Streamlined Applications and Approvals

Streamlined Applications and Approvals
There are several options available to lenders that help streamline delivery of the SBA’s loan
guaranty.
1. LowDoc Loan Program: LowDoc is one of the SBA’s most popular programs.
Once you have met your lender’s requirements for credit, LowDoc offers a simple,
one page SBA application form and rapid turnaround for loans of $150,000 or less.
SBA will guarantee up to 85% of the loan amount. The loans should be adequately
secured. Business assets are usually pledged and personal guarantees of the principals
are required. The applicant completes the front of a one-page SBA application; the
lender completes the back. The lender requires additional information. The same
interest rate rules apply as in the 7(a) program. To be eligible, business must have
average annual sales for the past three years not exceeding $5 million and must have
fewer than 100 employees. Business start-ups are also eligible for the LowDoc Loan
Program.
2. SBA Express: This program makes capital available to businesses seeking loans of
up to $350,000 without requiring the lender to use the SBA process. Lenders use their
existing documentation and procedures to make and service loans. The SBA
guarantees up to 50 percent of a SBA Express loan. Your local SBA office can
provide you with a list of SBA Express lenders.
3. Certified and Preferred Lenders Program: The most active and expert SBA
lenders qualify for the SBA’s Certified and Preferred Lenders Program. Participants
are delegated partial or full authority to approve loans, which results in faster service.
Certified lenders are those that have been heavily involved in regular SBA loanguaranty
processing and have met certain other criteria. Preferred lenders are chosen
from among the SBA’s best lenders and enjoy full delegation of lending authority. A
list of participants in the Certified and Preferred Lenders Program may be obtained
from your local SBA office.
4. 7(M) Micro Loan Program: The MicroLoan Program provides small loans up to
$35,000. Under this program, the SBA makes funds available to nonprofit
intermediaries; these, in turn, make the loans. The average loan size is $10,500.
Completed applications usually are processed by an intermediary in less than one
week. This is a pilot program available at a limited number of locations.
Micro loans may be used to finance machinery, equipment, fixtures and leasehold
improvements. They may also be used to finance receivables and for working capital.
They may not be used to pay existing debt. Depending on the earnings of your
business, you may take up to six years to repay a microloan. Rates are pegged at no
more than 4 percent over the prime rate. There is no guaranty fee. Each nonprofit
lending organization will have its own collateral requirements, but must take as
collateral any assets purchased with the microloan. Generally the personal guaranties
of the business owners are also required.
5. 504 Certified Development Company: CDCs are nonprofit corporations set up
to contribute to the economic development of their communities or regions. They
work with the SBA and private-sector lenders to provide financing to small
businesses. The program is designed to enable small businesses to create and retain
jobs; the CDC’s portfolio must create or retain one job for every $50,000 of
debenture proceeds provided by the SBA. They provide small businesses with 10 or
20-year financing for the acquisition of land and buildings, machinery and equipment
or for constructing, modernizing, renovating or converting existing facilities. To be
eligible, the business must operate for profit. Tangible net worth must not exceed $7
million and average net income must not exceed $2.5 million for the past two years.
The maximum loan amount is generally $1,500,000. The amount may go up to $2
million if the project meets public policy goals (i.e., business district revitalization,
expansion of export, expansion of minority business). Collateral may include a
mortgage on the land and the building being financed. Personal guarantees of
principals are required. SBA will take business assets as collateral. Interest is set at
second TD rate based on the current market rate for 5- and 10-year U.S. Treasury
Bonds and is generally below market rate.