Apply with confidence

Risk – Innovation – Change. small businesses possess qualities that make them exciting and dynamic. However the characteristics that can lead to rapid success can also cause a fast plummet. This puts small business owners in a difficult position between needing quick access to financing and struggling to prove their creditworthiness. To help promote the development of these ventures, the Small Business Administration (SBA) provides loan assistance.

The SBA 7a program is the SBA’s most popular loan program, says Bert Bryan, president of CU Business Capital, LLC. It is designed to assist small businesses in obtaining financing that they may not be able to find through regular commercial lending channels. Other programs, such as SBA 504 and Export Working Capital, also aid small companies.

Smart Business spoke with Bryan about the benefits of SBA loans and how to apply for them.

How can companies use SBA loans?
You can use loan proceeds from 7a SBA financing for most sound business purposes including: working capital, machinery and equipment acquisition, land and building expenses, business acquisitions, and even debt refinancing.

Proceeds from SBA 504 loans must be used for fixed asset projects financing such as: purchasing land and buildings, upgrading existing facilities, or purchasing and installing machinery and equipment with a useful life of at least 10 years. In addition, certain soft costs directly attributable to the project can be paid with loan proceeds. These include interim interest costs and professional fees.

Where can small business owners find more information on SBA loans?
The South Florida District Office of the SBA is located at 100 Biscayne Boulevard in Miami, on the 7th floor. The phone number is (305) 536-5521. This is a resource center for information. Loan applications are made directly with an approved SBA lender.

Details on certified SBA lenders and the entire SBA program are available on the SBA web site at www.sba.gov and in Spanish at www.sba.gov/espanol. Additional help for minority-owned businesses is available by contacting the SBA Florida Minority Enterprise Development Staff. See the resource listing at www.sba.gov/gopher/Local-Information/Med/medfl.txt.

What will applicants need to prepare for an SBA loan application?
Your proposal must include a cover letter or executive summary. In this portion, you must describe yourself and your background; your business; the purpose of the loan and the amount you are requesting; what payment terms you would like and how you will make the payments.

Describe your business and industry fully, including the type of organization; your location(s); a history of your business and the products or services you provide; a summary of your customers and competition; and your vision for your future. Talk about your supply chain and your dependencies. Describe what it is you do best and why.

What support material should business owners provide with their applications?
Include resumes for your management and key staff or employees to show the strength of your people. You will need to provide recent financial statements for any of your principal owners with more than a 20 percent stake and include tax returns from last year.

Also, support your loan repayment proposal with solid information regarding your cash flow, your source of funds and the timing you anticipate for repayment. Include budget details and other supporting evidence. For a proposed business, be very careful to detail the proposed or planned balance sheet showing your sources of both equity and borrowed funds. Also explain how you will use them.

For an existing business, provide financial statements for at least the last three years, along with a current dated statement, no older than 90 days. This must include a reconciliation of net worth, your balance sheets, your profit & loss statements, and the aging of accounts payable and accounts receivables. Include a schedule of term debt.

Project your future operations for at least twelve months or to the point where you will demonstrate positive cash flow. Estimate your earnings and expenses and provide reasons for these estimations. Use a profit and loss format and if your assumptions differ from trends or standards for your industry, provide very clear explanations that can be documented.

How are applications evaluated?
Your application will be looked at in terms of several core items. You must have a verifiable equity investment in your business. Realize that cash is still king and you must demonstrate cash flow as it relates to the ability to repay all debt and loans. Adequate working capital must be shown. Sufficient collateral is required, including either personal or business assets. The SBA requires personal guarantees from principal owners and key managers and these may include personal property assets. A full discussion of the management skills necessary to succeed in this business must be strongly emphasized. The lender will closely scrutinize the management skill set.

BERT BRYAN is president of CU Business Capital LLC. CUBC provides commercial lending and cash management services to credit unions across the country. www.cubusinesscapital.com. Contact him at (800) 882-5018.

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