|
February 06, 2008
Ask The Expert Witmer H. JonesUS Small Business Administration NH District Office
SBA has many programs to help small business. Information on all of our programs is available from our web site www.sba.gov . Here in New Hampshire one of our most popular programs is our SBA Express loan program. SBAExpress Streamlines Process for Smaller Loans The program, SBAExpress loan, has a maximum loan size of $350,000, more than double the average size SBA loan, with a streamlined process that usually results in a completed process within 36 hours. Nationwide the program is so popular that SBAExpress loans make up 60-70 percent of all SBA-guaranteed loans. Last fiscal year here in New Hampshire, 567 SBA Express loans totaling $30,125,000 were approved. The streamlined process, one of the many advantages of the SBAExpress loan for both lenders and borrowers, is made possible by the agreements with qualified lenders authorizing them to make eligibility determinations without direct SBA involvement. The program allows lenders to apply for 7(a) loans using their own forms and processes instead of the SBA’s official paperwork. In exchange for that authorization, the SBA guaranty percentage is reduced from the more typical 75 percent of the loan amount to 50 percent. SBAExpress loans follow the 7(a) loan program rules on use of proceeds; accordingly, they may be used for a variety of purposes, but there are also some restrictions. The loans can be used: Loans cannot be used to refinance existing debt where the lender is in a position to sustain a loss and SBA would take over that loss through refinancing, or to effect a partial change of business ownership or a change that will not benefit the business. In addition, these loans can’t be used to reimburse 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. They also cannot be used for any “non-sound” business purpose. Interest rates on SBAExpress loans are tied to the prime rate (as published in the Wall Street Journal) and may be fixed or variable. Lenders and borrowers can negotiate the interest rate and maturity, but they may not exceed maximums set by SBA. Recently SBA created the Patriot Express loan program to assist our military community. Patriot Express is similar to Express except that loans are available up to $500,000 and qualify for SBA’s maximum guaranty of 85% for loans of $150,000 or less and up to 75% for loans over $150,000 up to $500,000. In order to qualify for Patriot Express the applicant must be a veteran, active duty service member eligible for the military’s transition assistance program, reservist, National Guard member, or the current spouses of any of the above. In addition the widowed spouse of a service member or veteran who died during service or of a service connected disability is eligible to apply for a Patriot Express loan. About Witmer H. JonesWitmer Jones was appointed District Director of the New Hampshire District office on September 3, 2007. He served as Acting District Director since March 2007. As District Director Mr. Jones oversees the delivery of agency programs for the State of New Hampshire, including financial assistance, management counseling and business development, the oversight of the New Hampshire Small Business Development Center (SBDC) network, the coordination of New Hampshire’s SCORE chapters and the Women’s Business Center. Mr. Jones oversees a staff of seven professional employees. Mr. Jones has served the agency in New Hampshire since 1998 as chief, finance division and later as deputy district director. He has worked for the SBA in various positions since 1972, notably as the team leader of the SBA’s New England Lending and Recovery project which assisted small businesses that had their loans taken over by the FDIC.
Questions and AnswersQUESTION: I'm wondering what percentage of small businesses apply for funding as a means to get the venture up and running. Is it common practice or do most people begin by investing their personal savings, and is this advisable. Also, can you define "small business?"
ANSWER: A small business is defined as any business with up to 500 employees. Here in NH there are an estimated 41,000 businesses with employees. Of these 39,700 are small. SBA does not track the number of small businesses that use loans to fund start up. Our experience is that most new businesses are funded with a combination of the owner's savings, business loans and unfortunately some with cash advances on credit cards. Anyone starting a business using an SBA guaranteed loan is expected to invest some of their own funds into the business, personally guaranty the business debt and in many cases secure their guaranty with a mortgage on their personal residence. Because the owner of a new business is taking a substantial personal financial risk we recommend that the owner carefully research the business opportunity. At a minimum the owner should prepare a business plan. Assistance preparing a business plan is available from SCORE (http://www.score.org/), the SBDC (http://www.nhsbdc.org)/ and the Women's Business Center (http://www.womenbiz.org/).
QUESTION: I’m a Veteran and I just came across the Patriot Express Loan. I am planning on starting my business in the next month or two. I was going to put my start up costs on a credit card but I think this would be a much better option. How would I go about getting the paperwork started for such a loan, and how long does the process take.
|