Scoring for Venture Capitalist

First-time users may try the first level software free of charge (it is a marketing tool for other services). This completely web-based software application has minimal overhead costs outside of maintenance and marketing expenses.

The software is designed to be user-friendly and takes less than two hours to complete. The second-level TVA Score is a $1,000 product which provides a comprehensive look at the feasibility of a Venture Capitalist funding a project - The Vulnerability Score.

SoCalBizOps, Inc. is in a strategic alliance relationship with TVA as their business plan customers are routed to SoCalBizOps, Inc. and TD Smith & Associates, Inc.

SBA Loan Packaging

Our Business Finance Division will assist you by matching you with the lender most suited for your business, circumstances, and financial objectives. 

Our funding department staff includes an Executive Vice President, Project Managers and Loan Processors who will use a combination of the Certified Business Plan, your loan application, credit report, tax returns and year-to-date financials to create a loan package for you.   

SBA Lending Guidlines

SoCalBizOps is a professional-grade business plan writing group.  We provide due diligence services which take 60-90 hours to complete an SBA qualified business plan which includes nine chapters.  The purpose of the business plan is to conform to SBA requirements of your loan package including assumptions worksheets, proof of ability pay, the strength of your marketing plan and management team, and the validation that your business model is sound.

 

SoCalBizOps does not guarantee approval or funding of SBA loans.  We do provide the highest quality business plans in the industry. 

 

The following information is provided by the SBA.  We have made undersigned notes that reflect our experience in the areas of qualification and minimum requirements.

 

Before we proceed with writing business plan (for those who you intend to use as a tool to gain approval through your commercial lender and/or the SBA), please read carefully to ensure you and your team qualify for a loan.  In the event you do not qualify, we may discuss other financing options such as Angel investors and Venture Capital investments, which are a more sophisticated business plan requiring additional forecasting and references showing substantial research of your business model.

 

We look forward to serving you.

Most Sincerely,  Tony Smith

 

1. Equity Investment

Business loan applicants must have a reasonable amount invested in their business. This ensures that, when combined with borrowed funds, the business can operate on a sound basis. There will be a careful examination of the debt-to-worth ratio of the applicant to understand how much money the lender is being asked to lend (debt) in relation to how much the owner(s) have invested (worth). Owners invest either assets that are applicable to the operation of the business and/or cash which can be used to acquire such assets. The value of invested assets should be substantiated by invoices or appraisals for start-up businesses, or current financial statements for existing businesses.

 

Strong equity with a manageable debt level provide financial resiliency to help a firm weather periods of operational adversity. Minimal or non-existent equity makes a business susceptible to miscalculation and thereby increases the risk of default on -- failing to repay -- borrowed funds. Strong equity ensures the owner(s) remains committed to the business. Sufficient equity is particularly important for new business. Weak equity makes a lender more hesitant to provide any financial assistance. However, low (not non- existent) equity in relation to existing and projected debt -- the loan -- can be overcome with a strong showing in all the other credit factors.

 

Determining whether a company's level of debt is appropriate in relation to its equity requires analysis of the company's expected earnings and the viability and variability of these earnings. The stronger the support for projected profits, the greater the likelihood the loan will be approved. Applications with high debt, low equity, and unsupported projections are prime candidates for loan denial.

 

Our findings of the current market indicate that the client must typically have as much as 30% equity invested (debt to equity ratio) in their business through a combination of cash and business receipts.  For example, a loan requesting $200,000 will require proof of owner equity investment of approximately $60,000.

 

In the business plan we show this in a spreadsheet called "Use of Capital" which includes the use of funds being provided by the loan as well as receipts and cash expenditures to be invested by the entrepreneur.

 

2. Earnings Requirements

Financial obligations are paid with cash, not profits. When cash outflow exceeds cash inflow for an extended period of time, a business cannot continue to operate. As a result, cash management is extremely important. In order to adequately support a company's operation, cash must be at the right place, at the right time and in the right amount.

 

A company must be able to meet all its debt payments, not just its loan payments, as they come due. Applicants are generally required to provide a report on when their income will become cash and when their expenses must be paid. This report is usually in the form of a cash flow projection, broken down on a monthly basis, and covering the first annual period after the loan is received.

 

When the projections are for either a new business or an existing business with a significant (20% plus) difference in performance, the applicant should write down all assumptions which went into the estimations of both revenues and expenses and provide these assumptions as part of the application.  This is accomplished in the business plan as well.

 

3. Working Capital

Working capital is defined as the excess of current assets over current liabilities.

 

Current assets are the most liquid and most easily convertible to cash, of all assets. Current liabilities are obligations due within one year. Therefore, working capital measures what is available to pay a company's current debts. It also represents the cushion or margin of protection a company can give their short term creditors.  Working capital is essential for a company to meet its continuous operational needs. Its adequacy influences the firm's ability to meet its trade and short-term debt obligations, as well as to remain financially viable.

 

This is determined in the use of funds worksheet and the cash flow projection in an effort to describe to the reader how the working capital needs match the loan amount.

 

4. Collateral

To the extent that worthwhile assets are available, adequate collateral is required as security on all SBA loans. However, SBA will generally not decline a loan where inadequacy of collateral is the only unfavorable factor.

 

Collateral can consist of both assets which are usable in the business and personal assets which remain outside the business. Borrowers can assume that all assets financed with borrowed funds will collateralize the loan. Depending upon how much equity was contributed towards the acquisition of these assets, the lender also is likely to require other business assets as collateral.

 

For all SBA loans, personal guarantees are required of every 20 percent or greater owner, plus others individuals who hold key management positions. Whether or not a guarantee will be secured by personal assets is based on the value of the assets already pledged and the value of the assets personally owned compared to the amount borrowed. In the event real estate is to be used as collateral, borrowers should be aware that banks and other regulated lenders are now required by law to obtain third-party valuation on real estate related transactions of $50,000 or more.  Certified appraisals are required for loans of $100,000 or more. SBA may require professional appraisals of business and personal assets, plus any necessary survey, and/or feasibility study.

 

Owner-occupied residences generally become collateral when:

 

1) The lender requires the residence as collateral;

2) The equity in the residence is substantial and other credit factors are weak;

3) Such collateral is necessary to assure that the principal(s) remain committed to the success of the

Venture for which the loan is being made;

4) The applicant operates the business out of the residence or other buildings located on the same

Parcel of land.

 

The owners equity investment and the collateral provided, combined, should cover the value of the loan in this volatile market, thus loans are hard to come by.  For example, a borrower who is requesting $200,000 will often require a combination of 40% equity and collateral so in this example a total of owner equity and collateral will likely need to be $80,000 in cash, receipts, and collateral.  This is not always the case, but it is becoming a frequent request of lenders.

 

5. Resource Management

The ability of individuals to manage the resources of their business, sometimes referred to as "character," is a prime consideration when determining whether or not a loan will be made. Managerial capacity is an important factor involving education, experience and motivation. A proven positive ability to manage resources is also a large consideration.

 

Mathematical calculations on the historical and projected financial statements form ratios which provide insight into how resources have been managed in the past. It is important to understand that no single ratio provides all this insight, but the use of several ratios in conjunction with one another can provides an overall picture of management performance. Some key ratios all lenders review are: debt to worth, working capital, the rate at which income is received after it is earned, the rate at which debt is paid after becoming due, and the rate at which the service or product moves from the business to the customer.

    

Even though the SBA-qualifying standards are more flexible than other types of loans, lenders will generally ask for certain information before deciding to use an SBA loan program. Generally, a business will need the following documentation to evaluate your loan request:

  • Business profile. A document describing type of business, annual sales, number of employees, length of time in business and ownership.
  • Loan request. A description of how loan funds will be used. Should include purpose, amount and type of loan. 
  • Collateral. Description of collateral offered to secure the loan, including equity in the business, borrowed funds and available cash.
  • Business financial statements. Complete financial statements for the past three years and current interim financial statements. 
  • Personal financial statements. Statements of owners, partners, officers and stockholders owning 20% or more of the business.

The strength and accuracy of your financial statements will be the primary basis for the lending decision, so be sure that yours are carefully prepared and up-to-date.

 

The most important documents in your financial statements are:

  • Balance sheets from the last three fiscal year-ends.
  • Income statements revealing your business profits or losses for the last three years.
  • Cash flow projections indicating how much cash you expect to generate to repay the loan.
  • Accounts receivable and "payable aging," breaking your receivables and payables in to 30-, 60-, 90- and past 90-day old categories.
  • Personal financial statements from you and your business partners listing all personal assets, liabilities and monthly payments, as well as your personal tax returns for the past three years.  

We are finding that our business plans provide more than adequate information concerning resource management.  Most important however, is there is a trend that lenders are requesting as much as FIVE years experience in the industry showing the borrowers knowledge and experience in the sector is strong enough to protect the lender.  Our business plans are written in an effort to anticipate the resource management questions of both the lender and the SBA.

 

The 5 C's of Credit:

Capacity to repay is the most critical of the five factors. The prospective lender will want to know exactly how you intend to repay the loan. The lender will consider the cash flow from the business, the timing of the repayment, and the probability of successful repayment of the loan. Payment history on existing credit relationships - personal and commercial - is considered an indicator of future payment performance. Prospective lenders also will want to know about your contingent sources of repayment.

 

The business plan addresses this through well formulated assumptions worksheets and forecast profit and loss statements.  The character of the credit history is not within our control.

 

Capital is the money you personally have invested in the business and is an indication of how much you will lose should the business fail. Prospective lenders and investors will expect you to contribute your own assets and to undertake personal financial risk to establish the business before asking them to commit any funding. If you have a significant personal investment in the business you are more likely to do everything in your power to make the business successful.

 

The latest response from Wells Fargo, Citibank, Bank of America, Certified Federal, 1st Centennial, and Celtic Bank is a request of up to 30% of the capital needed for the business come from the owners.

 

Collateral or guarantees are additional forms of security you can provide the lender. If the business cannot repay its loan, the bank wants to know there is a second source of repayment. Assets such as equipment, buildings, accounts receivable, and in some cases, inventory, are considered possible sources of repayment if they are sold by the bank for cash. Both business and personal assets can be sources of collateral for a loan. A guarantee, on the other hand, is just that - someone else signs a guarantee document promising to repay the loan if you can't. Some lenders may require such a guarantee in addition to collateral as security for a loan.

 

We are finding that collateral values have dropped significantly.  Only 25-70% of the current value of the collateral may be used.  For instance, a home worth $500,000 with a current mortgage of $300,000, leaving $200,000 in equity may only have a collateralized value of $150,000 in the eyes of the lender because of dropping home values in the past 18 months.  In addition, equity and inventory assets have even lesser collateral value.  Trucks, heavy equipment, fixtures, and furniture assets will only have 50% of their value applied to the collateral value.  Stock and bonds only rate 50% of their value for collateral.  Perishable inventory has no value.  Standard vehicle have no value.  Only certificates of deposit receive 100% of their fixed value for collateral.

 

Conditions focus on the intended purpose of the loan. Will the money be used for working capital, additional equipment, or inventory? The lender will also consider the local economic climate and conditions both within your industry and in other industries that could affect your business.

 

The strength of the business plan and use of funds is important in this regard.  How the money is used and the strength of the return on investment argument is high. 

 

Character is the personal impression you make on the potential lender or investor. The lender decides subjectively whether or not you are sufficiently trustworthy to repay the loan or generate a return on funds invested in your company. Your educational background and experience in business and in your industry will be reviewed. The quality of your references and the background and experience of your employees will also be considered.

 

Although the SBA the most important factor is the ability to repay, the character question tends to be the most important factor in today's market.  A combination of a strong business plan, five years of experience in the industry and a 680 or high credit score are the keys to providing clear character.  If the borrower does not have five years experience then managers will need to be hired who do have the experience, but this now decreases the ability to pay by raising the operating costs of the business.

    

SBA Loan Programs

7 (a) Loans

7(a) loans are the most basic and most used type loan of SBA's business loan programs. Its name comes from section 7(a) of the Small Business Act, which authorizes the Agency to provide business loans to American small businesses.

 

All 7(a) loans are provided by lenders who are called participants because they participate with SBA in the 7(a) program. Not all lenders choose to participate, but most American banks do. There are also some non-bank lenders who participate with SBA in the 7(a) program which expands the availability of lenders making loans under SBA guidelines.

 

7(a) loans are only available on a guaranty basis. This means they are provided by lenders who choose to structure their own loans by SBA's requirements and who apply and receive a guaranty from SBA on a portion of this loan. The SBA does not fully guaranty 7(a) loans. The lender and SBA share the risk that a borrower will not be able to repay the loan in full. The guaranty is a guaranty against payment default. It does not cover imprudent decisions by the lender or misrepresentation by the borrower.

 

Under the guaranty concept, commercial lenders make and administer the loans.

 

The business applies to a lender for their financing. The lender decides if they will make the loan internally or if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made. The guaranty which SBA provides is only available to the lender. It assures the lender that in the event the borrower does not repay their obligation and a payment default occurs, the Government will reimburse the lender for its loss, up to the percentage of SBA's guaranty. Under this program, the borrower remains obligated for the full amount due.

 

All 7(a) loans which SBA guaranty must meet 7(a) criteria. The business gets a loan from its lender with a 7(a) structure and the lender gets an SBA guaranty on a portion or percentage of this loan. Hence the primary business loan assistance program available to small business from the SBA is called the 7(a) guaranty loan program.

 

A key concept of the 7(a) guaranty loan program is that the loan actually comes from a commercial lender, not the Government. If the lender is not willing to provide the loan, even if they may be able to get an SBA guaranty, the Agency cannot force the lender to change their mind. Neither can SBA make the loan by itself because the Agency does not have any money to lend. Therefore it is paramount that all applicants positively approach the lender for a loan, and that they know the lenders criteria and requirements as well as those of the SBA. In order to obtain positive consideration for an SBA supported loan, the applicant must be both eligible and creditworthy.

 

What SBA Seeks In A Loan Application:

In order to get a 7(a) 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, 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.

 

Eligibility Criteria:

All applicants must be eligible to be considered for a 7(a) loan. The eligibility requirements are designed to be as broad as possible in order that this lending program can accommodate the most diverse variety of small business financing needs. All businesses that are considered for financing under SBA's 7(a) loan program must: meet SBA size standards, be for-profit, not already have the internal resources (business or personal) to provide the financing, and be able to demonstrate repayment. Certain variations of SBA's 7(a) loan program may also require additional eligibility criteria. Special purpose programs will identify those additional criteria.

 

Eligibility factors for all 7(a) loans include: size, type of business, use of proceeds, and the availability of funds from other sources. The following links will provide more detailed information on these eligibility issues.

 

In addition to credit and eligibility criteria, an applicant should be aware of the general types of terms and conditions they can expect if SBA is involved in the financial assistance. The specific terms of SBA loans are negotiated between an applicant and the participating financial institution, subject to the requirements of SBA. In general, the following provisions apply to all SBA 7(a) loans. However, certain Loan Programs or Lender Programs vary from these standards. These variations are indicated for each program.

 

Use of Proceeds

7(a) loan proceeds may be used to establish a new business or to assist in the operation, acquisition or expansion of an existing business. These may include (non-exclusive):

  • To purchase land or buildings, to cover new construction as well as expansion or conversion of existing facilities;
  • To acquire equipment, machinery, furniture, fixtures, supplies, or materials; 
  • For long term working capital including the payment of accounts payable and/or for the purchase of inventory; 
  • To refinance existing business indebtedness which is not already structured with reasonable terms and conditions;
  • For short term working capital needs including: seasonal financing, contract performance, construction financing, export production, and for financing against existing inventory and receivable under special conditions; or
  • To purchase an existing business.  

 

Ineligible use of Proceeds

There are certain restrictions for the use of SBA loans. The following is a list of purposes which SBA loans cannot finance:

  • To refinance existing debt where the lender is in a position to sustain a loss and SBA would take over that loss through refinancing;
  • To effect a partial change of business ownership or a change that will not benefit the business;
  • To permit the reimbursements of funds owed to any owner. This includes any equity injection, or injection of capital for the purposes of the businesses continuance until the loan supported by SBA is disbursed;
  • To repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow; and
  • For a non sound business purpose.

Maximum Loan Amounts

SBA's 7(a) Loan Program has a maximum loan amount of $2 million dollars. SBA's maximum exposure is $1.5 million. Thus, if a business receives an SBA guaranteed loan for $2 million, the maximum guaranty to the lender will be $1.5 million or 75 percent. SBAExpress loans still have a maximum guaranty set at 50 percent

 

Maturity

 

SBA loan programs are generally intended to encourage longer term small business financing but actual loan maturities are based on: the ability to repay, the purpose of the loan proceeds, and the useful life of the assets financed. However, maximum loan maturities have been established: twenty-five (25) years for real estate and equipment; and, generally seven (7) years for working capital.

 

Loans for working capital purposes will not exceed seven (7) years, except when a longer maturity (up to 10 years) may be needed to ensure repayment.

 

Guaranty Percents

For those applicants that meet the SBA's credit and eligibility standards, the Agency can guaranty up to 85 percent of loans of $150,000 and less, and up to 75 percent of loans above $150,000. This standard applies to most variations of the 7(a) Loan Program.

 

However, SBAExpress loans carry a maximum guaranty of 50 percent guaranty. The Export Working Capital Loan Program carries a maximum of 90 percent guaranty, up to a guaranteed amount of $1,000,000.

 

7a Interest Rates

Interest rates are negotiated between the borrower and the lender but are subject to SBA maximums, which are pegged to the Prime Rate.

 

Interest rates may be fixed or variable. Fixed rate loans of $50,000 or more must not exceed Prime Plus 2.25 percent if the maturity is less than 7 years, and Prime Plus 2.75 percent if the maturity is 7 years or more.

 

For loans between $25,000 and $50.000, maximum rates must not exceed Prime Plus 3.25 percent if the maturity is less than 7 years, and Prime Plus 3.75 percent if the maturity is 7 years or more.

 

For loans of $25,000 or less, the maximum interest rate must not exceed Prime Plus 4.25 percent if the maturity is less than 7 years, and Prime Plus 4.75 percent, if the maturity is 7 years or more.

 

Fees

To offset the costs of the SBA's loan programs to the taxpayer, the Agency charges lenders a guaranty fee and a servicing fee for each loan approved and disbursed. The amount of the fees is based on the guaranty portion of the loans. The lender may charge the upfront guaranty fee to the borrower after the lender has paid the fee to SBA and has made the first disbursement of the loan. The lender's annual service fee to SBA cannot be charged to the borrower.

  • For loans approved on or after December 8, 2004, the following fee structure applies:
  • For loans of $150,000 or less, a 2 percent guaranty fee will be charged. Lenders are again permitted to retain 25 percent of the up-front guarantee fee on loans with a gross amount of $150,000 or less.
  • For loans more than $150,000 but up to and including $700,000, a 3 percent guaranty fee will be charged.
  • For loans greater than $700,000, a 3.5 percent guaranty fee will be charged.
  • For loans greater than $1,000,000, an additional .25 percent guaranty fee will be charged for that portion greater than $1,000,000. The portion of $1,000,000 or less would be charged a 3.5 percent guaranty fee. The portion greater than $1,000,000 would be charged at 3.75 percent.

The annual on-going servicing fee for all 7(a) loans approved on or after October 1, 2006 shall be 0.494 percent of the outstanding balance of the guaranteed portion of the loan. The legislation provides for this fee to remain in effect for the term of the loan.

 

Prepayment Penalties

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

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

C.     The prepayment is made within the first 3 years after the date of the first disbursement (not approval) of the loan proceeds.

 

The prepayment fee calculation is as follows:

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

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

c.       During the third year after disbursement, 1 percent of the amount of the prepayment.

 

Patriot Express

1.      Maximum Loan Amount: $500,000

2.      Maximum SBA Guaranty %: 75/85%

3.      Interest Rate: Rate may be fixed or variable and lenders and borrowers can negotiate interest rate, but lenders may not charge more than 2.25 percent over Prime for loans of less than 7 years and 2.75 percent over Prime for loans greater than 7 years; lenders may charge 1 percent more for loans of $50,000 or less and 2 percent more for loans of $25,000 or less.

4.      Eligibility Decision: Must meet standard SBA eligibility and must be 51 percent or more owned/controlled by:

  • Veteran (other than dishonorably discharged)  
  • Active Duty Military potential retiree within 24 months of separation and discharging Active Duty member within 12 months of discharge (TAP eligible)
  • Reservist and National Guard
  • Current spouse of above or spouse of service member or veteran who died of a service-connected disability.

 

 Revolving Lines of Credit

1.      Revolving loans allowed up to 7 years with maturity extensions permitted at the outset.

2.      SBA Turnaround Time Within 36 Hours

3.      Forms: Streamlined: Lender Uses Mostly Own Forms and Procedures. 

4.      Collateral: Lenders are not required to take collateral for loans up to $25,000; may use their existing collateral policy for loans over $25,000 up to $350,000, but must take available collateral for loans greater than $350,000.

5.      Credit Decision By Lender

6.      Purchase May request expedited SBA purchase on small loans or in situations where liquidation may be delayed. 

 

Lender Participation

A lender may be eligible to participate in Patriot Express if it currently participates with SBA and meets certain performance standards. There are no minimum SBA loan volume requirements to begin making Patriot Express loans.  A non-SBA lender that makes a reasonable number commercial loans of $50,000 or less may be eligible to participate, but must apply for SBA loan authority.

 

 Loans made under this program generally follow SBA's standards for Size, Use of Proceeds, Type of Business and Availability of Funds. Differences unique to Patriot Express are noted below. Contact your SBA district office for more information.

 

SBA Express

1.      SBA Program Office SBA Programs 8(a) Business Dev. Advocacy Banking CFO CIO Disaster Assistance Entrepreneurial Dev. Faith Based Comm. Init Financial Assistance Freedom of Information GCBD Goaling Program Government Contracting Hearings and Appeals HUBZone Inspector General International Trade Investment (SBIC) Lender Oversight Native American Affairs NAC Ombudsman Press Office SBDCs SCORE Size Standards SDB Surety Guarantees Technology (SBIR/STTR) Veterans Womens Bus.

2.      Maximum Loan Amount: $350,000

3.      Maximum SBA Guaranty %: 50%

4.      Interest Rate: Lenders and borrowers can negotiate the interest rate. Rates are tied to the prime rate (as published in the Wall Street Journal) and may be fixed or variable, but they may not exceed SBA maximums:

 

Lenders may charge up to 6.5 percent over prime rate for loans of $50,000 or less and up to 4.5 percent over the prime rate for loans over $50,000

 

  • Eligibility Decision: By SBA, Qualified Lenders May be granted Authorization to make eligibility determinations
  • Revolving Lines of Credit: SBAExpress allows revolving loans up to 7 years with maturity extensions permitted at the outset
  • Turnaround Time: Within 36 Hours
  • Forms: Lender Uses Mostly Own Forms and Procedures 
  • Collateral:  Lenders are not required to take collateral for loans up to $25,000. Lenders may use their existing collateral policy for loans over $25,000 up to $150,000.
  • For Loans greater than $150,000, follows SBA's general collateral policy 
  • Credit Decision:  By Lender 
  • Purchase:  May request expedited SBA purchase on small loans or in situations where liquidation may be delayed.   

Lender Participation

A lender may be eligible to participate in SBAExpress if one of the following.

Currently participate with SBA and meet certain portfolio performance standards. There are no minimum SBA loan volume requirements to begin making SBAExpress loans.  Are a non-SBA lender that currently makes a reasonable number commercial loans of $50,000 or less, and

 

Loans made under this program generally follow SBA's standards for Size, Use of Proceeds, Type of Business and Availability of Funds. Differences unique to SBAExpress are noted below. Contact your SBA district office for more information.

 

Community Express

Community Express is a pilot SBA loan program that was developed in collaboration with the National Community Reinvestment Coalition (NCRC) and its member organizations. Under the pilot, who is available to selected lenders, a SBAExpress like program will be offered to pre-designated geographic areas serving mostly Low and Moderate Income areas and New Markets small businesses. The program will also include technical and management assistance, which is designed to help increase the loan applicant's chances of success.

 

SBA Community Express 

1.      Maximum Loan Amount:  $250,000 

2.      Maximum SBA Guaranty %:  Follows Standard SBA Guaranty Percent 

3.      Interest Rate:  Community Express loans are subject to the same maximum interest rate as all SBA loans 

4.      Eligibility Decision:  By SBA 

5.      Revolving Lines of Credit:  Allows revolving loans up to 7 years 

6.      Turnaround Time:  Mostly Within 36 Hours 

7.      Forms:  Lender Uses Mostly Own Forms and Procedures 

8.      Collateral:  Lenders are not required to take collateral for loans up to $25,000. Lenders may use their existing collateral policy for loans over $25,000 up to $150,000.

9.      For Loans greater than $150,000, follows SBA's general collateral policy 

10.  Credit Decision:  By Lender 

11.  Technical Assistance:  Arranged or Provided by Lender 

 

 

Lender Participation

The SBA initiated the Community Express program in May of 1999 with about 10 NCRC lenders. The Agency is now expanding the program to PLP lenders that have at least a 90 percent currency rate on their SBA 7(a) portfolio for the last 3 fiscal years and to selected non-PLP lenders that meet the eligibility requirements for participating in the SBAExpress program.

 

Technical Assistance has been recognized by both the NCRC and the SBA as often crucial to the success of these businesses. As a result, the Community Express program includes a specific technical assistance component. Borrowers must receive pre- and post-loan closing technical and management assistance from local non-profit providers and/or from participating lenders, with that assistance coordinated, arranged and, when necessary, paid for by Community Express lenders. Community Express lenders may also consider this technical assistance as a collateral enhancement.

 

Community Express lenders must establish (and document) an internal procedure to ensure the consistent delivery of appropriate and effective technical and management assistance. The process begins with the identification of qualified and committed T/A providers. The focus then shifts to the Community Express applicant and the T/A provider's development of a business plan (as appropriate) and an assessment of the applicant's management and technical assistance strengths and weaknesses. If weaknesses are identified as a result of that assessment, the lender should document the T/A provider's recommendations and the remedial plan. The lender, in cooperation with the T/A provider, is also expected to strongly encourage the applicant to follow that plan.