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Check In Code: FFFD Name Flavors of of Session Owner/User Financing Speakers Enter Check In Code by 1:25 p.m.

John Randall The SBA Guy Live Oak Bank (317) 775-0344 John.Randall@liveoak.bank Who is the SBA Guy? 300 + SBA loans booked Purchase Ground Up Tenant Improvements Refinance 17 years experience $375,000,000 + in Loans Closed 98.7% Approval on Proposals Issued Not a Banker

Owner Occupied CRE Financing Agenda Market Update Rate Outlook Financing Comparisons Tools you can use What's getting done? How to Close Fast Questions

Market Update Competition is strong Lenders are aggressive Strong borrowers are benefiting Rates are rising There are changes coming

Lenders Showing Caution

Regulation

Regulation

Regulation

Fewer Banks

Fewer Banks

Regulation

Regulation

Interest Rates

Interest Rates

Low Unemployment

Construction Costs

Market Factors Cautious Traditional Lenders Escalating Costs Increasing Interest Rates Challenging Hiring Environment Uncertain Trade Environment Businesses want to Conserve Cash..

Record High Approvals

7(a) Lender Consolidation

Top 50 Lender Trends

Technology Operations Manual Data Collection File Sharing, Electronic Signatures, Cloud Collaboration Marketing Word of Mouth CRM, Marketing Automation, Social Media Analytical Labor Intensive Credit scoring (at origination & portfolio mgmt.)

SBA National Top 7(a) Lenders FY 2018, Through March 2018 Live Oak Banking Company $777,927,600 Wells Fargo Bank, National Association $648,373,800 The Huntington National Bank $447,228,100 JPMorgan Chase Bank, National Association $322,718,300 Byline Bank $281,854,700 Newtek Small Business Finance, Inc. $270,538,000 Celtic Bank Corporation $200,817,800 Bank of Hope $184,399,900 U.S. Bank National Association $178,823,700 First Bank $176,826,000

SBA Lending Overview SBA 7(a) maximum loan size - $5,000,000 SBA 504 maximum loan size - $12,500,000 Size limitations Most businesses qualify Net profit < $5M 2 year average, NW less that $15M Personal guarantees any owner > 20% For-profit businesses only 24

Overview of SBA 7 (a) Loans Flagship Program Utilized for many purposes: Real estate purchase, construction and refinance Business acquisition / partner buy-out Equipment purchase, expansion Working Capital, Inventory Leasehold Improvements Combination of all with one loan

Overview of SBA 504 Loans Real Estate Purchase/Construction or large fixed assets only Lenders work with a local community development corporation (CDC)

Tools Your Lending Partner Should Provide Pre-Screening of buyers A quality buyer will get your listing closed faster Proposed purchase scenarios Outlines loan payments and costs Can help market your listings to more potential buyers Co-marketing opportunities Sign riders Window clings Co-branded marketing flyers Advertising 90% financing available 28

3 Way Comparison

Recently Closed Transactions Carmel Professional Office Building $648,000 Commercial Real Estate Loan 10% cash equity 25 year loan Included funds for Interior Buildout Furniture Working Capital 32 Calendar Days

Recently Closed Transactions Westfield Flex Space $1,023,000 Commercial Real Estate Loan 10% cash equity 25 year loan Included funds for Significant Construction 34 Calendar Days

Recently Closed Transactions Fort Wayne Office Building $557,000 Commercial Real Estate Loan 10% cash equity 25 year loan 39 Calendar Days

Recently Closed Transactions Indianapolis Office Building $1,132,000 Commercial Real Estate Loan 10% cash equity 25 year loan 39 Calendar Days

Recently Closed Transactions Indianapolis Industrial Building $1,873,500 Commercial Real Estate Loan 10% cash equity 25 year loan New Parking Lot and Access Doors 43 Calendar Days

Recently Closed Transactions Columbus Industrial Building $1,835,300 Commercial Real Estate Loan 10% Down Payment 25 Year Loan Significant Construction Insulation, Ventalation System, New Loading Docs and Parking Lot 43 Days

37 Recently Closed Transactions Injection Molding Company $4,025,000 Real Estate Purchase with Construction WHY SBA? Lowest Down Payment Longer Amortization/Lower Monthly Payment Fully Amortizing (No Baloons, Maturities, Etc) No Covenants, No Monitoring No Personal Liquidity Limit 37

38 Recently Closed Transactions Family Entertainment Center $589,000 in equipment $875,000 in TI s No Real Estate as collateral! WE CAN HELP ON LEASE PROJECTS!!!! 38

Why there s never been a better time for an SBA Loan More companies than ever are eligible Tangible net worth <$15MM Net profits <$5MM in each of last two years Interest rates are still very reasonable Permanently increased lending limits $5,000,000 7(a) and $12,500,000 504 Pari Passu Financing Options if Needed 39

Why SBA? Lower Down Payment Low Monthly Payments Flexible Prepayment Terms (7a) No balloon payments

Ways to Close Faster Ask for all critical documents right away Prior Phase 1 or Phase 2 Environmental Reports Prior Appraisals Prior Surveys Floor Plans Lease Agreements, Rent Rolls, 2 Yrs Operating Exp. List of Recent Capital Improvements Request a Preliminary Title Report right away

Ways to Close Faster Be Ready to Recommend: A good attorney or CPA to set up new entity s (Articles, Bylaws/Operating Agreements, Tax ID # s) A good insurance agent A good contractor, architect, or designer who can get into the building FAST A good environmental vendor A good surveyor

Ways to Close Faster Find out if buyer has any: Moving expenses Signage needs Equipment or furniture needs Help! A Good Lender Can Probably

Ways to Close Faster Sniff Test Save Time, don t take an offer until a lender you trust has talked to the buyer, seen financials and given an okay Let your lender discuss Cash Flow Personal Credit, Legal, and Criminal History Source of Down Payment It should only take a good lender 24 hours to do this and issue a proposal/prequalification letter A good lender will give a quick yes and a fast no.

Ways to Close Faster Have a sense of urgency in conversations with all parties and let everyone know the closing expectations in advance: Buyers -Environmental Vendors Sellers -Lenders Title company -CPA s Appraiser -Insurance Agents Attorneys -Contractors, etc. Set expectations with a critical item/timeline checklist Close Fast before Fear and Doubt Creep In Time kills Deals Be Diligent and follow-up!

Questions?

Conventional Financing Sources Community Banks/Commercial Banks 75-80 % LTV Various PPP Structures Generally up to 20 year Amortizations 5-10 year terms (Balloon Payments) Covenants/Monitoring Credit Unions Similar Terms Lower Lending Limits Competitive Rates

Conventional Financing Sources Life Insurance Companies Long Term financing (up to 30 years) Focus on borrower and collateral CMBS (Conduit Loans) Non Recourse Fixed Rate Typically 10 year terms Greater focus on collateral

Unconventional Financing Asset Based Lending Inventory Accounts Receivable Equipment Personal (non business assets)

Unconventional Financing Using Self-Directed IRA Pledged to lender Private Bank/Venture Capital Secured Line of Credit Merchant Loan

Government Guaranteed Financing USDA Beginning Farmers & Rancher Loans Emergency Farm Loans Socially Disadvantaged Farmers & Ranchers: Development in rural areas such as: senior care facilities office corporate headquarters mining operations, etc. USDA funds to one borrower must not exceed $10 million

Underwriting/Loan provisions Loan to Value Ratio Leverage Debt Service Coverage Ratio Reserves Security Mortgage Assignment of rents and leases Recourse Full Limited Non-recourse/carve-out guaranties

Step Down 5,4,3,2,1 Prepayment Penalties Yield Maintenance Defeasance Flat Fee

Questions?

3A22 Please Enter Check Out Code by 3:10 P.M.