1 00:00:04,260 --> 00:00:09,390 A bank may decide a borrower is too risky for a standard bank loan but may be willing to lend to the 2 00:00:09,390 --> 00:00:09,900 borrower. 3 00:00:09,890 --> 00:00:14,790 Three United States government program like the Small Business Administration loan programs. 4 00:00:15,000 --> 00:00:18,240 I'll briefly describe some of the major loan programs. 5 00:00:18,240 --> 00:00:20,400 These programs serve small businesses. 6 00:00:20,490 --> 00:00:24,630 For those of you from other countries watching this course you can skip this section if you like since 7 00:00:24,630 --> 00:00:31,580 it focuses on U.S. programs the Small Business Administration also known as the SBA has a variety of 8 00:00:31,580 --> 00:00:33,800 loan programs for small businesses. 9 00:00:33,800 --> 00:00:39,170 As you'll soon see the size of businesses that qualify as small may be bigger than you may guess. 10 00:00:39,170 --> 00:00:45,020 The SBA is a wealth of education and programs for small business owners to major loan programs that 11 00:00:45,020 --> 00:00:49,750 I'll briefly describe in this course of the seven day program for general business loans and the CDC 12 00:00:49,750 --> 00:00:52,770 5 4 program for major fixed assets. 13 00:00:52,790 --> 00:00:55,670 There are other smaller programs they don't cover in this course. 14 00:00:55,760 --> 00:01:01,590 I provide a link on this page to a site where you can get more info about their loan programs some of 15 00:01:01,590 --> 00:01:06,840 the key eligibility requirements for the main loan programs are that the business must be for profit 16 00:01:06,870 --> 00:01:09,270 doing business in the United States. 17 00:01:09,330 --> 00:01:12,750 The owner must have invested equity in the company. 18 00:01:12,750 --> 00:01:16,640 The borrower must also have exhausted other financing options. 19 00:01:16,950 --> 00:01:21,370 The size of the companies that qualify for SBA loans is different for each industry. 20 00:01:21,380 --> 00:01:26,810 There is a huge table that lists all the industries at the SBA site I listed in the previous slide. 21 00:01:26,910 --> 00:01:31,140 Company size for each industry is determined by revenue or by the number of employees. 22 00:01:31,230 --> 00:01:36,330 The ranges of maximum sizes vary considerably but I wanted to give you a rough idea of what the SBA 23 00:01:36,330 --> 00:01:38,120 considers a small business. 24 00:01:38,250 --> 00:01:44,990 It's very roughly a maximum of 8 to 40 million in revenue or one hundred to fifteen hundred employees. 25 00:01:45,060 --> 00:01:53,310 I recognize those are wide ranges but you can see that it extends to some fairly good sized companies. 26 00:01:53,340 --> 00:01:55,700 The main program is the 7 8 program. 27 00:01:55,770 --> 00:02:01,610 There are actually many programs subtypes under 7 8 but this slide gives a general overview of the program. 28 00:02:01,770 --> 00:02:06,090 The maximum loan under the seven day program is five million dollars. 29 00:02:06,090 --> 00:02:11,970 The loans are provided by banks and lenders who receive a guarantee of 75 to 85 percent of the loan. 30 00:02:11,970 --> 00:02:17,640 This reduces their risk so they're willing to lend to risk your small businesses loans can be fixed 31 00:02:17,700 --> 00:02:19,290 or variable rate. 32 00:02:19,320 --> 00:02:24,390 One benefit of SBA loans is that you can get terms that are much longer than Standard Bank business 33 00:02:24,390 --> 00:02:31,690 terms you can get repayment terms without balloons of up to 25 years for real estate equipment and revolving 34 00:02:31,690 --> 00:02:39,810 lines have a maximum term of up to 10 years of for loans are long term fixed rate loans for fixed assets 35 00:02:40,470 --> 00:02:46,170 instead of a loan guarantee like the 7 8 program the SBA takes a second mortgage behind a bank's first 36 00:02:46,170 --> 00:02:49,330 mortgage of up to 40 percent of the project costs. 37 00:02:49,440 --> 00:02:56,610 The SBA funding is provided by a Certified Development Company or CDC the maximum amount of the SBA 38 00:02:56,610 --> 00:03:00,030 CDC portion of the loan is five million dollars. 39 00:03:00,030 --> 00:03:04,080 Once again you can get 10 to 20 year fixed rate loans with no balloon. 40 00:03:04,080 --> 00:03:06,600 That's a much longer fixed term and life of the loan. 41 00:03:06,600 --> 00:03:12,190 The many banks offer to businesses there are some cons to SBA loans. 42 00:03:12,190 --> 00:03:14,960 Remember this is a government program we're talking about here. 43 00:03:15,010 --> 00:03:17,130 So there's lots of paperwork. 44 00:03:17,320 --> 00:03:20,460 The approval process may be longer than standard bank loans. 45 00:03:20,470 --> 00:03:26,470 Some banks can't approve SBA loans themselves and have to send the loan to the SBA for approval collateral 46 00:03:26,470 --> 00:03:28,780 and personal guarantees are required. 47 00:03:28,780 --> 00:03:33,550 Finally the interest rate or fees may be higher than standard bank loans but these are companies that 48 00:03:33,550 --> 00:03:40,430 didn't qualify for loans without the risk reduction provided by the SBA the Farm Service Agency or FSA 49 00:03:40,670 --> 00:03:43,520 provide similar programs to guarantee loans to reduce risk. 50 00:03:43,520 --> 00:03:49,070 The banks that provide loans to family farms or ranchers I listed the FSA loan program page that you 51 00:03:49,070 --> 00:03:50,540 can visit for more information.