#SBALoans #KeyBank #SpotlightOnFinance
By Ryan Case, Business Banking Team Leader, Capital Region, KeyBank
According to the U.S. Small Business Administration (SBA), there are nearly 29 million small businesses in America. These businesses account for 99.9 percent of all U.S. businesses, and over the past couple of decades have accounted for 63 percent of net new jobs. Truly, small businesses are the economy’s little engine that can—leading in tech and product innovation, creating jobs and representing the nation’s diverse talent base.
The SBA is the government agency tasked with protecting, strengthening and representing the interests of America’s small businesses, and it understands the value of small businesses to the economy better than anyone.
What the SBA and government-guaranteed loans can do for your business
While the SBA offers management assistance and special outreach programs to encourage and support entrepreneurs, arguably the most important role it serves is to provide a guarantee for loans made by a lender to businesses that may not otherwise qualify for conventional financing. In most cases the terms are more favorable than traditional financing.
SBA loans can be used to start a business, expand a business, acquire a business, or to supplement working capital. They are designed to be flexible in tough economic times or during periods of rapid growth. Benefits of SBA loans include:
- Competitive terms. SBA-guaranteed loans generally have rates and fees that are comparable to non-guaranteed loans.
- Counseling and education. Some loans come with continued support to help you start and run your business.
- Favorable benefits. SBA loans can offer lower down payments, lower collateral conditions and extended terms to ease cash flow needs.
The SBA does not make direct loans to small businesses. SBA partners, including traditional lenders like KeyBank, community development organizations and microlending institutions make loans to businesses according to SBA guidelines.
Loan programs to meet a variety of needs
The SBA has a core set of loan programs that serve a wide range of business needs. The following are some of the more common debt financing programs offered through the SBA.
SBA 7(a) – This is the SBA’s largest loan guarantee program and is designed to provide loans to qualified businesses that cannot otherwise obtain funding on reasonable terms. SBA 7(a) loans can be used for real estate, equipment and machinery, construction and expansion improvements, working capital support for accounts receivables and inventory, purchasing a business and refinancing business debt. Benefits include longer terms than conventional lending and lower collateral requirements. The maximum loan amount is $5 million.
SBA 504 – SBA 504 Loans are a great option for business owners in need of financing for the acquisition and/or improvement of owner occupied real estate and equipment. 504 Loans can also be used to refinance debt used for these purposes. This program supports the success of small businesses by providing access to affordable financing and flexible repayment terms. The SBA 504 features loan maturities of 10 and 20 years and is designed for project sizes ranging from $100,000 to $25 million. SBA 504 loans are intended to stimulate job creation and economic development.
Working Capital CAPLine – Designed for short-term working capital needs, such as inventory, managing receivables or consolidating short-term debt, the Working Capital CAPLine functions as a working/revolving line of credit. Terms are set by the lender. For example, KeyBank offers maturity up to 10 years with a maximum loan amount of $1 million.
SBA Express Program – Targeted for smaller requests, this loan program allows for an expedited and streamlined application process. Loans may be used for fixed-asset purchase, debt consolidation or working capital. Credit requests can be up to $350,000.
SBA Export Programs – The SBA Export programs provide financing to businesses that will enhance a company’s export development. The Export Express Program can be used in the form of a line of credit or term loan with a maximum loan amount of $500,000. The Export International Trade Loan Program is a term loan with a maximum loan amount of $5 million.
How can your business qualify for an SBA loan?
To qualify for an SBA loan, a company must be independently owned and operated and must meet SBA employment or sales standards for different business types.
Potential borrowers must also be of good character and demonstrate strong management skills and an ability to pay, based on historic cash flow. Startups must present strong business plans. Businesses must have net worth consistent with industry averages and adequate collateral to secure the loan.
For more information about the financing and support the SBA can provide to your company, call a preferred lender experienced in SBA loans or visit www.sba.gov (the SBA site) or www.key.com/sba. You might be surprised how much they, and your banker, can do to help you become one of the many small business success stories that prop up the economy by creating jobs and spurring innovation.
About the author: Ryan Case is Business Banking team leader for KeyBank in the Capital Region. He may be reached at either 518-257-8416 or [email protected]
Five small business financing sources
If you are looking to start or expand your business, there are a number of different funding sources available. The following five are the most common:
- The Small Business Administration (SBA). Combined bank/SBA programs are available to meet a wide range of small business financing needs, such as new business start-ups and capital for expansion and growth. You can get more information, guidance and help from the SBA by logging on to their web site at www.sba.gov or visiting www.key.com/sba.
- Private Investors. Angels and venture capitalists are options outside of traditional lending institutions. They are typically associated with high-growth start-ups. The primary difference with private investors is they typically invest equity capital rather than debt. This provides them with a share of your business, and their return on investment is determined by the performance of your business.
- Partnership and Merger Opportunities. Don’t overlook the possibility of raising new funds through a partnership or merger. Large companies sometimes are interested in acquiring a minority interest in good small companies. Or, a merger with a comparable business is a possibility as well. Preferably the company needing capital would be the survivor in such a merger. In addition, a partnership with an individual or a strategic working alliance with another profitable enterprise are options that can help you expand.
- Bank Loans. Many banks offer comprehensive programs such as loans and investment plans to help you raise the capital you need. The small business expert at your bank may suggest non-conventional financing, such as a mortgage, a home equity loan or debt refinancing. Talk to your banker or visit your bank’s website to learn more about available programs and services. Through creative financing, today’s banks are playing an important role in small business growth.
- Economic Development Agencies. We have several public and private economic development agencies in the Capital Region, including the Center for Economic Growth (CEG), Capitalize Albany and Saratoga Economic Development Corporation. Each of these organizations is focused on spurring economic growth in our region by attracting, supporting and retaining businesses. You can find additional economic development agencies supporting your area on the New York State Economic Development Council website (www.nysedc.org).
- Communities are committed to helping small businesses succeed, and plenty of resources are available to help you find the financing you need to launch and grow your business. In addition to regional economic development councils and chambers of commerce, your bank can help you gather the information you need and help you identify and secure the most appropriate source of financing for your business.