporters have greater flexibility in negotiating export payment terms—secure in the assurance that adequate financing will be in place when the export order is won.

Benefits of the EWCP

Financing for suppliers, inventory or production of export goods.
Export working capital during long payment cycles.
Financing for stand-by letters of credit used as bid or performance bonds or advance payment guarantees.
Reserves domestic working capital for the company’s sales within the U.S.
Permits increased global competitiveness by allowing the exporter to extend more liberal sales terms.
Increases sales prospects in under-developed markets which may have high capital costs for importers.
Low fees and quick processing times.

Guaranty Coverage

Maximum loan amount is $5,000,000.
90 percent of principal and accrued interest up to 120 days.
Low guaranty fee of one-quarter of one percent of the guaranteed portion for loans with maturities of 12 months or less.
Loan maturities are generally for 12 months or less, but can be up to a maximum of 36 months.

Use of Proceeds

To pay for the manufacturing costs of goods for export.
To purchase goods or services for export.
To support standby letters of credit to act as bid or performance bonds.
To finance foreign accounts receivable.

Interest Rates

The SBA does not establish or subsidize interest rates on loans. The interest rate can be fixed or variable and is negotiated between the borrower and the participating lender.

Advance Rates

Up to 90 percent on purchase orders.
Up to 90 percent on documentary letters of credit.
Up to 90 percent on foreign accounts receivable.
Up to 75 percent on eligible foreign inventory located within the U.S.
In all cases, not to exceed the exporter’s costs.

Collateral Requirements

The export-related inventory and the receivables generated by the export sales financed with EWCP funds generally will be considered adequate collateral. The SBA requires the personal guarantee of owners with 20 percent or more ownership.

How to apply

Application is made directly to SBA-participating lenders. Businesses are encouraged to contact SBA staff at their local U.S. Export Assistance Center (USEAC) to discuss whether they are eligible for the EWCP and whether it is the appropriate tool to meet their export financing needs. Participating lenders review/approve the application and submit the guaranty request to SBA staff at the local USEAC.

CAPLines

The CAPLines program for loans up to $5 million is designed to help small businesses meet their short-term and cyclical working capital needs. The programs can be used to finance seasonal working capital needs; finance the direct costs of performing certain construction, service and supply contracts, subcontracts, or purchase orders; finance the direct cost associated with commercial and residential construction; or provide general working capital lines of credit. The maturity can be for up to 10 years except for the Builders Capline which is limited to 36 months after the first structure is completed. Guaranty percentages are the same as for a Basic 7(a) Loan. There are four distinct short term loan programs under the CAPLine umbrella:

The Contract Loan Program is used to finance the cost associated with contracts, subcontracts, or purchase orders. Proceeds can be disbursed before the work begins. If used for one contract or subcontract, it is generally not revolving; if used for more than one contract or subcontract at a time, it can be revolving. The loan maturity is usually based on the length of the contract, but no more than 10 years. Contract payments are generally sent directly to the lender but alternative structures are available.
The Seasonal Line of Credit Program is used to support buildup of inventory, accounts

receivable or labor and materials above normal usage for seasonal inventory. The business must have been in business for a period of 12 months and must have a definite established seasonal pattern. The loan may be used over again after a “clean-up” period of 30 days to finance activity for a new season. These loans also may have a maturity of up to five years. The business may not have another seasonal line of credit outstanding but may have other lines for non-seasonal working capital needs.

The Builders Line Program provides financing for small contractors or developers to construct or rehabilitate residential or commercial property. Loan maturity is generally three years but can be extended up to five years, if necessary, to facilitate sale of the property. Proceeds are used solely for direct expenses of acquisition, immediate construction and/or significant rehabilitation of the residential or commercial structures. The purchase of the land can be included if it does not exceed 20 percent of the loan proceeds. Up to 5 percent of the proceeds can be used for physical improvements that benefit the property.
The Working Capital Line Program is a revolving line of credit (up to $5,000,000) that provides short term working capital. These lines are generally used by businesses that provide credit to their customers, or whose principle asset is inventory. Disbursements are generally based on the size of a borrower’s accounts receivable and/or inventory. Repayment comes from the collection of accounts receivable or sale of inventory. The specific structure is negotiated with the lender. There may be extra servicing and monitoring of the collateral for which the lender can charge up to 2 percent annually to the borrower.

Other Guaranty Lines of Credit

All the Special Purpose Programs listed above have SBA structured repayment terms meaning the Agency tells the lender how principal and interest is to be repaid. These programs also require the lender to use certain closing forms. Lenders with the ability to obtain 7(a) guarantees through any of the Express processes are considered experienced enough to be able to structure their own repayment terms and use their own closing documents. With this ability the lender can tailor a line of credit that it gets guaranteed by SBA to the needs of the business. Therefore, if a potential applicant sees that the previously listed Basic 7(a) or Special Purpose 7(a) Programs don’t meet their needs they should discuss their options with a lender capable of providing an SBAExpress loan with an SBA guaranty.

SBAExpress

The SBAExpress Loan or Line of Credit is a flexible smaller loan up to $350,000 that a designated lender can provide to its borrower using mostly their own forms, analysis and procedures to process, structure, service, and disburse this SBA-guaranteed loan. When structured as a term loan the proceeds and maturity are the same as a Basic 7(a) Loan. When structured as a revolving line of credit the requirements for the payment of interest and principal are at the discretion of the lender and maturity can’t exceed 7 years.

Export Express

SBA’s Export Express loans offers flexibility and ease of use for both borrowers and lenders on loans up to $500,000. It is the simplest export loan product offered by the SBA.

Use of Proceeds

Loan proceeds may be used for business purposes that will enhance a company’s export development. Export Express can take the form of a term loan or a revolving line of credit. As an example, proceeds can be used to fund participation in a foreign trade show, finance standby letters of credit, translate product literature for use in foreign markets, finance specific export orders, as well as to finance expansions, equipment purchases, and inventory or real estate acquisitions, etc.

Ineligible Use of Proceeds

Proceeds may not be used to finance overseas operations other than those strictly associated with the marketing and/or distribution of products/services exported from the U.S.

Interest Rates

Terms are negotiated between the borrower and lender but interest rates may not exceed Prime plus 4.5 percent on loans over $50,000 and Prime plus 6.5 percent on loans of $50,000 or less.

Exporter Eligibility

Any business that has been in operation, although not necessarily in exporting, for at least 12 full months and can demonstrate that the loan proceeds will support its export activity is eligible for Export Express. The one year in business operations requirement can be waived if the applicant can demonstrate previous successful business experience and exporting expertise and the lender does conventional underwriting, not relying solely on credit scoring.

Foreign Buyer Eligibility

The exporter’s foreign buyer must be a creditworthy entity and not located in countries prohibited for financial support on the Export-Import Bank’s Country Limitation Schedule and the methods of payment must be acceptable to the SBA and the SBA lender.

How to Apply

Interested businesses should contact their existing lender to determine if they are an SBA Export Express lender. Application is made directly to the lender. Lenders use their own application material in addition to SBA’s Borrower Information Form. Lenders’ approved requests are then submitted with a limited amount of eligibility information to SBA’s National Loan Processing Center for review.

7(a) LOAN PROCESSES FOR LENDERS

There are various procedures for lenders to follow when they apply to SBA for a 7(a) guaranty. Some are designed for experienced lenders who are fully committed to providing business loans guaranteed by SBA to their clientele that need them, while others are designed for lenders with limited experience or when there are certain issues that require SBA to thoroughly review the situation. The foundational process is called the Standard Loan Guaranty Process and it is used by lenders to request a guaranty from SBA when they are new to SBA lending or the request requires an SBA review. Other methods of processing have less requirements for SBA but more for the lender and the determining factors on which one a lender will use depends on the experience of the lender in dealing with SBA, the complexity of the case, the purpose of the loan, and the dollar amount being requested.

Standard 7(a) Loan Processing

After the applicant business and lender complete their required documents, the lender makes application to SBA for a guaranty by submitting them to SBA’s Loan Guaranty Processing Center. The center will screen the application and, if satisfactory complete a thorough review of both eligibility and creditworthiness before making the decision to approve the issuance of a guaranty as submitted, approve with modifications (which will be discussed with the lender), or reject the request. When the lender makes application to SBA, they have already internally agreed to approve the recommended loan to the applicant if, and only if, the SBA provides a guaranty.

Standard processing means a lender makes their request for guaranty using SBA Form 1920 and the applicant completes SBA Form 1919, even if the applicant previously completed the lender’s required application forms.

The analysis of eligibility starts with a review of the “Eligibility Questionnaire,” completed by the lender. The analysis of credit starts with a review of the SBA Form 1920 and the lender’s credit memo which must discuss at least six elements:

Balance sheet and ratio analysis;
Analysis of repayment. It is not acceptable to base repayment ability solely on the applicant’s credit score.
Assessment of the management skills of the applicant;
Explanation of the collateral used to secure the loan and the adequacy of the proposed collateral;
Lender’s credit history with applicant including an explanation of any weaknesses;
Current financial statements and pro-forma financial spread. SBA pro-forma analysis reflects how the business will look immediately following disbursement, not one year after disbursement.

SBA also expects that the lender’s credit memo includes the intended use of the loan proceeds and any historical and current issues that require explanation. SBA also expects a discussion of the process by which the applicant business generates its income when it is not immediately obvious. An explanation of how the business conducts its operation is also expected.

SBA has three days to screen and 10 days to process the request for guaranty from the lender. Any additional time a lender takes to make their determination prior to requesting a guaranty from SBA will add to the length of time to reach a final decision. If the guaranty is approved, SBA will prepare a loan authorization outlining the terms and conditions under which the guaranty is provided and prepare an approval letter for transmission to the lender.

Certified Processing

SBA has a Certified Lenders Program (CLP) which lenders with more experience and commitment to SBA lender can obtain which allows them to request a 7(a) guaranty through a process similar to the Standard process except the SBA will only review the lenders request rather than re-analyze.

Preferred Processing

SBA has a Preferred Lenders Program (PLP) designed for lenders who have been delegated the authority to make both the eligibility and credit decisions without a second look by SBA. This process is used by the most experienced lenders who have the most dedicated staffs ready to review requests for financial assistance from existing and potential customers in order to see if they need to become SBA guaranteed loans

SBAExpress Processing

The SBAExpress guaranty is available to lenders as a way to obtain a guaranty on smaller loans up to $350,000. The program authorizes select, experienced lenders to use mostly their own forms, analysis and procedures to process, structure, service, and disburse SBA-guaranteed loans. The SBA guarantees up to 50 percent of an SBAExpress loan. Loans under $25,000 do not require collateral. The use of proceeds for a term loan is the same as for any Basic 7(a) Loan. 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. Revolving lines of credit are allowed for a maximum of seven years.

Export Express Processing

SBA Export Express offers flexibility and ease of use for lenders. Participating lenders may use their own forms, procedures and analyses.

The SBA provides the lender with a response within 36 hours. This loan is subject to the same loan processing, closing, servicing and liquidation requirements as for other similar-sized SBA loans.

Guaranty Coverage

The SBA provides lenders with a 90 percent guaranty on loans up to $350,000 and a 75 percent guaranty on loans between $350,001 and $500,000.

U.S. Export Assistance Centers

SBA trade finance specialists are located in 19 U.S. Export Assistance Centers throughout the U.S., which also are staffed by U.S. Department of Commerce and, in some locations, Export-Import Bank of the U.S. personnel, providing trade promotion and export-finance assistance in a single location. The USEACs also work closely with other federal, state and local international trade organizations to provide assistance to small businesses. To find your nearest USEAC, visit: http://www.sba.gov/content/us-export-assistance-centers. You can find additional export training and counseling opportunities by contacting your local SBA district office.

International Trade Programs

U.S. Export Assistance Center

1625 Broadway Ave., Ste. 680

Denver, CO 80202

303-844-6623 • 303-844-5651 Fax

Community Advantage Loans

The Community Advantage Pilot Program is aimed at helping businesses located in underserved communities gain access to capital by opening up 7(a) lending to mission-focused, community-based lenders — such as Community Development Financial Institutions (CDFIs), Certified Development Companies (CDCs), and microlenders. These lenders provide technical assistance and economic development support to businesses located in underserved markets.

The application process is the same as for a Basic 7(a) Loan. The main difference with this program from other SBA 7(a) loan programs is the lender who ultimately provides the loan funds is not a traditional SBA lender. Visit: www.sba.gov/advantage for more information about this program.

CERTIFIED DEVELOPMENT COMPANY LOAN PROGRAM

(504 LOANS)

The 504 Loan program is an economic development program that supports American small business growth and helps communities through business expansion and job creation. The 504 loan program provides long-term, fixed-rate, subordinate mortgage financing for acquisition and/or renovation of capital assets including land, buildings and equipment. Some refinancing is also permitted. Most for-profit small businesses are eligible for this program. The types of businesses excluded from 7(a) loans (listed previously) are also excluded from the 504 loan program.

The SBA’s 504 Certified Development Companies (CDC) serve their communities by financing business expansion needs. Their professional staff works directly with borrowers to tailor a financing package that meets program guidelines and the credit capacity of the borrower’s business.

CDCs work with banks and other lenders to make loans in first position on reasonable terms, helping lenders retain growing customers and provide Community Reinvestment Act credit.

The SBA 504 loan is distinguished from the SBA 7(a) loan program in these ways:

The maximum debenture, or long-term loan, is:

$5 million for businesses that create a certain number of jobs or improve the local economy;
$5 million for businesses that meet a specific public policy goal, including loans for aiding rural development and expansion of small businesses owned by veterans, women, and minorities; and
$5.5 million for manufacturers and energy related public policy projects.

Recent additions to the program allow $5.5 million for each project that reduces the borrower’s energy consumption by at least 10 percent; and $5.5 million for each project that generates renewable energy fuels, such as biodiesel or ethanol production. Projects eligible for up to $5.5 million under one of these two requirements do not have to meet the job creation or retention requirement, so long as the CDC portfolio reflects an average jobs to debenture portfolio ratio of at least 1 job per $65,000.

Eligible project costs are limited to long-term, fixed assets such as land and building (occupied by the borrower) and substantial machinery and equipment.
Most borrowers are required to make an injection (borrower contribution) of just 10 percent which allows the business to conserve valuable operating capital. A further injection of 5 percent is needed if the business is a start-up or new (less than two years old), and a further injection of 5 percent is also required if the primary collateral will be a single-purpose building (such as a hotel).
Two-tiered project financing: A lender finances approximately 50 percent of the project cost and receives a first lien on the project assets (but no SBA guaranty); A CDC (backed by a 100 percent SBA-guaranteed debenture) finances up to 40 percent of the project costs secured with a junior lien. The borrower provides the balance of the project costs.
Fixed interest rate on SBA loan. The SBA guarantees the debenture 100 percent. Debentures are sold in pools monthly to private investors. This low, fixed rate is then passed on to the borrower and establishes the basis for the loan rate.
All project-related costs can be financed, including acquisition (land and building, land and construction of building, renovations, machinery and equipment) and soft costs, such as title insurance and appraisals. Some closing costs may be financed.
Collateral is typically a subordinate lien on the assets financed; allows other assets to be free of liens and available to secure other needed financing.
Long-term real estate loans are up to 20-year term, heavy equipment 10- or 20-year term and are self-amortizing.

Businesses that receive 504 loans are:

Small — net worth under $15 million, net profit after taxes under $5 million, or meet other SBA size standards.
Organized for-profit.
Most types of business — retail, service, wholesale or manufacturing.

For information, visit

MICROLOAN PROGRAM (LOANS UP TO $50,000)

The Microloan program provides very small loans (up to $50,000) to women, low-income, minority, veteran, and other small business owners through a network of more than 100 Intermediaries nationwide. Under this program, the SBA makes funds available to nonprofit intermediaries that, in turn, make the small loans directly to start-up and existing businesses. Entrepreneurs work directly with the Intermediaries to receive financing, and business knowledge support. The proceeds of a microloan can be used for working capital, or the purchase of furniture, fixtures, supplies, materials, and/or equipment. Microloans may not be used for the purchase of real estate. Interest rates are negotiated between the borrower and the Intermediary. The maximum term for a microloan is six years. Because funds are borrowed from the Intermediary, SBA is not involved in the business loan application or approval process. And, payments are made directly from the small business to the Intermediary.

The program also provides business-based training and technical assistance to micro-borrowers and potential micro-borrowers to help them successfully start or grow their businesses. Such training and technical assistance may include general business education, assistance with business planning, industry-specific training, and other types of training support.

Entrepreneurs and small business owners interested in small amounts of business financing should contact the nearest SBA district office for information about the nearest Microloan Program Intermediary Lender.

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REACHING UNDERSERVED COMMUNITIES

The SBA also offers a number of programs specifically designed to meet the needs of the underserved communities..

WOMEN BUSINESS OWNERS

Women entrepreneurs are changing the face of America’s economy. In the 1970s, women owned less than 5 percent of the nation’s businesses.

Today, they are majority owners of about a third of the nation’s small businesses and are at least equal owners of about half of all small businesses. SBA serves women entrepreneurs nationwide through its various programs and services, some of which are designed especially for women.

The SBA’s Office of Women’s Business Ownership (OWBO) serves as an advocate for women-owned businesses. The office oversees a nationwide network over 100 Women’s Business Centers that provide business training, counseling and mentoring geared specifically to women, especially those who are socially and economically disadvantaged. The program is a public-private partnership with locally-based nonprofits.

Women’s Business Centers serve a wide variety of geographic areas, population densities, and economic environments, including urban, suburban, and rural. Local economies vary from depressed to thriving, and range from metropolitan areas to entire states. Each Women’s Business Center tailors its services to the needs of its individual community, but all offer a variety of innovative programs, often including courses in different languages. They provide training in finance, management, and marketing, as well as access to all of the SBA’s financial and procurement assistance programs.

VETERAN BUSINESS OWNERS

The Office of Veterans Business Development (OVBD), established with Public Law 106-50, has taken strides in expanding assistance to veteran, service-disabled veteran small business owners and reservists by ensuring they have access to SBA’s full-range of business/technical assistance programs and services, and that they receive special consideration for SBA’s entrepreneurial programs and resources.

The SBA’s Veterans Office provides funding and collaborative assistance for a number of special initiatives targeting local veterans, service-disabled veterans, and Reserve Component members. These initiatives include Veterans Business Outreach Centers (VBOCs), the business assistance tools –Balancing Business and Deployment, and Getting Veterans Back to Business, which includes interactive CD ROMs for reservists to help prepare for mobilization and/or reestablishment of businesses upon return from active duty.

The agency offers special assistance for small businesses owned by activated Reserve and National Guard members. Any self-employed Reserve or Guard member with an existing SBA loan can request from their SBA lender or SBA district office loan payment deferrals, interest rate reductions and other relief after they receive their activation orders. In addition, the SBA offers special low-interest-rate financing to small businesses when an owner or essential employee is called to active duty. The Military Reservist Economic Injury Disaster Loan Program (MREIDL) provides loans up to

$2 million to eligible small businesses to cover operating costs that cannot be met due to the loss of an essential employee called to active duty in the Reserves or National Guard.

Each of the SBA’s 68 District Offices also has a designated veteran’s business development officer. These local points-of-contact assist veteran small business owners/entrepreneurs with starting, managing and growing successful businesses. Yearly, OVBD reaches thousands of veterans, Reserve component members, transitioning service members and others who are – or who want to become – entrepreneurs and small business owners. In fiscal year 2012, the number of veterans assisted through OVBD programs exceeded 135,000. For more information about OVBD, please visit www.sba.gov/veterans.

NATIONAL BOOTS TO BUSINESS INITIATIVE

The aptly named Operation Boots to Business program (B2B) builds on SBA’s role as a national leader in entrepreneurship training. The program’s mission is to develop veteran entrepreneurs from the approximately 250,000 service members who transition from the military each year. Boots to Business is an entrepreneurial education program offered as an elective track within the Department of Defense’s revised Transition Assistance Program called Transition Goals, Plans, Success (Transition GPS).

CENTER FOR FAITH-BASED AND NEIGHBORHOOD PARTNERSHIPS

SBA’s Center for Faith-Based and Neighborhood Partnerships (The Partnership Center) works to engage and build strong partnerships with community and nonprofit organizations, both secular and faith-based, to support entrepreneurship, economic growth and promote prosperity for all Americans. The center works in coordination with other offices within the Agency to assist in formulating policies and practices with the goal of extending the reach and impact of SBA programs into communities. SBA recognizes the important role of community leaders and networks in economic development at the local and national level, and that partnerships provide effective and efficient leverage for SBA programs. Further, the center plays a key role in helping identify, engage and impact underserved communities.

The program engages in outreach, technical assistance, education, formulates and administers training programs, coordinates entrepreneurial and business development opportunities and access to SBA’s 68 district offices and extensive network of resource grant partners. The center additionally works with the White House Office of Faith-Based and Neighborhood Partnerships and the Faith-Based and Neighborhood Partnership Centers that are within 13 additional federal agencies, and participates in interagency working groups to ensure effective and efficient coordination of resources and initiatives.

NATIVE AMERICAN

BUSINESS DEVELOPMENT

The SBA Office of Native American Affairs (ONAA) ensures that American Indians, Alaska Natives and Native Hawaiians seeking to create, develop and expand small businesses have full access to business development and expansion tools available through the agency’s entrepreneurial development, lending, and contracting programs. The office provides a network of training initiatives that include a Native Entrepreneurial Empowerment Workshop, a Native American 8(a) Business Development Workshop, a Money Smart Workshop, an Incubator Workshop and the online tool, “Small Business Primer: Strategies for Growth”. ONAA also is responsible for consulting with tribal governments prior to finalizing SBA policies that may have tribal implications.

VETERANS BUSINESS OUTREACH CENTERS

The Veterans Business Outreach Program (VBOP) is designed to provide entrepreneurial development services such as business training, counseling and mentoring, and referrals for eligible veterans owning or considering starting a small business. The SBA has 15 organizations participating in this cooperative agreement and serving as Veterans Business Outreach Centers (VBOC) across the country. Services provided by VBOC’s include: pre-business plan workshops, concept assessments, business plan preparations, comprehensive feasibility analysis, entrepreneurial training and counseling, mentorship, and other business-development related services.

VBOCs also provide assistance and training in such areas as international trade, franchising, Internet marketing, accounting, etc. For a VBOC directory, please visit

Young Entrepreneurs

The SBA recognizes the importance of fostering young entrepreneurs and small business owners and their role in the economy. The SBA offers different activities and resources throughout the year aimed at aspiring young entrepreneurs, including social media outreach and customized online courses. The SBA also works with other federal agencies to provide various activities for this market (www.findyouthinfo.gov). To find more information, visit

Encore Entrepreneurs To help meet the needs of “encore entrepreneurs,” SBA and AARP have joined forces to mentor, counsel, and educate Americans age 50 and over on how to start or grow a small business. Through this partnership, SBA and AARP collaborate to connect the 50+ population to small business development resources, including online courses, live workshops, conferences, and mentoring activities. For additional information, visit www.sba.gov/encore.

ARE YOU RIGHT FOR SMALL BUSINESS OWNERSHIP?

Most new business owners who succeed have planned for every phase of their success. Thomas Edison, the great American inventor, once said, “Genius is 1 percent inspiration and 99 percent perspiration.” That same philosophy also applies to starting a business.

First, you’ll need to generate a little bit of perspiration deciding whether you’re the right type of person to start your own business.

IS ENTREPRENEURSHIP FOR YOU?

There is simply no way to eliminate all the risks associated with starting a small business, but you can improve your chances of success with good planning, preparation and insight. Start by evaluating your strengths and weaknesses as a potential owner and manager of a small business. Carefully consider each of the following questions:

Are you a self-starter? It will be entirely up to you to develop projects, organize your time, and follow through on details.
How well do you get along with different personalities? Business owners need to develop working relationships with a variety of people including customers, vendors, staff, bankers, employees and professionals such as lawyers, accountants, or consultants. Can you deal with a demanding client, an unreliable vendor, or a cranky receptionist if your business interests demand it?
How good are you at making decisions? Small business owners are required to make decisions constantly – often quickly, independently, and under pressure.
Do you have the physical and emotional stamina to run a business? Business ownership can be exciting, but it’s also a lot of work. Can you face six or seven 12–hour workdays every week?
How well do you plan and organize? Research indicates that poor planning is responsible for most business failures. Good organization — of financials, inventory, schedules, and production — can help you avoid many pitfalls.
Is your drive strong enough? Running a business can wear you down emotionally. Some business owners burn out quickly from having to carry all the responsibility for the success of their business on their own shoulders. Strong motivation will help you survive slowdowns and periods of burnout.
How will the business affect your family? The first few years of business start-up can be hard on family life. It’s important for family members to know what to expect and for you to be able to trust that they will support you during this time. There also may be financial difficulties until the business becomes profitable, which could take months or years. You may have to adjust to a lower standard of living or put family assets at risk.

Once you’ve answered these questions, you should consider what type of business you want to start. Businesses can include franchises, at-home businesses, online businesses, brick-and-mortar stores or any combination of those.

FRANCHISING

There are more than 3,000 business franchises. The challenge is to decide on one that both interests you and is a good investment. Many franchising experts suggest that you comparison shop by looking at multiple franchise opportunities before deciding on the one that’s right for you.

Some of the things you should look at when evaluating a franchise: historical profitability, effective financial management and other controls, a good image, integrity and commitment, and a successful industry.

In the simplest form of franchising, while you own the business, its operation is governed by the terms of the franchise agreement. For many, this is the chief benefit for franchising. You are able to capitalize on a business format, trade name, trademark and/or support system provided by the franchisor. But you operate as an independent contractor with the ability to make a profit or sustain a loss commensurate with your ownership.

If you are concerned about starting an independent business venture, then franchising may be an option for you. Remember that hard work, dedication and sacrifice are key elements in the success of any business venture, including a franchise.

HOME-BASED BUSINESSES

Going to work used to mean traveling from home to a plant, store or office. Today, many people do some or all their work at home.

Getting Started

Before diving headfirst into a home-based business, you must know why you are doing it. To succeed, your business must be based on something greater than a desire to be your own boss. You must plan and make improvements and adjustments along the road.

Working under the same roof where your family lives may not prove to be as easy as it seems. One suggestion is to set up a separate office in your home to create a professional environment.

Ask yourself these questions:

Can I switch from home responsibilities to business work easily?
Do I have the self-discipline to maintain schedules while at home?
Can I deal with the isolation of working from home?

Legal Requirements

A home-based business is subject to many of the same laws and regulations affecting other businesses.

Some general areas include:

Zoning regulations. If your business operates in violation of them, you could be fined or shut down.
Product restrictions. Certain products cannot be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, explosives, sanitary or medical products and toys. Some states also prohibit home-based businesses from making food, drink or clothing.

Be sure to consult an attorney and your local and state departments of labor and health to find out which laws and regulations will affect your business. Additionally, check on registration and accounting requirements needed to open your home-based business. You may need a work certificate or license from the state. Your business name may need to be registered with the state. A separate business telephone and bank account are good business practices.

Also remember, if you have employees you are responsible for withholding income and Social-Security taxes, and for complying with minimum wage and employee health and safety laws.

Writing a Business Plan

After you’ve thought about what type of business you want, the next step is to develop a business plan. Think of the business plan as a roadmap with milestones for the business. It begins as a pre-assessment tool to determine profitability and market share, and then expands as an in-business assessment tool to determine success, obtain financing and determine repayment ability, among other factors.

Creating a comprehensive business plan can be a long process, and you need good advice. The SBA and its resource partners, including Small Business Development Centers, Women’s Business Centers, Veterans Business Outreach Centers, and SCORE, have the expertise to help you craft a winning business plan. The SBA also offers online templates to get you started.

In general, a good business plan contains:

Introduction

Give a detailed description of the business and its goals.
Discuss ownership of the business and its legal structure.
List the skills and experience you bring to the business.
Discuss the advantages you and your business have over competitors.

Marketing

Discuss the products and services your company will offer.
Identify customer demand for your products and services.
Identify your market, its size and locations.
Explain how your products and services will be advertised and marketed.
Explain your pricing strategy.

Financial Management

Develop an expected return on investment and monthly cash flow for the first year.
Provide projected income statements and balance sheets for

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Start, Market and Manage Your Business

Every year, the U.S. Small Business Administration and its nationwide network of resource partners help millions of potential and existing small business owners start, grow and succeed.

Whether your target market is global or just your neighborhood, the SBA and its resource partners can help at every stage of turning your entrepreneurial dream into a thriving business.

If you’re just starting out, the SBA and its resources can help you with business and financing plans. If you’re already in business, you can use the SBA’s resources to help manage and expand your business, obtain government contracts, recover from disaster, find foreign markets, and make your voice heard in the federal government.

You can access SBA information at www.sbaloansUtah.com

SBA’S ENDORSED LOCAL PROVIDERS AND LOAN OFFICERS.

In addition to our Utah offices, which serve every state and territory, the SBA works with a variety of local resource partners to meet your small business needs: SCORE chapters, Small Business Development Centers (SBDCs), and Women’s Business Centers (WBCs). This partner network reaches into communities across America: More than 13,000 business counselors, mentors and trainers available through over 900 Small Business Development Centers, 110 Womens’ Business Centers and 350 SCORE chapters. These professionals can help with writing a formal business plan, locating sources of financial assistance, managing and expanding your business, finding opportunities to sell your goods or services to the government, and recovering from disaster. To find your local district office or SBA resource partner, visit www.sbaloansutah.com Complete short contact box.

SCORE

SCORE is a national network of more than 11,000 entrepreneurs, business leaders and executives who volunteer as mentors to America’s small businesses. SCORE volunteers donated more than 1.1 million hours providing services to small business clients. SCORE leverages decades of experience from seasoned business professionals to help entrepreneurs to start and grow companies and to create jobs in local communities. SCORE does this by harnessing the passion and knowledge of individuals who have owned and managed their own businesses and want to share this “real world” expertise with you.

Found in more than 350 chapters and 800 locations throughout the country, SCORE provides key services – both face-to-face and online – to busy entrepreneurs who are just getting started or are in need of a seasoned business professional as a sounding board for their existing business. As members of your community, SCORE mentors understand local business licensing rules, economic conditions and important business networks. SCORE can help you as they have done for many entrepreneurs through the years by:

Matching your specific needs with a business mentor
Traveling to your place of business for an on-site evaluation
Teaming with several SCORE mentors to provide you with tailored assistance in a number of business areas

Across the country, SCORE offers more than 10,000 local businesses educational workshops and seminars ranging in topic and scope depending on the needs of the local business community. SCORE workshops cover all manner of business topics, including: an introduction to the fundamentals of a business plan, managing cash flow and marketing your business. For established businesses, SCORE offers more in-depth training in areas like customer service, hiring practices and home-based businesses.

For around-the-clock business advice and information on the latest business news and trends visit www.sbaloansutah.com for the local office nearest you. Get your Score today. More than 1,200 online mentors with over 150 business skill sets answer your questions about starting and running a business.

For more information on SCORE and to get your own business mentor, visit

DON’T WAIT

It’s true, there are a lot of reasons not to start your own business. But for the right person, the advantages of business ownership far outweigh the risks.

You get to be your own boss.
Hard work and long hours directly benefit you, rather than increasing profits for someone else.
Earnings and growth potential are unlimited. Sale business for profit, or keep in family for future generation. The sooner you get started, the sooner you can start shopping for your own business.

See link for businesses to buy or for sale.

SMALL BUSINESS DEVELOPMENT CENTERS

The U.S. Small Business Administration’s Small Business Development Centers (SBDC) mission is to build, sustain, and grow small businesses; as well as to promote small business development and enhance local economies by creating businesses and fulfilling its mission of creating jobs.

The Small Business Development Centers, vital to SBA’s entrepreneurial outreach, have been providing service to small businesses for almost 35 years. It is one of the largest professional small business management and technical assistance networks in the nation. With over 900 locations across the country, SBDCs offer existing and future entrepreneurs free one-on-one expert business counseling and low-cost training by qualified small business professionals.

In addition to its core services, the SBDCs offer special focus areas such as green business technology, disaster recovery and preparedness, export assistance, international trade assistance, veteran’s assistance, technology transfer and regulatory compliance.

The program combines a unique combination of federal, state and private sector resources to provide, in every state and territory, the foundation for the economic growth of small businesses. The return on investment is demonstrated by the program’s success during FY2013.

Assisted more than 14,200 entrepreneurs to start new businesses – equating to nearly 39 new business starts per day.
Provided counseling services to more than 104,000 emerging entrepreneurs and over 96,000 existing businesses.
Provided training services to approximately 330,000 clients.

The efficacy of the SBDC program has been validated by a nationwide impact study. Of the clients surveyed, more than 80 percent reported that the business assistance they received from the SBDC counselor was worthwhile. The top five impacts of counseling cited by SBDC clients were revising marketing strategy, increasing sales, expanding products and services, improving cash flow and increasing profit margin. More than 40 percent of long-term clients receiving five hours or more of counseling reported an increase in sales and profit margins.

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