SBA Loan

・SBA Loan

SBA loan is a government-assisted loan program through the Federal SBA(Small Business Administration) for small businesses, which usually has a difficult time getting a loan from the bank in a normal way.

・Definition of Small Business

Manufacturing	Max. Employee	500-1500
Wholesaling	Max. Employee	100
Services	Max. Gross sales	$5 Million - $14.5 Million
Retailing	Max. Gross sales	$5 Million - $13.5 Million
→For details, go to Size Standard on the SBA web site

・SBA Loan program

	7(a)Loan	504Loan
Purpose	To buy an existing business, as Start-up capital, working capital, Refinance existing debt, purchase New or used equipment, finance A/R Purchase of real estate for business purpose	To purchase an industrial or commercial building (owner occupancy must be 51% or more)
Loan amount	$25,000-$2 Million SBA Guarantee 75% (up to $1.5 Million)	Up to 90% of the project cost or appraised value of the property, whichever is lower
Term	7-25 years	10, 15, 20, 25 years
Interest rate	Prime rate + up to 2.75%

・Documents

7(a) Loan& 504 Loan
Business info.	Industry, products, If new business, need a business plan
Individual info.	All owners who have more than 20% ownership
Application	Type of loan and purpose
Repayment plan	Repayment schedule
Other documents	Lease agreement, Escrow documents, appraisal reports etc.
Collateral	Equivalent of loan amount (Real Estate owned by corporation/individual, Inventory, A/R, Equipment/facilities)

・Purpose of Loan

Refinance	For business purpose only
Working capital	Max. 7-year repayment term, only for increase of inventory, expansion of business, new products, working capital because of increase of employee
Purchase of business	Applicant must have good credit history and 25% must come from his/her own account

SBA loan must be used for tangible assets and not for intangible ones like trademarks etc. The subject business must be profitable and have enough cash flow to repay the loan. Applicants must have enough experience. For a purchase of a nationally recognized franchise, it is not necessary. A Business plan must be attached to application. If retail, it must have lease term enough to repay the loan. Usual repayment term is 10 years. If real estate is included in purchase price, it can extend from 10 to 25 years.