Illinois District Office

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In FY 2010, SBA Nationally delivered over $17.0 billion in

financing, guaranteed over 60,771 loans

In FY 2010, SBA in Illinois 221 participating lendersdelivered over $719.6 million in

financing, guaranteed 2,357 loans

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What is the What is the SBA? SBA?

• Started in 1953Started in 1953

• Small independent federal agencySmall independent federal agency

• Mission: Help small businesses Mission: Help small businesses start, grow, succeedstart, grow, succeed

• Programs delivered through district Programs delivered through district offices, working with resource partnersoffices, working with resource partners

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Programs & Partners

• Counseling & Training Assistance

SCORE / SBDC’s

• Financial Assistance

Banks, S&Ls, Credit Unions

• Federal Contracting Assistance

Agencies - DOD, GSA, VA

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SCORESCORE

• Counselors to America’s Counselors to America’s Small BusinessSmall Business

• Free confidential one-on-one Free confidential one-on-one assistanceassistance

• Monthly workshops Monthly workshops

• www.scorechicago.orgwww.scorechicago.org

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Small Business Small Business Development Center Development Center

(SBDC)(SBDC)• Provides free services of Provides free services of

specialized technical specialized technical assistance to small assistance to small businesses businesses • Help develop business plansHelp develop business plans

• Low cost SeminarsLow cost Seminars

• www.ilsbdc.bizwww.ilsbdc.biz

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SBA Guaranty SBA Guaranty Loan ProgramsLoan Programs

• No grantsNo grants

• No direct loansNo direct loans

• We do have several guaranteed loan We do have several guaranteed loan programsprograms

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Three (3) Main Reasons Why Lenders Use SBA

• Newer or Start-Up Business

• Inadequate Collateral

• Longer Repayment Term

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Process• BorrowerBorrower applies for a loan with an SBA

participating lender

• LenderLender submits application for SBA review and approval

• After SBASBA approval, lender disburses funds

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• All Business PurposesAll Business Purposes• Export FinancingExport Financing

• Working Capital FinancingWorking Capital Financing• Receivable FinancingReceivable Financing• Inventory FinancingInventory Financing• Real Estate FinancingReal Estate Financing• Equipment FinancingEquipment Financing

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A Typical 504 Project

• A private sector loan covering up to 50%

• A loan from the CDC covering 40%

(100% SBA-guaranteed debenture)

• At least 10% equity from the small business

• Participating lender has first lien on assets

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504 Loan Program504 Loan Program

• Up to $ 13,750,000 ProjectUp to $ 13,750,000 Project

• 504 Projects504 Projects• New ConstructionNew Construction

• Purchase of existing leased buildingPurchase of existing leased building• Long Term equipmentLong Term equipment

• Projects can be companioned with 7 (a)Projects can be companioned with 7 (a)

• Up to $ 5,500,000 for SBA PortionUp to $ 5,500,000 for SBA Portion

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• 7(a) loans from $2 million to $5 million;

• 504 loans from $2 million to $5 million – standard borrowers(project up to $12.5 M)

• from $4 million to $5.5 million – manufacturers (project up to $13.75 M)

• Microloans from $35,000 to $50,000

JOBS ACT September 27,2010

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JOBS ACT September 27, 2010

90 Percent Guarantee

• As of September 27, 2010 - SBA to raise its loan guarantee to as much as 90%

• Prior SBA would guarantee loans up to 85% on loans up to $150,000, up to 75% on loans greater than $150,000.

• Maximum SBA guarantee $4.5M

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JOBS ACT September 27, 2010

Temporary Elimination of fees• Fees for SBA’s 7(a) and 504 loan programs

until December 31, 2010.

• 7 (a) - Upfront borrower guaranty fees

range 2% to 3.75%

• 504 - Processing fee 1.5% Third party Lender fee .5%

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Survival Rates Business Start-ups:

66 % New Employer Firms Last At Least 2 Years

50% New Employer Firms Last at Least 4 Years

Rates Vary By Industry

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Major Factors for Success

--Adequate Capital--Owners Knowledge of Industry--Knowing Target Market--Low Fixed Cost

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Start-up Business Available Info for Risk Analysis:

Business Plan--Market for Product--Identified Target Market--Sales forecast--Capital Balance Sheet--Cash Flow projection 12 months--Owners Equity Investment--Identified needed Financing--Demonstrate Debt Repayment

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Risk Analysis Info Cont:

--Collateral

--Managerial Experience --Knowledge of Industry

--Credit Score

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--Credit Score is a Numeric Summary of the Info on Your Credit Report.

--Score is Counted Slightly Different by The

Three Major Reporting Agencies.

--Equifax, TransUnion and Experian

--Use FICO (Fair Isaac Company)

--FICO Score Ranges 300 to 850

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35% --Payment History (Pay on Time) 30% --Debt Level (Keep Debt Low as a % of Credit Limit—Try to stay at 75%) 15% --Length of Credit History (Develop a long relationship with a credit card).10% --Diversity of Credit Accounts -Mix It Up Car loan, Mortgage loan- shows you can manage 10% --Number of New Attempts To Get Credit Cards More attempts Hits Lowers your Score.100%

FICO SCORE Elements

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FICO Scores National Distribution

58% 700 Plus 27% 600 to 69915% 0 to 599

Very Bad 499 to 0 Bad 500 to 580 Sub Prime 581 to 619 Okay 620 to 679 Good 680 to 699

Very Good 700-Plus

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Most Start-Ups F/SCapital Balance Sheet and Income Statement ( Financial Forecast at Best)

Risk Management Association (RMA)Financial Ratio Benchmarks( Key Ratios Expressed in Upper, Median, Lower Range)

Annual Statements Studies by IndustryIdentify industry by using Standard Industrial Codes(SIC) North American Industry Classification Code(NAICS)

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--Meaningful Ratio Analysis Requires a Comparison Trend Over Several Years and to Industry Norms

--Start-up Businesses Have No Track Record. This Limits our Analysis to: --A Few Key Ratios --Capital Balance Sheet --Income Financial Forecast

--Cash Flow Statement

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Industry Norms vs. Start-up Business B/S

AssetsCurrent Assets %Non-Current Assets %Intangible Assets %

Total Assets 100%

LIABILITIESCurrent Liabilities %Non-Current Liabilities %Total Liabilities 50% Net Worth 50%Total Liabilities & Net Worth 100%

Compare value in each category to a norm for the industry for at least a one year period.

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Forecast Income StatementSales 100.0% - Cost of Sales (Inventory) 56.0%Gross Profit 44.0%

-Operating Expenses 40.4% Operating Profit 3.6% -Other Expenses 1.9% Profit before Taxes 1.7%

Shoe Store, SIC#5139,5661, NAICS#448210RMA Page 974-975

Compare Start-up Forecast to Industry Norm

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2:1 Current Ratio =total current assets

total current liabilities

1:1 Quick Ratio =cash & accts receivables

total current liabilities

Stability Ratio

3:1 Debt to Net Worth =total liabilities

tangible net worth

Liquidity Ratios

Key Ratios Capital Balance Sheet

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Dollar Sales Breakeven

Fixed Costs $ BE= 1.-- Variable Costs

Sales

Divide $ BE by widget SP to determine number of widget to sell to achieve BE.

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Monthly Cash flow for 12 month period

Positive Cash each month to service P & I

Month with largest Negative figure represents W/C needs.

Repayment Ability

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Additional Information-

Illinois District Office

500 W. Madison, Suite 1150

(312) 353-4528

SBA.GOV/IL

Contact: