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All About the SBA Microloan Program
CBA Members-only Webinar March 15, 2018
© 2018 Credit Builders Alliance, Inc. Some rights reserved
1. Audio is streamed through your computer. 2. This webinar is being recorded. 3. Questions? Type them into the CHAT box
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Members-only Webinars
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Meet the Experts
(OEO)
Office of Economic Opportunity The Symbiotic Lending Products for Mission Lending
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•Loan Guaranty – up to $250K – Mission-Driven Lenders Community
Advantage (CA)
•Direct Loans – up to $200K – Non-profit Lenders Intermediary Lending Pilot Program (ILPP)
•Direct Loans – up to $50K – Non-profit Lenders •Technical Assistance GrantsMicroloan Program
•Grants up to $250K •Technical Assistance •Capacity Building •Research and Development
PRIME Grant Program
How the Microloan Program Works
SBA • SBA Lends $ to Intermediary Lender • SBA Provides grants $ to Intermediary Lender to help
offset cost of providing Training and Technical Assistance (TA)
Intermediary Lender
microbusinesses
How the Microloan Program Works SBA Loans to Intermediary Lenders
•$750,000 (1st loan) •$2,500,000 (subsequent loans) •$5,000,000 (Maximum Program Debt Outstanding)
Max. Borrowing
•10 Years from Date of NoteMaturity
•5 year T-Bill Rate less 2% for average microloan size under $10,000; otherwise less 1.25%Interest Rate
•Intermediary’s Microloan Revolving Fund, Loan Loss Reserve Fund, and Microloan NotesCollateral
•15% of Loan Disbursements must be matched with non-borrowed, non-Federal fundsMatching Funds
•To make direct, short term, fixed rate loans of $50,000 or less Use of Proceeds
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How the Microloan Program Works Loans from Intermediary to Microbusiness
•Up to $50,000Loan Amount
•Up to 6 years (72 months)Maturity
•Fixed rate, up to: •Cost of Funds + 8.50% (if microloan is $10,000 or less) •Cost of Funds + 7.75% (if microloan is above $10,000)
Interest Rate
•To make loans for supplies, furniture, fixtures, materials, equipment, or working capitalUse of Proceeds
•Required at Intermediary’s discretion – flexibility in structuring loanCollateral
•Decisions made by Intermediary - not SBA •According to Intermediary’s policies and proceduresUnderwriting/Servicing
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How the Microloan Program Works Technical Assistance Grants
SBA provides Grant funding to Intermediary Lenders who in turn provide free business training and Technical Assistance to their microbusiness clients.
Intermediary provides ongoing training and technical assistance to microbusinesses (minimum 75% for post-loan TA)
Grant dollars help defray the cost of providing training and technical assistance to micro borrowers and potential micro borrowers.
Grant Amount up to 25% of Intermediary’s outstanding debt to SBA.
25% matching funds required
Training opportunities One-on-one consulting/Counseling Reviewing business plans and cash flow projections Business assessment/evaluation: planning, sales and
marketing, organization structure, management skills, accounting, budgeting
Accounting system training; improve recordkeeping Regular site visitations Identifying and targeting new markets Identifying strategies for business growth Preparing for a bank loan Analyzing business financials
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Ladder of Opportunity SBA Program Tiers
- Maximum Loan Size $50,000. - Network of Non-Profit Intermediaries who offer Small Business
Technical Assistance and training. - Many Non-Profits specialize in Startups.
- Maximum Loan Size $250,000. - Many Community Advantage Lenders offer Technical Assistance.
- Maximum loan size $5 Million. - Available through participating lenders. - Longer loan maturity terms available
• Ten years for working capital, inventory, and equipment
Community Advantage Program Parameters
• 5% cash reserve on unguaranteed portion of loanLLRF requirement
• 60% of the number of CA loans must be in underserved marketsMarkets served
• Highly encouraged but not a requirement for the program
Management and technical assistance
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• 90% guaranty for International Trade loans • 85% guaranty for loans of $150,000 or less • 75% guaranty for loans greater than $150,000
Percent of Guaranty
• Maximum of 10 years for working capital • Maximum of 10 years or useful life for equipment • Maximum of 25 years for real estate
Maturity
• 0.25% for maturities ≤ 12 months (guaranteed portion) • For maturities > 12 months
• 2.0% for CA loan ≤ $150,000 (guaranteed portion, lender can retain ¼ fee)
• 3.0% for CA loan > $150,000 (guaranteed portion, full fee paid to SBA)
• 0.55% on-going guaranty fee paid by lender
Guaranty Fees
Symbiotic Relationship
How does becoming an SBA Microlender prepare you to become a Community Advantage lender?
How does becoming a Community Advantage lender help you as a microlender?
What other products can you use?
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Community Advantage Program
WHO ARE APPROVED CA LENDERS? At the end of FY 2017 125 Approved CA Lenders
60 SBA Microlenders
50 SBA CDCs
84 Treasury-certified CDFIs
Many CA lenders have more than one designation – for instance 12 lenders are approved as a CDC, CDFI and Microlender
From program Inception (Feb 2011)
3,788 CA Loans approved for $ 489 million
Average loan size $129,108
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Top 10 OEO Lenders (w/ minimum 10% participation in complementary program) # Approved $Approved
LiftFund, Inc. 272 $10,399,624
PeopleFund 147 $10,767,100
Women's Wisconsin Business Initiative Corporation 82 $4,953,950
Mountain Bizcapital, Inc. 79 $3,778,758
Union County Economic Development Corporation 78 $1,768,862
Main Street Launch 70 $9,453,407
Valley Economic Development Center 57 $3,839,329
Community Investment Corporation 38 $2,590,000
Community Advantage TOP 10 Loan Volume - FY 2017
Lender Name CA Loans # CA Loans $ 1 CDC Small Business Finance Corporation 127 $19,808,260 2 PeopleFund 91 $9,504,600 3 Main Street Launch 61 $9,373,300 4 LiftFund, Inc. 57 $7,340,100 5 Empire State Certified Development Corporation 42 $6,438,500 6 Business Development Finance Corporation 40 $5,137,700 6 ACCION New Mexico 40 $3,730,700 7 Carolina Small Business Development Fund 37 $4,396,500 7 Growth Capital Corporation 37 $2,584,700 8 Regional Business Assistance Corp. 35 $3,673,000 9 Wisconsin Women's Business Initiative Corporation 34 $3,738,500 10 Valley Economic Development Corp. 24 $2,949,500
SBA Microloan Program Application Process
WHAT DOES SBA LOOK AT IN A NEW APPLICATION?
Eligibility Non-Profit
At lease 1 Year In-house Technical Assistance Experience
Qualification Personnel – Relevant Micro-lending Experience
Lending – Experience
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WHAT’S REQUIRED IN THE APPLICATION? 1 - cover sheet.xls 2 - SBA 1081.pdf 3 - Lending History Chart.xls 4 - Cost of Lending Calculation.xls 5 - Item 10 Chart.xls 6 – Cert. of Contracts sba1711.pdf 7 – Disclosure of Lobbying Activities sflllin.pdf 8 – Debarment sba1623.pdf 9 – Resolution of the Board of Directors sba160.pdf 10 –Security Agreement SBA1059.pdf 11 - Microloan SOP 52 00 A (FINAL).pdf
Application Process (Cont’d.) - Cover Sheet 1 Applicant's signed statement giving SBA permission to obtain additional information regarding applicant's relationship
with creditors, other federal agencies, or other entities as necessary to evaluate this application.
2 A copy of applicant’s IRS tax exempt certificate, Conflict of Interest Policy, and a Certificate of Good Standing from the Secretary of State.
3 A complete copy of the applicant’s Mission Statement, Articles of Incorporation, and Bylaws, as amended. 4 An organizational chart with explanation. 5 A list of corporate officers and directors with a resume and Form 1081 for each individual listed. 6 A list of personnel instrumental to the microlending operation (current and proposed) with a resume and a Form 1081
for each individual listed. 7 Copies of the Applicant’s year end audited financial statements for the last three years. If application is submitted
after July 1 of any given year, also submit Year to Date balance sheets. Also, include a separate schedule of non-federal sources of funding, and funds received, for the period covered by the financial statements.
8 Completed charts, suggested formats attached, regarding client demographics, lending activities, technical assistance (TA) activities, and delivery costs. Also include a set of loan policies and procedures.
9 A map of the current area of operation. 10 A description of the applicant’s current service area detailing the following:
a. identification of urban, rural, and/or distressed areas (see definition) within the service area. b. characteristics of the area’s small business community with analysis of micro-level financial and technical assistance needs. c. charts, suggested formats attached, regarding economic, unemployment, and poverty characteristics.
11 A 6-10 page narrative detailing microlending and TA programming provided to date and planned uses of the subject funds for changes or expansion of the applicant's current activities. Include information regarding:
a. any planned geographic expansion (provide expanded maps and appropriate charts) b. a description of current microenterprise activities and any lending and TA expansion/enhancement plans subject
to approval of this application. c. current and planned integration of internal TA programming with other community resources.
12 Signed forms (provided) as follows: a. Certification for Contracts, Grants, Loans and Cooperative Agreements (SBA Temp Form 1711) b. Disclosure of Lobbying Activities (SF LLL) c. Certification Regarding Debarment, Suspension, and other Responsibility Matters - Primary Covered
Transactions (SBA Temp Form 1623) d. Compensation Agreement (SBA Form 159) e. Resolution of the Board of Directors (SBA Form 160) f. Security Agreement
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APPLICATION RULES
1. Read the Microloan Program SOP 2. Give clear description of current lending and TA programs 3. Follow the directions / Cover Sheet carefully 4. Only deliver a complete application 5. Use the Lending History and TA History templates provided
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Hear from ECDI, a CBA Member
Inna Kinney Founder/CEO
Questions?
Thank you!
Slide Number 3
Slide Number 4
Slide Number 5
Slide Number 6
Meet the Experts
Office of Economic OpportunityThe Symbiotic Lending Products for Mission Lending
Office of Economic Opportunity (OEO) Overview
How the Microloan Program Works
How the Microloan Program WorksSBA Loans to Intermediary Lenders
How the Microloan Program WorksLoans from Intermediary to Microbusiness
How the Microloan Program WorksTechnical Assistance Grants
Examples of Mentoring and Technical Assistance
Slide Number 15
Symbiotic Relationship
Community Advantage TOP 10Loan Volume - FY 2017
SBA Microloan Program Application Process
SBA Microloan Program Application Process (Cont’d.)
Application Process (Cont’d.) - Cover Sheet
APPLICATION RULES
Hear from ECDI, a CBA Member