SBA 7(a) Loan Guaranty Program Flexible financing for small businesses

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1 Creature Comforts Inman, SC Carolina Kids Anderson, SC May River Dermatology Bluffton, SC BUSINESS DEVELOPMENT CORPORATION A Leader in Small Business Lending SBA 7(a) Loan Guaranty Program Flexible financing for small businesses

2 Palmetto Express Lynchburg, SC R&J Pharmacy North, SC EventWorks North Charleston, SC

3 SBA 7(a) Loan Guaranty Program Helping Small Businesses Secure Challenging Financing SBA 7(a) loans are the most commonly used type of SBA loan given the various financing options available. In addition, this is the most flexible of all the SBA loan programs, since funds may be used for a variety of general business purposes. BDC s Loan Overview for SBA 7(a) MAXIMUM AMOUNT OF LOAN $5 million MAXIMUM GUARANTY AMOUNT REPAYMENT TERMS (BASED ON ABILITY TO REPAY) 75% of a loan, not to exceed $3.75 million 85% for loans of $150,000 and less Working capital up to 5-7 years Machinery & equipment up to 10 years, not to exceed useful life Real estate & construction up to 25 years INTEREST RATES (VARIABLE) Under 7 years Maximum is WSJ Prime Rate % 7 years and over Maximum is WSJ Prime Rate % TYPE OF ENTITIES For-profit businesses APPROVAL OF LOAN SBA GUARANTEE BDC (subject to SBA s final approval) Yes

4 SBA 7(a) Authorized Area of Operations In an effort to expand the value of membership in BDC, we now have authority from both the state and the SBA to make SBA 7(a) loans in a seven state area that includes:» Alabama» Florida» Georgia» South Carolina» Tennessee» Virginia» North Carolina How Small Businesses and Banks Benefit from SBA 7(a) BUSINESS BORROWER > Provides the borrower long-term financing, in most cases > SBA 7(a) loans can be used for refinancing of high interest rate loans > Borrower can use loan proceeds for a variety of business purposes > Gives the borrower access to financing that may not otherwise be available BANK > Grows bank portfolio with reduced risk > Bank provides an alternate financing solution to meet the customer s needs (win-win) > Bank can buy the risk-free portion of the loan > Banks have ideal opportunity to refinance proven borrowers to a fixed rate in 3-5 years > Helps bank retain client and provide ancillary banking services > Provides the bank CRA credit for each transaction > BDC offers banks a referral incentive program

5 Eligible Small Businesses Businesses which are eligible for this loan program are those who carry on a business activity in the U.S. for profit and meet the SBA size standard according to its sales volume or number of employees, depending on industry type. MANUFACTURERS WHOLESALE RETAIL Up to 500 employees Up to 100 employees $7 million or less in average annual sales over the last three years Use of Proceeds > Expansion or renovation > Construction of new facilities > Purchase of land or buildings > Purchase equipment, fixtures, leasehold improvements > Working capital > Refinance debt if compelling reasons > Inventory growth SBA Guaranty SBA itself does not make loans, but rather guarantees a portion of loans made and administered by BDC. The SBA guaranty fee is based upon the amount guaranteed, such as: LOAN AMOUNT UP TO $150,000 OVER $150,000 AND UP TO $700,000 OVER $700,000 OVER $1 MILLION GUARANTY FEE 2% of the guaranteed portion 3% of the guaranteed portion 3.5% of the guaranteed portion Additional 0.25% added to the fee of the guaranteed portion over $1 million Borrower Equity and Fees In most cases, the borrower s minimum equity requirement with a SBA 7(a) loan is ten percent (10%). In addition, the borrower is responsible for paying the guaranty fee, closing costs and other direct costs, such as cost of environmental reports and appraisals; these costs can often be included in the financing of the loan.

6 Harkey Chiropractic Sumter, SC HandPicked Columbia, SC For more information about SBA 7(a), please contact BDC at businessdevelopment.org