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SBA Capital Loan Programs
By: Patrick Rodriguez

Small Business Banking

             Small Business: America's Economic Engine            
                               Access to capital Improving for Small Business           

SBA is known for its “Three C’s” – Capital, Counseling and Contracting.  This article focuses on SBA’s Capital Loan Programs, but first here is an overview of SBA’s and the district office’s recent accomplishments.

Through the Recovery Act and last year’s Small Business Jobs Act, aspiring and existing business owners have more tools available to them to start and expand their businesses.  Key components of these laws helped to put more than $42 billion in the hands of small businesses nationwide through increased lending, business advising and transparency and parity in the way government contracts are awarded.

Locally, small businesses with SBA assistance generated annual contract procurements of $1.44 billion in fiscal year 2010.  In addition, the district office provided thousands of hours of one-on-one, long-term business advising via its six Small Business Development Centers, four SCORE chapters and four Women’s Business Centers.

In regard to “Capital”, the district office ranks among the top offices in the country in lending.  In 2011, access to capital improved - as it did in 2010.  The number of SBA-backed loans in Los Angeles, Ventura and Santa Barbara counties increased 14 percent during the government’s second quarter of FY 2011 and 64.7 percent in dollar volume compared to the same time last year.

Between Oct. 1, 2010 and March 31, 2011, the district office financed a portfolio of 1,379 businesses in the amount of $972.4 million compared to 1,206 businesses with $590.3 million the same time last fiscal year.  The majority of these small business loans flowed though SBA’s 7(a) and 504 loan programs.

The 7(a) Loan Program is SBA’s primary business loan program (for working capital).  The program accommodates a wide range of financing needs and has a $5 million loan limit.  The lender analyzes the loan package, underwrites the loan, and ensures the application meets the lender’s criteria as well as SBA’s requirements.

Normally, if a small business owner wants to acquire financing, the owner should have a business summary or business plan prepared before it applies for a loan.  The plan will explain what financial resources are needed, including a breakdown of all costs, the applicants’ contribution, detailed use of loan proceeds, collateral (if any), and most important, an explanation of how the business will be able to repay the loan.  SBA’s network of technical assistance providers can help small businesses package their loan applications.

Owner-occupied real estate financing is also available through SBA’s 504 Loan Program.  This real estate financing program provides long-term, fixed-rate, financing for acquisition and/or renovation of capital assets, including land, buildings and equipment up to $5 million. 
In addition, the SBA Express Loan limit was temporarily raised from $350,000 to $1 million (expires 09/27/11), which is the same as the 7(a) loan program but with reduced lender paperwork and can be used for revolving lines of credit.

The SBA Export Express loan transitioned from a pilot loan to a permanent loan with a $500,000 limit.  This streamlined loan program is designed to help small businesses develop and expand their export markets.  Two additional export loans limits were also increased - the Export Working Capital Program and the International Trade Loan limits went from $2 million to $5 million.  These two loan programs provide export working capital.

SBA also rolled out two new initiatives this year to reach underserved communities: the Small Loan Advantage and Community Advantage Loan Pilot Program.  These programs are structured to encourage larger, existing SBA lenders and community-based financial institutions to make lower dollar loans, which often benefit businesses in underserved markets.

Built on what the SBA refers to as its “Advantage” platform, both Small Loan Advantage and the Community Advantage pilot offer a streamlined application process for SBA 7(a) loans up to $250,000.  These loans offer an 85 percent SBA guarantee for loans up to $150,000 and a 75 percent SBA guarantee for those greater than $150,000.

Small Loan Advantage is available to the current 630 financial institutions across the country that participates in the SBA’s Preferred Lender Program. The Community Advantage pilot will expand the points of access small business owners have to obtain loans by opening this SBA’s primary 7(a) loan program to “mission-focused” financial institutions, including Community Development Financial Institutions, Certified Development Companies and non-profit microlending intermediaries.

If you would like more information related to SBA’s “Three C’s” – Capital, Counseling and Contracting, please call the SBA’s Los Angeles District Office at 818-552-3201 or feel free to contact any one of SBA’s Small Business Development Centers, SCORE Chapters and Women’s Business Centers for assistance.

Patrick Rodriguez is SBA, Public Information Officer, Los Angeles District Office