Use of Funds
Your paper trail has been established by now, so now its about using the money right. You know, all I read and hear about is, money being misused. The countries not getting any better. The money stays in the hands of the few. The people are suffering. Their hungry. There are no jobs. We do not have that many good public schools, mostly private. There's no money to feed the kids for lunch. We have no health care. Our hospital facilities are not that good. Our roads are terrible. Our people our dying.
Politics well........I want to stay away from that, but as they say, the decision makers are not suffering as much or nearly anywhere close. Don't get me wrong what ever neighborhood they reside in is probably doing well but, the country as a whole......I guess, if a person looked around it would speak for itself.
You know, I just saw a commercial the other day soliciting for low income persons in the states to call this 1800 number because Venezuela is donating oil. You think Haiti can get some? Before anyone bites my head off, that is if we don't have any conflicts with them. But you know what, even if we did, we as humans need to be able to get past little things for the greater common good.
Getting Haiti right, putting it back together, can no way be a one man or woman effort. And unfortunately, if we as Haitians were able to put it together by ourselves, I can only imagine, that we would have already by now.
In the following lesson are the things that the SBA (Small Business Administration) here in the United States give out money and loan money for. If you can't use of the information, but know someone who can use it, pass it on.
Sometimes, too much info, is good info. Split it up and pass it around.
SBA Assistance
Financial Programs and Other Assistance
The Small Business Administration (SBA) is the largest source of long­term small business financing in the nation. In order to determine whether you qualify for, or if an SBA business loan best suits your financing needs, please read this material carefully. If you have further questions, please contact your banker, one of the active SBA guaranteed lenders listed in this guide, or an SBA loan officer.
The 7(a) Loan Guaranty Program
The 7(a) Loan Guaranty Program is the SBA's primary loan program. The SBA reduces risk to lenders by guaranteeing major portions of loans made to small businesses. This enables the lenders to provide financing to small businesses when funding is otherwise unavailable on reasonable terms.
The eligibility requirements and credit criteria of the program are very broad in order to accommodate a wide range of financing needs.
When a small business applies to a lending institution for a loan, the lender reviews the application and decides if it merits a loan on its own or if it requires additional support in the form of an SBA guaranty. SBA backing on the loan is then requested by the lender. In guaranteeing the loan, the SBA assures the lender that, in the event the borrower does not repay the loan, the government will reimburse the lending institution for a portion of its loss. By providing this guaranty, the SBA is able to help tens of thousands of small businesses every year get financing they would not otherwise obtain.
To qualify for an SBA guaranty, a small business must meet the 7(a) criteria, and the lender must certify that it could not provide funding on reasonable terms except with an SBA guaranty. The SBA can then guarantee as much as 85 percent on loans of up to $150,000 and 75 percent on loans of more than $150,000. In most cases, the maximum guaranty is $1 million. Exceptions are the International Trade, and 504 loan programs, which have higher loan limits. The maximum total loan size under the 7(a) program is $2 million.
How it Works
You submit a loan application to a lender for initial review. If the lender approves the loan subject to an SBA guaranty, a copy of the application and a credit analysis are forwarded by the lender to the nearest SBA office. After SBA approval, the lending institution closes the loan and disburses the funds. You make monthly loan payments directly to the lender. As with any loan, you are responsible for repaying the full amount of the loan.
There are no balloon payments, prepayment penalties, application fees or points permitted with 7(a) loans. Repayment plans may be tailored to each business.
Use of Proceeds
You can use a 7(a) loan to: expand or renovate facilities; purchase machinery, equipment, fixtures and leasehold improvements; finance receivables and augment working capital; refinance existing debt with compelling reason; finance seasonal lines of credit; construct commercial buildings; and/or purchase land or buildings.
Terms, Interest Rates and Fees
The length of time for repayment depends on the use of the proceeds and the ability of your business to repay: usually five to 10 years for working capital, and up to 25 years for fixed assets such as the purchase or major renovation of real estate or purchase of equipment (not to exceed the useful life of the equipment).
Both fixed and variable interest rates are available. Rates are pegged at no more than 2.25 percent over the lowest prime rate* for loans with maturities of less than seven years and up to 2.75 percent for seven years or longer. For loans under $50,000, rates may be slightly higher.
The SBA charges the lender a nominal fee to provide a guaranty, and the lender may pass this charge on to you. The fee is based on the maturity of the loan and the dollar amount that the SBA guarantees. On any loan with a maturity of one year or less, the fee is just 0.25 percent of the guaranteed portion of the loan.
On loans with maturities of more than one year where the portion that the SBA guarantees is $150,000 or less, the guaranty fee is 2 percent of the guaranteed portion. On loans with maturities of more than one year, where the SBA's portion exceeds $150,000 but not more than $700,000, the guaranty fee is 3 percent, and it is 3.5 per ent on loans over $700,000.
Collateral
You must pledge sufficient assets, to the extent that they are reasonably available, to adequately secure the loan. Personal guaranties are required from all the principal owners of the business. Liens on personal assets of the principals may be required. However, in most cases a loan will not be declined where insufficient collateral is the only unfavorable factor.
Eligibility
Your business generally must be operated for profit and fall within the size standards set by the SBA. The SBA determines if the business qualifies as a small business based on the average number of employees during the preceding 12 months or on sales averaged over the previous three years. Loans cannot be made to businesses engaged in speculation or investment.
Maximum Size Standards
Manufacturing - from 500 to 1,500 employees
Wholesaling ­ 100 employees Services ­ from $2.5 million to $21.5 million in annual receipts
Retailing - from $5 million to $21 million
General construction ­ from $13.5 million to $17 million
Special trade construction ­ average annual receipts not to exceed $7 million
Agriculture - from $0.5 million to $9 million
What You Need to Take to the Lender
Documentation requirements may vary; contact your lender for the information you must supply. Common requirements include the following:
Purpose of the loan
History of the business
Financial statements for three years (existing businesses)
Schedule of term debts (existing businesses)
Aging of accounts receivable and payable (existing businesses)
Projected opening day balance sheet (new businesses)
Lease details
Amount of investment in the business by the owner(s)
Projections of income, expenses and cash flow
Signed personal financial statements
Personal resume(s)
What the SBA Looks for:
Good character
Management expertise and commitment necessary for success
Sufficient funds, including the SBA-guaranteed loan, to operate the business on a sound financial basis (for new businesses, this includes the resources to meet start­up expenses and the initial operating phase)
Feasible business plan
Adequate equity or investment in the business
Sufficient collateral
Ability to repay the loan on time from the projected operating cash flow
Special Loan Guaranty Programs 7(a) Program
There are a number of special loan guaranty programs under the 7(a) program that address specific needs of start­up or established businesses. They are governed, for the most part, by the same rules, regulations, fees, interest rates, etc., as the regular 7(a) loan guaranty. Your lender can advise you of any variations.
SBAExpress
SBAExpress is available for loans up to $350,000. The program authorizes SBA preferred lenders to use mostly their own forms, analyses and procedures to process, service and liquidate SBA guaranteed loans. The SBA guarantees up to 50 percent of an SBAExpress loan. Loans under $25,000 to not require collateral. Like most 7(a) loans, maturities are usually five to seven years for working capital and up to 25 years for real estate or equipment. Revolving lines of credit are allowed for a maximum of five years.
Contact your local SBA office for the names of approved banks.
The Export Working Capital Loan
The Export Working Capital Program is a line of credit for financing foreign accounts receivable. It is a transaction-based program and can be revolving or nonrevolving. The SBA provides a 90 percent guarantee to the lender. The business must have been in operation for at least 12 months prior to the application, and the proceeds can be used to finance materials and labor needed to manufacture or purchase goods and services for sale in foreign markets, including such items as consulting services, overseas travel to establish a market, and participation at trade shows. Funds cannot be used to refinance existing debt or purchase fixed assets. The maturity is generally 12 months or less but can be renewed up to a total of 36 months.
International Trade Loan
This program provides short­term and long­term financing to small businesses that are engaged in international trade, preparing to engage in international trade, or adversely affected by competition from imports. The SBA can guarantee up to $1.25 million for a combination of fixed­asset financing and permanent working capital.
SBA 504 Loan Program
504 is the SBA's economic development instrument that supports American small business growth and helps communities through business expansion and job creation. The SBA 504 loan program provides long­term, fixed­rate, subordinate mortgage financing for acquisition and/or renovation of capital assets including land, buildings and equipment. Virtually all types of for-profit small businesses are eligible for this program.
The SBA 504 loan is distinguished from other SBA loan programs in these ways:
Lower down payment; allows a business to conserve valuable operating capital by injecting just 10% of total project cost.
Fixed interest rate; borrower knows cost of occupancy for the next 20 years.
Rate is usually below market rate.
All project costs can be financed, including acquisition (land and building, land and construction of building, renovations, machinery and equipment) and soft costs such as title insurance, legal, appraisal, environmental and bridge loan fees. Closing costs may be financed.
Collateral is typically assets financed; allows other assets to be free of liens and available to secure other needed financing.
Long­term: real estate loans are 20-year term, heavy equipment 10­ or 20-year terms and are self­amortizing.
504 program encourages banks and other lenders to make loans in first position on reasonable terms, helps them retain growing customers, and provides CRA credit.
504 program benefits the borrower's community through job creation and retention.
Businesses that receive 504 loans are:
Small ­ net worth under $6 million, net profit after taxes under $2 million, or meet other SBA size standards.
Organized as for­profit.
Any type of business ­ retail, service, wholesale or manufacturing.
The SBA's 504 lending intermediaries, Certified Development Companies (CDCs) serve your community to finance business expansion needs through 504. Its professional staff works directly with you to tailor a financing package that meets program guidelines and the credit capacity of your business. The 504 Loan Program is the first national financing program specifically designed for expanding small business whose investment will create jobs.
The Certified and Preferred Lenders Program
The most active and expert 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. They receive a partial delegation of authority and are given a three-day turnaround on their applications (they may also use regular processing).
Certified lenders account for 10 percent of all SBA business loan guaranties. Preferred lenders are chosen from among the SBA's best lenders and enjoy full delegation of lending authority. This authority must be renewed at least every two years, and the lender's portfolio is examined by the SBA periodically. Preferred loans account for 18 percent of SBA loans. For list of certified/preferred lenders in your area contact your local SBA office.
The 7(M) Microloan Program
These loans are provided directly by a network of intermediaries approved by the SBA for the purpose of making microloans (from $500 up to $35,000) to small businesses for the purchase of machinery, equipment, furniture, fixtures, inventory and also for working capital. These intermediaries also provide technical and management assistance to the owners. Most small businesses who are unable to obtain funding through conventional sources or the other SBA guaranteed loan programs should contact the microloan lenders in their area.
The Small Business Investment Company (SBIC) Program
There are a variety of alternatives to bank financing for small businesses, especially business start­ups. The Small Business Investment Company Program is the gap between the availability of venture capital and the needs of small businesses that are either starting or growing. Licensed and regulated by the SBA, SBICs are privately owned and managed investment firms that make capital available to small businesses through investments or loans. They use their own funds plus funds obtained at favorable rates with SBA guaranties and/or by selling their preferred stock to the SBA. SBICs are for­profit firms whose incentive is to share in the success of a small business. In addition to equity capital and long­term loans, SBICs provide debt­equity investments and management assistance. The SBIC Program provides funding to all types of manufacturing and service industries. Some investment companies specialize in certain fields, while others seek out small businesses with new products or services because of the strong growth potential. Most, however, consider a wide variety of investment opportunities.
The Community Adjustment & Investment Program (CAIP) was created to help communities that suffered job losses due to changing trade patterns following the North American Free Trade Agreement (NAFTA). The North American Development Bank has partnered with the SBA and the U.S. Department of Agriculture to make credit available to businesses in eligible communities to create or retain jobs. Business applicants must be able to demonstrate that the loan or loan guaranty will be used to create or preserve at least one job for every $35,000 in loans over a 24-month period.
SBA Pre-Qualification (Pre-Qual) Pilot Loan Program
SBA Pre-Qualification Pilot Loan (Pre-Qual) Program was developed to provide substantive support and assistance in the small business loan application process to those segments of the small business community that traditionally may have been underserved by the lending community.
The Pre-Qual concept was originally introduced as the Women's Pre- Qualification Pilot Loan Program in June 1994. A Minority Pre- Qualification Pilot Loan Program followed in April 1995. In July 1998, these programs were combined under an umbrella Pre-Qual program to more aggressively market the SBA's loan programs to a wider variety of underserved markets.
The new combined Pre-Qualification Pilot Loan Program was developed primarily to address the following markets, identified by SBA as underserved, via traditional lending programs: women, veterans and minority-owned businesses, as well as exporters, rural markets and certain designated geographical areas and industries.
The Pre-Qual concept revolves around intermediaries who help market the SBA's loan programs and assist prospective borrowers in assembling a viable loan application package.
To be eligible, a prospective business must be 51 percent or more owned by veterans, women and/or minorities. Export-eligible loans are those made with the intention of significantly expanding existing export markets or developing new export markets. With respect to rural markets, and other specially designated geographical areas or industries, contact your local SBA office for specific requirements.
The maximum loan amount under this program is $250,000. If a borrower currently has an SBA loan and the combined loans required as a result of this program are more than $250,000, the request is to be processed through the regular guaranty program.
The Pre-Qualification Loan Program is a 7(a) loan program. Therefore all other terms, conditions and requirements of the 7(a) program apply as prescribed by SBA's policies and regulations.
Government Contracting Assistance
The federal government is the largest buyer in the world and small businesses are often at a disadvantage when trying to win federal contracts, but the U.S. Small Business Administration (SBA) can help overcome the barriers. Working closely with federal agencies and the nation's leading large contractors, the SBA works to ensure that small businesses obtain a fair share of government contracts and subcontracts. The SBA has a number of programs to help small firms do business with the federal government:
Through the Prime Contracts Program the SBA helps to increase the small business share of government contracts. It also advocates for the breakout of items purchased through full and open competition. SBA procurement center representatives (PCRs) work to expand contracting opportunities for small businesses. PCRs review contracting actions at major federal procurement centers, review the subcontracting plans, recommend contracting sources and provide counseling.
There are two types of PCRs: traditional and breakout. Traditional PCRs work to increase the number of procurements set aside for small businesses. Breakout PCRs work to remove components or spare parts from sole­source procurements to procurements through open competition, which generates savings for the federal government.
The Subcontracting Assistance Program promotes the full utilization of small businesses by the nation's major prime contractors. The Agency's Commercial Marketing Representatives (CMRs) concentrate on large businesses that have one or more federal contracts in excess
of $500,000.
The CMR will review these large companies' subcontracting plans in order to identify small business sources to satisfy specific needs of the prime contractor.
The Certificate of Competency Program (COC) helps small businesses secure Federal contacts by providing an appeal process to low­bidder firms denied government contracts for a perceived lack of ability or financial resources to perform the work. A small firm may apply to the SBA for a Certificate of Competency (CoC) when they are low bidder on such a contract but are considered by the contracting agency to be unable to complete the work. The CoC is a document indicating that the firm with the low bid has the plant or financial capacity to complete the contract. A plant survey and financial analysis of the firm is performed by SBA personnel. Within 15 workdays of receipt of the referral, the firm and contracting officer are notified of SBA's decision regarding the CoC. Issuance of the CoC to the successful low bidder usually results in savings to the government over the next low bid.
The Size Determination Program ensures that only small firms receive contracts and other benefits set aside exclusively for small business. When a firm's claim that it is small is challenged, the SBA size specialists determine if the firm does, in fact, meet established SBA size standards. Size determinations may also be made when requested in connection with other federal contracting programs.
The Surety Bond Guarantee Program
The Surety Bond Guarantee (SBG) Program provides small and minority contractors with contracting opportunities for which they could not otherwise compete. By law, prime contractors to the federal government must post surety binds on federal construction projects valued at $100,000 or more. Many state, county, municipal and private sector contracts also require bonding, but small and minority businesses may not be able to obtain bonds through regular commercial channels. Through this program, the U.S. Small Business Administration (SBA) can guarantee bid, performance and payment bonds for contracts up to $1.25 million for eligible small contractors.
A surety bond is a three­way agreement between the surety company, the contractor and the project. It binds the contractor to comply with the terms of a contract. If the contractor is unable to do so, the surety assumes the responsibility and ensures that the project is completed. The SBA guarantees surety companies against a percentage of losses sustained as a result of a contractor's default on a guaranteed bid, payment or performance bond.
There are four major types of surety bonds:
Bid ­ guarantees the bidder will enter into a contract and furnish the required payment and performance bonds.
Payment ­ guarantees payment from the contractor to parties who furnish labor, materials, equipment and supplies.
Performance ­ guarantees the contractor will fulfill the contract in accordance with its terms.
Ancillary ­ bonds which are incidental and essential to the performance of the contract.
The SBG Program consists of the Prior Approval Program and the Preferred Surety Bond Program. Under the Prior Approval Program, the guarantee may range from 80 to 90 percent of the losses sustained under a guaranteed bond, and the surety must obtain SBA approval for each bond. Under the Preferred Surety Bond Program, selected sureties receive a 70 percent bond guarantee and are authorized to issue, service and monitor bonds without the SBA's approval.
Eligibility
Contractors ­ In addition to meeting the surety's bonding qualifications, a contractor must meet the SBA's size eligibility standards for a small business. Businesses in the construction and service industries can qualify if their average annual receipts for the last three years, including those of any affiliates, do not exceed $5 million. Your SBA district office can answer any questions regarding eligibility.
Bonds ­ The SBA can guarantee bonds for contracts up to $1.25 million. A contract bond (bid, performance or payment) is generally eligible for an SBA guarantee if the bond is:
listed in the Contract Bonds section of the Surety Association of America's "Manual of Rules, Procedures and Classifications";
required by the contract or invitation to bid and:
executed by a surety company that is acceptable to the U.S. Treasury (Circular 57) and qualified by the SBA.
Ancillary bonds may also be eligible. For more information, contact your SBA district office.
Submitting an Application
The contractor chooses a participating surety company and applies for a specific bond through a bonding agent who represents that surety. The application provides the background, credit and financial information required by the surety company and the SBA. Contact your SBA district office for a list of local surety agents who can provide the forms required by the SBA.
Once the surety company receives its completed forms and sufficient underwriting information from the applicant, it processes and underwrites the application and decides whether to:
execute the bond without the SBA's guarantee,
execute it only with the SBA's guarantee, or
decline the bond even with the SBA's guarantee.
If surety in the Prior Approval Program determines that the SBA must guarantee the bond, it submits an underwriting review, guarantee agreement, supporting documents, and the contractor's application forms to the SBA. If the application is for a final bond, the contractor's guarantee­fee check is also attached.
A surety in the Preferred Surety Bond Program may issue the bond without the SBA's approval. The surety must then report the bond to the SBA and forward the contractor's fee payment within the required time.
Application Review
In the Prior Approval Program, the SBA reviews the information, documentation and underwriting rationale of the surety company to determine if the application is eligible for the program. If it is, and the information submitted by the surety company appears favorable, the SBA guarantees the bond (the SBA may also request additional information).
Fees
The SBA charges fees to both the contractor and the surety company; rates are published periodically in the Federal Register. The SBA does not charge the contractor a fee for an application or a bid­bond guarantee.
When the bond is issued, the contractor pays the surety company's bond premium. This charge cannot exceed the level approved by the state in which the bond is issued.
For more information on the Surety Bond Guarantee Program, contact your local SBA office.
The Small Business Innovation Research Program (SBIR)
The mission of the Office of Technology is to strengthen and expand the competitiveness of U.S. small high technology research and development businesses in the federal marketplace. The SBIR also provides assistance in achieving commercialization of the results of both the federal research and development programs mandated by the Small Business Innovation Development Act of 1982 and the Small Business Research and Development Enhancement Act of 1992.
The mission of the Office is carried out through legislated programs including:
The Small Business Innovation Research Program
The Small Business Technology Transfer Pilot Program
The R, R & D Goaling Program
Advocacy of Federal technology assistance
The Office of Technology, formerly the Office of Innovation, Research and Technology, is organized into two components: the Research Acquisition Policy Division and the Innovation and Technology Division.
The Office of Technology promotes federal small business high­technology programs to improve the competitive capabilities of small research and development businesses with particular emphasis on emerging and underserved small firms. It encourages state-of­the­market technology training, technology information exchange and outreach on federal technology programs. It also encourages private and public resource support for the commercialization of federal R & D efforts. It promotes outreach activities to introduce women and minority­owned small business concerns to the advantages of competing for federal R & D projects. For more information contact your local SBA office.
Disaster Assistance
The SBA's Disaster Assistance Loan Program is the primary federally funded, disaster assistance loan program for funding long­range recovery for private sector, nonagricultural disaster victims. Assistance is available to businesses of all sizes and to individuals. Eligibility is based on an individual's financial criteria. Interest rates fluctuate according to statutory formulas. A low interest rate (not to exceed four percent) is available to applicants without credit available elsewhere. A higher rate (not to exceed eight percent) is available for those with credit available elsewhere. The program provides disaster loans when a declaration is made by the President or the SBA Administrator. There are three disaster loan programs:
Physical Disaster Business Loans
Loans are available to qualified applicant businesses of any size for uninsured losses up to $1.5 million to repair or replace business property to predisaster conditions. Loans may be used to replace or repair real estate, equipment, fixtures and inventory and leasehold improvements.
Economic Injury Disaster Loans (EIDLs)
­ Loans of up to $1.5 million are available for small businesses that sustain economic injury as a direct result of a disaster. These working capital loans are made to businesses, without credit available elsewhere, to help pay ordinary and necessary operating expenses that would have been payable barring the disaster.
Note: The maximum loan amount is $1.5 million for EIDL and physical disaster business loans combined, unless the business meets the federal criteria for a major source of employment. The $1.5 million limit can be waived for businesses employing 250 or more people in an affected area.
Loans for Homes and Personal Property ­ Real Property:
This is the major long­term recovery program for individual disaster losses. Loans are available to qualified homeowners for uninsured losses up to $200,000 to repair or restore a primary residence to predisaster condition.
Personal Property: Loans are available to qualified homeowner and renter applicants for uninsured losses up to $40,000 to repair or replace personal property, such as clothing, furniture, cars and so forth. Loans are not intended to replace extraordinarily expensive or irreplaceable items, such as antiques, pleasure crafts, recreational vehicles or fur coats.
Building Management Skills With Information
Throughout its 45-year history, SBA has complemented its financial assistance programs with publications aimed at helping small business owners gain the skills required to start, manage and grow a small enterprise.
Review SBA's comprehensive electronic library
Also visit SBA's electronic campus for a large menu of online courses.
New version coming up
Upcoming Events for the Next 3 Day(s) Private calendar events are seen only by member who owns calendar
12-28-07, 03:21 PM
