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SBC
Home Office
South Florida
State Business Capital
150 Lake Carol Drive
W Palm Beach, FL 33411

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THE   SMALL  BUSINESS   LOAN 
FRANCHISE • COMMERCIAL  PROPERTY 
ACQUISITION • EXISTING BUSINESS • START-UP 
                FOR  THE  OWNER-USER

How to Develop
& Finance it Successfully

THE INCREDIBLE SBA GOVERNMENT GUARANTEED
COMMERCIAL & BUSINESS LOAN PROGRAM
AVAILABLE THROUGHOUT THE UNITED STATES

There is no fee to pre-apply
No additional documents and No credit reports
are required at this stage

STATE BUSINESS CAPITAL (SBC)

SBA  LOAN INDEX

• The Incredible SBA Government Guaranteed Loan program

• Who Is State Business Capital (SBC)

• Why Choose State Business Capital

• Basic SBA Loan Program

• What Do These Companies Have In Common

• Benefits To The Borrower

• Loan Purposes

• Use Of Loan Proceeds

• Specific Types Of Businesses Not Eligible

• Highlights Of The 90% Government Guarantee SBA Loan Program

• What SBC Seeks In A Loan Application

• What Does SBC Look For In A Successful Borrower

• Acceptance Guidelines

• Some Of The Items That Will Be Required

• Existing - Start-up - Business Acquisition Loans (Important Information)

• Questions And Answers

• Applying For Funding is Simple

• Contact Us

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THE INCREDIBLE SBA GOVERNMENT GUARANTEED
COMMERCIAL & BUSINESS LOAN PROGRAM

Dear Business Professional:

If you’re like most businessmen, you have mixed feelings about taking out a business loan.  "That extra money would sure come in handy," you say to yourself, "but I don’t know if it’s worth all the time, trouble and aggravation!"

We at State Business Capital agree completely. That’s why we’ve made the process as fast, easy and convenient for you as possible.

We can handle your business needs for expansion, acquisition or start-up capital or practically any type of business growth funding.  Our loans are ideal for franchises, office/warehouse condominiums, freestanding buildings, and small office buildings.

No inconvenient visits to banks or loan companies.  No intimidating interviews with over-bearing loan officers.  No compensating bank balances required.  No saving or checking accounts needed.  You can apply for the money you need for your business by mail – in the privacy, comfort and convenience of your own office or home.  Since 1981 this is how we’ve always done business – and it’s one good reason why so many businessmen have come to us for their commercial and business real estate-secured loans from all across the country.

There are other good reasons as well, including the government’s competitive rates, flexible terms and our outstanding customer service.

We arrange for the advancement of funds to corporations, partnerships and sole proprietorships.  With our SBA loan you can borrow from $300,000 up to $2,000,000 secured by real estate and equipment.  With our USDA loan you can borrow from $2,000,000 to $10,000,000 (to $25,000,000 in some instances).  With our Special Conventional loan you can borrow from $400,000 to $6,000,000 secured by real estate (not including equipment) or going concern value.  And with our NEW " Stated Income/Stated Asset" loan you can borrow from $300,000 to $1,000,000.  And we'll help you keep your payment low by giving you a choice of repayment plans (up to 25 years SBA and 30 years USDA, fully amortized, 15 to 20 years Conventional, fully amortized – no balloon).  You can be sure you'll find terms that fit your needs exactly.

When we receive your loan application with the required documents, pending qualification, we’ll get back to you right away with preliminary approval.  We’ll even arrange the closing in a location convenient to you.  Usually, once we receive your application and essential documentation, you’ll have your approval in 7 to 15 days!  As long as your credit is good, have a valid business purpose for the loan, can meet the monthly payments, have adequate collateral, and meet federal regulations, you will be qualified.

For speed, convenience, privacy and attractive terms, you’ll find State Business Capital’s arranged business loan made to order.

Best of all, we’re just an e-mail away.

STATE BUSINESS CAPITAL (SBC)

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WHO IS STATE BUSINESS CAPITAL (SBC)

State Business Capital (SBC) is a correspondent lender that originates SBA and USDA guaranteed loans and special Conventional loans.  SBC joint ventures with other lenders whereby the other lenders are the lender of record.  In these cases, SBC is considered a joint venture compensated affiliate of the lender of record.  SBC normally packages the SBA/USDA and Conventional loans. Since 1981 SBC has provided small business financing in conjunction with other lenders of the U.S. Small Business Administration (SBA).  SBC offers real estate, equipment, construction and other financing, as well as exceptional service, to small businesses throughout the U.S.  SBC’s highly trained staff members are dedicated to simplifying the loan process so you can get the financing you need quickly!  SBC’s proven experience with government guaranteed business loan programs ensures that our clients receive quick, responsive service.

SBC's purpose is to arrange permanent financing for small business owners, to assist the small business owner to access capital that is not dependent upon variables beyond your immediate control, such as economic factors, re-appraisal results, the condition of other loans in the lender's portfolio, and maintenance of financial ratios.

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WHY CHOOSE STATE BUSINESS CAPITAL

The only function of SBC is to assist small business with the funding of U.S. Small Business Administration guaranteed loans (SBA), the U.S. Department of Agriculture guaranteed loans (USDA), and our special Conventional loans.  We are well versed in the financial needs of small business and in the regulations and policies of the United States Small Business Administration since 1981.  Our staff will work with you directly to obtain the information needed to process your request. If your loan request cannot fit into one of our government loan programs, we will try to place it in our Special Conventional loan program.

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WHAT DO THESE COMPANIES HAVE IN COMMON

These businesses have in the past received SBA assistance, as defined by Federal regulation, or assistance from SBA grantees.  Through hard work and unwavering commitment to excellence, these businesses have achieved outstanding success.

All of these Companies Have Been
Helped By SBA Sponsored Programs!

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BENEFITS TO THE BORROWER

1. We can arrange up to 90% SBA government guaranteed loans to small businesses and professions throughout most the United States.
   

2. Your interest rate is controlled by the Federal Government. It is the LOWEST CURRENT NEW YORK PRIME RATE (as published in The Wall Street Journal - not a higher Bank Prime), plus 2-1/4% on loans less than 7 years.  Prime plus 2-3/4% over 7 years.  These rates may decrease depending on market conditions.
   

3. The interest rate and payment is adjusted quarterly, if the prime changes, otherwise it remains the same.
   

4. Loans on real estate (to include equipment), up to 25 year amortization can be obtained. Funds are available for owner-user office and warehouse condominiums, or commercial real estate, the purchase of a business and/or franchise.  Usually 5 to 7 years for working capital.
   

5. There are NO HIDDEN CHARGES such as pre-computed interest, service fees or escrows.  The government agency (SBA) receives a fee for their guarantee.
   

6. There are NO BALLOON PAYMENTS.
   It is not necessary to maintain compensating or minimum bank balances, since the lender does not have checking or savings accounts.
   

7. Unlike banks, re-appraisals, on-going debt coverage minimums or other financial performance covenants are not required.  Banks can demand the pay-off of your loan during periods of economic recession.  All SBC's programs are permanent loans and provide peace-of-mind.
   

8. THIS SBA FINANCING PROVIDES A LONG-TERM ADDITIONAL SOURCE OF CAPITAL.  YOUR BANK LINE OF CREDIT FOR CURRENT OPERATING EXPENSES AND SHORT-TERM LOANS IS NOT DISTURBED. 

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     •  Purchase existing land or buildings
     •  Construct new commercial buildings
     •  Purchase a franchise
     •  Business start-up
     •  Business acquisition
     •  Expand or renovate facilities
     •  Purchase machinery, equipment, fixtures, furniture
     •  Leasehold improvements
     •  Refinance existing debt for compelling credit reason of benefit to borrower
     •  Purchase inventory
     •  Working capital

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the applicant holding company is a small business concern organized and operated for profit and in the business of owning and leasing real or personal property to the operating company;

the operating concern fits eligibility criteria of size, type, use of proceeds, and special circumstances;

1. loan proceeds are used only for acquisition, improvement, and eligible refinancing of real or personal business property;
    

2. principals with ownership interest in the applicant holding company are identical with and in the same proportion as the ownership interest in  the holding operating company.  An exception may be granted where this is not the case solely because one or more immediate members of the same family have variant interest. The identity of interests, generally, must remain throughout the life of the loan. (Consult with the local office when family members hold different interests in the holding and operating companies);
    

3. an assignment of the lease between the holding company and the operating  company with a term (including options to renew) at least as long as the term of the loan is required in addition to the normal collateral;
    

4. the operating company either co-signs or guarantees the loan.

NOTE: alter ego financing applies only to fixed asset purposes; any working capital needs must be financed separately.

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SPECIFIC TYPES OF BUSINESSES NOT ELIGIBLE

Businesses cannot be engaged in illegal activities, speculation, multi sales distribution, gambling, investment or lending, or where the owner is on parole.

If your business falls within one of the following categories, it is ineligible for an SBA loan.  In this case, see if SBC can help you with a USDA loan.

REAL ESTATE INVESTMENT firms exist when the real property will be held for investment purposes – as opposed to loans to otherwise eligible small business concerns for the purpose of occupying the real estate being acquired.

OTHER SPECULATIVE ACTIVITIES are those firms developing profits from fluctuations in price rather than through the normal course of trade, such as wildcatting for oil and dealing in commodities futures, when not part of the regular activities of the business.  Dealers of rare coins and stamps are not eligible.

LENDING ACTIVITIES include banks, finance companies, factors, leasing companies, insurance companies (not agents), and any other firm whose stock in trade is money.

PYRAMID SALES PLANS are characterized by endless chains of distributors and sub-distributors where a participant’s primary incentive is based on the sales made by an ever-increasing number of participants.  Such products as cosmetics, household goods, and other soft goods lend themselves to this type of business.

ILLEGAL ACTIVITIES are by definition those activities which are against the law in the jurisdiction where the business is located.  Included in these activities are the production, servicing, or distribution of otherwise legal products that are to be used in connection with an illegal activity, such as selling drug paraphernalia or operating a motel that permits illegal prostitution.

GAMBLING ACTIVITIES include any business whose principal activity is gambling.  While this precludes loans to race tracks, casinos, and similar enterprises, the rule does not restrict loans to otherwise eligible businesses, which obtain less than one-third of their annual gross income from either:  1) the sale of official state lottery tickets under a state license, or 2) legal gambling activities licensed and supervised by a state authority.

CHARITABLE, RELIGIOUS, OR OTHER NON-PROFIT or eleemosynary institutions, government-owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives are not eligible.

OTHER BUSINESSES NOT ELIGIBLE:  Passive business owned by developers and landlords - Academic school with a religious affiliation - Speculative firm - Life insurance company - Business located in a foreign country - Recreational facility not open to the general public - Private club or business which limits the number of memberships for reasons other than capacity - Government-owned entity - Consumer and marketing cooperative - Business with an associate who is incarcerated, on probation, on parole, or has been indicted for a felony or crime of moral corruption - Business which presents live performances of an offensive sexual nature; or sells products or services of a sexual nature - Unless waived by SBA for good cause, business that has previously defaulted on a Federal loan - Business primarily engaged in political or lobbying activities.

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HIGHLIGHTS OF THE 90% GOVERNMENT GUARANTEE
SBA LOAN PROGRAM

PROPERTY TYPES: 
Office/Warehouse Condo – Freestanding building – Franchise – Retail – Owner-User ONLY.  

QUALIFICATIONS: 
THE BUSINESS SHALL BE PROFITABLE and capable of supporting the mortgage debt service.

1. have a maturity of 15 years or more where the borrower is prepaying voluntarily;

2. the prepayment amount exceeds 25 percent of the outstanding balance of loan; AND

3. the prepayment is made within the first 3 years after the date of the first disbursement (no approval) of the loan proceeds.

The prepayment fee calculation is as follows:

1. during the first year after disbursement, 5 percent of the amount of the prepayment;

2. during the second year after disbursement, 3 percent of the amount of the prepayment; or

3. during the third year after disbursement, 1 percent of the amount of the prepayment.

1. SBA one time Government Guarantee Fee:
   Guaranteed portion <$150,000 = 2% fee.
   Guaranteed portion  >$150,000 to $700,000 = 3% fee.
   Guaranteed portion >$700,000 to $1,000,000 = 3.5% fee.
   Guaranteed portion >$1,000,000 3.75%.

2. Servicing Fee = 0.5% of the outstanding balance of the guaranteed portion of the loan.

3. Attorney Fee – Approximately $2,500 (1/4%) of the loan amount.

4. Packaging Fee – $750.00 Paid out of closing (POC).

5. Closing Deposit – $1,250.00.

6. Commitment Fee – None.

7. Underwriting Fee – None.

8. Assumability Fee – None.

9. Application Fee – $250.00 (non-refundable). Paid out of closing (POC)

10. Good Faith Deposit on approval.  Refunded at closing.

11. Lender Fee None.

12. Late Fee – 5% if due after 10 days.

13. SBC Fee – ≤ 3% of the loan amount.  May be paid by Franchiser, Seller, Realtor, Builder
    & is paid out of closing (POC).

DEPOSIT:                        
The Applicant is required to place with the Lender a good faith deposit when the Lender approves the loan.  This deposit will be refunded less expenses (courier, postage, etc.) at loan closing, or if the Lender denies the loan.  This deposit will not be refundable if the applicant cancels after the loan has been approved.

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WHAT SBC SEEKS IN A LOAN APPLICATION

In order to get this loan, the applicant must first be eligible.  Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process but good character, credit, management capability, collateral, and owner's equity contribution are also important considerations.  All owners of 20 percent or more are required to personally guarantee SBA loans.

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WHAT DOES SBC LOOK FOR IN A SUCCESSFUL BORROWER

SBC will analyze your loan application based upon a combination of several factors

• Cash Flow Coverage:  Cash flow sufficient to cover business debt service is required.  Cash flow coverage is determined after owner's withdrawals or officers' salaries, existing debt service and proposed debt service have been deducted.  A sufficient amount of living expenses will be considered for sole proprietorships.  Fluctuations in cash flow coverage must be explained.
   

• Debt To Worth Ratio/Capital:  Generally, a debt to worth ratio of 4:1 or better is expected, and required for start-up businesses.  This ratio indicates to SBC the equity within your business, or what the owners may have at risk.  In cases where the debt to worth ratio is manipulated through forgiveness of debt, standby debt and market value balance sheet adjustments, you should fully explain the adjustment.
   

• Collateral:  SBC does not set definite collateral coverage ratios, as these ratios may vary based on the individual loan request.  In most cases, the primary assets of the business are required to secure the loan request.
   

• Management:  The amount of management's direct experience in the business can determine collateral needs, pricing and overall viability of the loan request.  Financial statements of existing businesses help indicate management's abilities.  Information should also be submitted on key management and guarantors, duties and responsibilities.  For start-up businesses, resumes should be detailed enough to explain past history and how it relates to the start-up business.
   

• Credit History:  The borrower's personal and business credit history are considered.  Credit blemishes must be explained in order to justify continued credit consideration.
   

• Conditions:  You should also be prepared to address other conditions of your loan request that may affect the success of your business, such as industry trends, seasonality, location and competition.

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ACCEPTANCE GUIDELINES

1. Working capital will be limited to a small percentage of the loan.

2. Good for owner-user real estate – people in business and who want to expand.

3. Good for office/warehouse condos, franchises, freestanding  buildings, expansion, additions, etc.

4. Good personal & business credit history a must.

5. The business shall be profitable and capable of supporting the mortgage debt service.

6. Repurchase agreement, remarketing contract or guarantee may be required by the franchiser.

7. Should own real property that is used as collateral.  (Building, home, etc).

8. Leased space is acceptable provided additional security is used as collateral.

9. Non-profit organizations are not acceptable.

10. Experience and track record a must.

11. Start-up businesses usually have more restrictive underwriting guidelines.

12. Maximum SBA size standards: (Some exceptions do apply)
        A.  Manufacturing – from 500 to 1500 employees.
        B.  Wholesaling – no more than 100 employees.
        C.  Retail & Service – from $3.5M to $13.5M in annual receipts.
        D.  General construction – from $7.0M to $17.0M in annual receipts.
        E.  Agriculture – from $0.5M to $3.5M.

13. Some examples of businesses.
        • Manufacturing  • Professional   • Retail   • Franchise   • Service   • Wholesale
        Laundromat - River Boat - Lounge & Motel - Hotel - Retail Food Store - Golf Course -
        Gas Station/Convenience Store - Commercial Fishing Boat - Furniture Manufacturer -
        Lumber Processing - Retail Sporting Goods - Automotive Repair Facility - Franchise
        Restaurant - Movie Theater - etc.

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SOME OF THE ITEMS THAT WILL BE REQUIRED

To apply for most programs, you should prepare the following items:

CREDIT APPLICATIONS for each principal.  (We will supply form)

1. CURRENT SIGNED PERSONAL FINANCIAL STATEMENTS not over 45 days old for each principal or stockholder owning 20 percent or more of the corporate stock in the business.  Husband and wife both must sign.  (We will supply form)

2. Last 3 years PERSONAL TAX RETURNS.  (Complete with all schedules and signed), for each principal.

3. IRS Form 4506 for corporate tax returns must be signed.  (Not required for start-up)

4. Last 3 years CORPORATE TAX RETURNS.  (Complete with all schedules and signed by company officer).  This also applies for the business your purchasing, if applicable.
   
   A.  Prepare a current business balance sheet listing all assets, liabilities and net worth.  Applicants for business start-up loans should prepare an estimated balance sheet as of the day the business starts.  The amount that the applicant has to invest in the business must be stated.  DO NOT INCLUDE PERSONAL ITEMS.  (Interim financial statement no older than 90 days)
   
   B.  Prepare profit and loss statements for the current period to the date of the balance sheet and for the most recent three fiscal years, if available.  Business start-up applicants should prepare a detailed projection of earnings and expenses for at least the first year of operation.  A monthly cash flow projection is recommended.  Interim plus 3 tax returns.
    

5. Copy of Executed PURCHASE AGREEMENT and/or Lease details (If applicable).  If purchasing an existing business, a copy of the option contract or a summary of the financial arrangements, advise age of the business and furnish us items in #4 above for the business your buying.

6. USE OF PROCEEDS LETTER.  Written explanation of what the funds are to be used for, a breakdown of the items and cost for each, amount of equity capital that will be contributed, a brief history of the business including a business description, ownership breakdown, and explanation of any business trends (change in sales, inventory buildup, changes in profitability, etc.), and business experience (personal resume) of each principal.  If there is any seller financing or a subordinate loan (standby or 2nd mortgage basis), be sure to disclose the amount and terms.

7. List collateral to be offered as security for the loan along with its description, date of acquisition, cost and current estimate of the present market value of each item and the balance of any existing liens.  List any other collateral available.  (i.e. building, land, home, stocks, bonds, etc).  If sufficient collateral is not available, please supply Credit Application and Personal Financial Statement  (items #1 and #2 above) on the cosigner of the note and state his or her Relationship  to the applicant.  (i.e. parents business associates, relatives, etc).  We will supply these forms if requested.

8. EXISTING APPRAISAL on subject and collateral property, if one is available.  If not, we will coordinate the ordering of an appraisal from an approved appraiser.  Appraisal fees are non-refundable.  Required on loans > $300,000.

9. Written explanation of any derogatory credit you and your business might have  now or had in the past that you are aware of.

SBC will help you structure the loan and provide details of which of their programs may serve you best.  If you decide to pursue an SBA loan, SBC will prepare the initial documentation for the SBA.

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EXISTING - START-UP - BUSINESS ACQUISITION LOANS
IMPORTANT INFORMATION

EXISTING BUSINESS
Most SBA lenders require at least 10% capital injection.  So, if you want a loan for $500,000, the lender will expect you to contribute $50,000.  This percentage may fluxuate depending on your credit, collateral and other factors involved, but 10% is common.

START-UP LOANS
While many commercial banks shun loans for start-up operations, it is the SBA's mission to assist such ventures and to help grow the number of successful small businesses in the United States.

When it comes to Start-Ups, there are several requirements for qualification:

     •  The borrower must have experience in the line of business;
     •  The borrower's cash injection must be at least 25% - 30% of the total project cost; and
     •  The borrower must provide some collateral for the loan portion of the total project cost

BUSINESS ACQUISITION LOANS
SBA loan funds can be used to purchase the assets of existing businesses.  Note, that this covers only the "hard" assets of the business you plan to buy, not goodwill for example.

The SBA guidelines concerning such transactions are as follows:

• Owner cash injection must be 25% - 30% of the business purchase price          

• SBA loan funds cannot finance the purchase of an intangible asset, such as goodwill -- this is normally covered by owner cash injection.

• The business to be acquired must be profitable and have sufficient historical cash flow to support the new debt.  That means we take last year's net profit and add back in depreciation and interest, and deduct all going forward loan payments including the new SBA loan, there must be a positive cash flow.

• The buyer must have experience in the line of business being acquired.  Franchises are
  excluded from this requirement since the new owner will be trained by the franchiser.

• If the business is a retail operation the SBA requires that the term of the lease for the business to be acquired is equal to or longer than the term of the loan.

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QUESTIONS AND ANSWERS

SBA Government guaranteed loans
best kept secret in Florida
(ARTICLE CORRECTED TO REFLECT THE YEAR 2005 REVISIONS)

R E P R I N T

GOVERNMENT GUARANTEED SMALL BUSINESS LOANS
THE BEST KEPT SECRET IN MIAMI !
By Lance Brown

This article on government guaranteed commercial & small business loans was written by Lance Brown, Senior Vice President of State Business Capital.  Brown is the government licensee's (lender) loan correspondent in Florida and one of the only active ten lenders in the entire country.  In this article, Brown explores the numerous questions most frequently asked by people in business.  For additional information write to State Business Capital at 150 Lake Carol Drive – W. Palm Beach, Florida 33411 or e-mail: Loans@StateBusinessCapital.com.

Q.  What are the features of the loan?   

1. No lender points.

2. Up to 90% financing.

3. Assumable to qualified applicant.

4. Low interest rate for long term

5. Amounts from $300,000 to $2,000,000.

6. End-loan commitments are available.

7. Up to 25 years fully amortized loan.

8. NO BALLOON notes.

9. Closing usually within 4 to 6 weeks after receipt of required documentation.

10. In-house approval by lender within 7 to 15 days depending on work load.  Turnaround time 30-60 days.

11. Lender does not require stock or equity position in business.

Q.  How does the government guarantee small business loan program work?

1. The government guarantee small business loan program was established to help the small businessperson.  Its purpose is to strengthen our national economy by making funds more available to small businesses.
   
   The only function of the government licensee (lender) is to assist small businesses with  the funding and servicing of commercial loans.
   
   State Business Capital is a correspondent of the government licensee (lender) and participate with them in loans to small businesses, and provide funds from $300,000 to $2,000,000 for long-term loans up to 25 years. (NO BALLOON).

Q.  Who is eligible for SBA government guaranteed loans from the SBA lender?

1. SBA government guaranteed loans from the SBA lender are available to small businesses.  A small business is described by the government as one that is independently owned and operated, not dominant in its field and meets employment or sales standards developed by the government agency.  (See Acceptance Guidelines in this article).

Q.  What purposes qualify for these loans?

1. Loans may be used to expand, convert or construct new buildings, to re-furbish & re-equip existing franchisees;  for leasehold improvements, and to purchase land, machinery, equipment, furniture, fixtures, inventory, working capital, modernization, motels, franchises, office and warehouse condominiums, or buildings; to start a new business or to purchase an existing business.

Q.  What is the minimum loan amount?

1. $300,000.  Lower amounts may be considered.

Q.  How is the length of the loan determined?

1. Loans for equipment have a maximum term of 10 years fully amortized with NO  BALLOON.  Loans for new construction or purchase of a building have a maximum term up to 25 years fully amortized, and NO BALLOON.

Q.  Am I better off taking a 15-year term instead of a 25 year term?

1. Yes.  You are much better off with a 15 year amortization.  You pay only a few more dollars per month and save 5 to 10 years interest & payments.

Q.  How is the interest rate determined?

1. The interest rate is competitive using the lowest current New York Prime Rate as an index (as published in The Wall Street Journal - not a higher Bank Prime).  We do not charge add-on interest.  Our interest is simple daily interest.  A payment received early results in considerable savings.  Conversely, a late payment has a negative effect.

Q.  How do you qualify for a government guaranteed small business loan?

1. Government loan guarantees are based on two major criteria:  the qualification of the borrower, and the feasibility of the actual loan based on the application.  (See Acceptance Guidelines in this article).

Applicant  -  qualifications:

• Management ability and experience in the field.

• Ability to repay the loan based on: 
  - character  (debt paying record)
  - past business earnings
  - future business prospects
  - feasible business plan

• Financial condition of applicants business based on debt to equity ratio.

• Loan applicants must comply with government regulations regarding employment.

Loan application feasibility:

• The loan must be in the public interest

• Reasonable assurance of repayment from the projected cash flow & profits

• Size of company must meet employment/sales standards

• Adequate collateral

• Adequate investment (generally 25 percent to 30 percent equity) by the owner in new business start-up

Q.  Can a new business (start-up) be accepted?

1. Yes.  However, start-up businesses usually have more restrictive underwriting guidelines.

Q.  What fees must the applicant pay?

1. Guarantee fee based on the loan amount is required by the government agency for the loan guarantee.  This is paid one time and is included in closing costs.
   
   Other fees are limited to the extent of filings necessary in the searching public records, and preparation and recording of documents necessary in the closing of an approved loan.

Q.  What type of properties are acceptable?

1. Office condo; warehouse; building, new or existing; and land.  We finance all types of commercial properties.

Q.  If I intend to purchase or build an office/warehouse condominium or building and need an end-loan commitment, can I obtain one under this program?

1. Yes.  We give you  a pre-construction  commitment.  As soon as you have  selected a location, we will give you a commitment to finance the location as soon as construction is completed.

Q.  What are the occupancy requirements?

1. This is only good for owner-user businesses and not for investors.  For an existing building you must occupy 51% and for a new building you must occupy 67% of the building.

Q.  What is the loan-to-value, the amount of deposit I must put down in relation to the purchase price or appraised value?

1. Maximum loan-to-value on individual permanent loans shall be no greater than the lesser of 90% of cost or appraised value.  Under certain circumstances the Lender may go greater than 90% loan-to-value.  (i.e. include interior decorator, leasehold improvements, equipment).

Q.  What is the interest rate?

1. The interest rate shall be set at the time of closing and shall be 2.75% above the then lowest current New York Prime Rate (as published in The Wall Street Journal - not a higher Bank Prime), as authorized by the government agency.  The rate is adjusted upwards and downward quarterly.  There will be no additional charges by the lender.  On equipment the rate is 2.25% up to 7 years or 2.75% up to 10 years.  Rates may vary depending on market conditions but will never be higher. 

Q.  How many points does the lender charge?

1. None.  The government  agency  does not allow the lender to charge what’s known as lender origination points.

Q.  How much are my closing points?

1. A guarantee fee based on the loan amount shall be paid to the government for the guarantee.  The attorney’s fee usually runs about $2,500 or 1/4%.  Other fees are title insurance, recording fees, etc.  A fee of $250.00 to apply and a packaging fee of $750.00.

Q.  What is the maximum I can borrow?

1. Maximum loan amount shall not exceed $2,000,000 per individual borrower depending on type of business and use of loan proceeds.

Q.  I have a corporation, do I have to sign personally?

1. Personal guarantees shall be required on all loans.

Q.  Does this loan have any prepayment penalties?

1. Yes.  Beginning December 22, 2000, on loans > 15 years.

Q.  Is this loan assumable?  (Can it be transferred)?

1. Yes.  The loan can be assumed if the prospective owner qualifies with the lender.

Q.  Is there a commitment fee, underwriting fee or assumability fee?

1. Yes.

Q.  Can I overpay my monthly payments and if so will the overpayment be applied towards principal?

1. Yes.  You can pay more than the monthly payment.  100% of the overpayment will be applied towards principal.  Therefore you will owe less thereby reducing the term of your loan.

Q.  Is this a Demand Note? Can the lender call the loan due at will for any reason?

1. No.  The Lender cannot call the note due as long as all the terms of the note have been met.

Q.  If I already have an SBA loan, can I pay it off with another SBA loan?

1. Yes.  The SBA must approve the loan in addition to the lender’s approval.  Both loans combined cannot exceed a guarantee of $1,000,000.

Q.  Must I maintain a checking or savings account with the lender?

1. No.  Since  the lender does not have checking or savings accounts, it is not necessary to maintain compensating or minimum bank balances.  We advise you to continue with your existing bank for conducting the day to day operation of your business.

Q.  If the lender doesn’t have checking or savings accounts will my credit be affected?

1. No.  The lender we supply provides a long-term additional source of capital.  Your bank line of credit for current operating expenses is not disturbed.

Q.  I understand this type of government lender will usually require a stock or equity position in my business.  In other words, they become my partner?

1. This might be true of other lenders.

2. The lender does not require a stock or equity position in your business.  He simply makes the loan and expects to be repaid according to the terms.

Q.  Do I get my tax benefits?

1. Yes.  Since our financing is a commercial note and mortgage, all tax benefits are your (interest deduction, depreciation, Investment Tax Credit, etc.).

Q.  What documents will I need to apply?

1. Credit application for each principal (forms are supplied by us).

2. Personal financial statement for each principal (forms are supplied by us).

3. Last 3 years corporate tax returns, complete with all schedules.

4. Last 3 years personal tax returns, complete with all schedules.

5. Copy of executed purchase agreement, if applicable.

6. IRS Form 4506 – Request for Copy or Transcript of Tax Return.

7. SBA Form 912 – Statement of Personal History.

8. Use of Proceeds Letter.  Written explanation of what the funds are to be used for (and breakdown of actual costs); a brief history of the business and resume of the applicants.

9. Appraisal on property, if applicable.

Q.  What qualifications do I need to qualify?  (Acceptance Guidelines)

1. Good personal & business credit history is a must.

2. The business shall be profitable and capable of supporting the mortgage debt service.

3. Real property should be in the transaction that is used as collateral (buildings, warehouse, home, etc.).

4. Office & warehouse condos, & franchises are acceptable.

5. Good for owner-user real estate – people in business and who want to expand, refurbish, modernize, construct a new building or buy a new or existing business or practice.  Most businesses are eligible.

6. Working capital is acceptable.

7. Repurchase agreement or guarantee may be required by franchiser.  Leased space is acceptable however, additional security may be required for collateral (buildings, home, CD’s, assignments, etc).

8. Non-profit organizations are not acceptable.

9. Experience & track record a must.

10. Start-up businesses usually have more restrictive underwriting guidelines.

Q.  I understand that banks take what seems forever to approve a loan because of all the red tape, loan committee, etc.  How long does your lenders in-house approval take?

1. You will receive a decision in approximately 7 to 15 days depending on workload.

Q.  How long does it take to close?

1. Usually within 4 to 6 weeks of receiving all the required documents.

Q.  How is this possible when I hear the government can take forever to fund?

1. That might be true of other lenders, however this is our only business and we are experts in this field.  We have a reputation in the industry for providing quick decisions and simple document procedures.

Q.  What would be considered most important in qualifying for this loan?

1. A characteristic and the most important one we look for in a loan application is the ability to make the payments.  This is more important than the collateral.  This isn’t to say you don’t need collateral.  You do.  Equally important is having the necessary business experience, but adequate collateral should also be available.

Q.  If I need a loan for my business and my collateral is in another state can you cross state lines.

1. Yes.  The collateral and the business do not have to be in the same state.

Q.  If I cannot qualify on my own can I use a co-applicant?

1. Yes.  Example:  Young doctor, attorney, etc., just  starting out may have a co- applicant.

Q.  I am buying a franchise and was told that I was very marginal in qualifying for a loan.  If the franchiser is willing to co-sign with me can I get the loan?

1. Yes.  Provided the Franchiser gives us a full financial disclosure and is acceptable.

Q.  Must I go to the office of State Business Capital to sign the documents and close the loan?

1. No.  The loan will be closed by a legal office in close proximity to your residence.

Q.  How good does my credit rating have to be?

1. The second most important factor in our loan evaluations is that a good credit rating is a must.  A bad debt charge-off is a negative.  It tells us the applicant failed to pay his bills and was a poor money manager.  A bankruptcy will also haunt an applicant.  It doesn’t preclude someone from obtaining a loan, but it makes us re-evaluate his management ability.

Q.  What about confidentiality?

A.  We share information submitted to us with those we represent and only in accordance with strict internal security standards, confidentiality policies and applicable laws.  We do not share client information with other companies except in order to conduct our business, to comply with applicable  law, and to protect against fraud.  For privacy and security reasons all information that you submit to us is stored in our corporate computer files which are offline and only accessible to SBC.

Q.  If I am in business less than 3 years, can I refinance my present loan and/or obtain an SBA loan for expansion, working capital, etc.?

1. Yes.  The SBA must approve the loan in addition to the lender’s approval.

Q.  What are the lender’s credit requirements?

   A.    A loan applicant must:

1. Be of good character.

2. Demonstrate sufficient  management expertise and the commitment necessary for a successful operation.

3. Have enough  funds, including the  lender’s guaranteed loan plus personal cash, to operate the business on a sound financial basis.  For  new businesses, this includes sufficient resources to withstand start-up expenses and the initial operating phase when losses are likely to occur.  The lender may require that the business owner provide, from personal resources, up to one-third or even one-half of the total assets needed to launch the new business.

4. Shows that the past earnings record and probable future earnings will be sufficient to repay the loan in a timely manner.

5. Pledge sufficient assets, to the extent they are available, to adequately secure the loan.  Personal guarantees are required from all the principal owners of twenty percent (20%) or more and from the chief executive officer of the business.  Liens on personal assets of the principals also may be required.

6. Repayment ability from the cash flow of the business is a primary consideration in the SBA loan decision process.

Q.  What else does the lender look for?

1. In  addition  to  having  proper  business  qualifications,  ability  to pay the loan, good credit rating, proper experience and collateral, people seeking loans for their businesses must have proper documentation for the lender.  When we consider applications, we want the business person to present us with the items previously mentioned.  This is all salient information a lender needs to evaluate a loan applicant.  Frequently, the person seeking a loan neglects to give the lender a business plan, yet the lender must know your goals and what you plan to do with the money.

Q.  How would I have to present the documents to the lender?

1. The documents do not have to be elaborately printed or presented.  But too many people come in with figures penciled in.  That makes a lender wonder if the person would run his business in a slipshod, careless way, too.  Make sure that your business financial statements are prepared by an accountant and that your other documents are neatly typed.  If you have trouble preparing this information, we highly recommend the Small Business Development Corp. (SBDC) advisory services that are available at most colleges and universities.  Their staffs are highly competent and helpful in consulting pre-loan applicants.  We have also found small business applicants that have been counseled by the Service Corps of Retired Executives (SCORE) to be well prepared.  Information about SBDC and SCORE locations may be obtained from any Small Business Administration office.

Q.  How do I apply?

Applying for funding is simple.  After reviewing the loan, if you feel you fit the loan parameters and want to pre-apply, complete the "Express Loan Pre-Ap