SBA, the Small Business Administration, is a non-profit federal agency designed to assist small businesses. In particular, the SBA is the largest source of long-term small business financing in the nation. As an entrepreneur the SBA offers numerous SBA loan programs that can assist you in the financing of your new or existing business.

How to Apply for a SBA Loan

A loan application must be obtained from a participating lender (list of Bay Area lenders attached) or through a non-profit intermediary. Loans are made by private lenders. A percentage of the loan amount up to $750,000 is guaranteed by the SBA. You submit your loan application to a lender that participates in the SBA loan guaranty program. If the application is approved by the lender, it is then submitted by the lender to the SBA for approval.

Necessary SBA documentation includes:

• Current profit and loss statement and balance sheet for existing businesses, or a proforma statement for new businesses. Provide a realistic projected cash flow and profit and loss statement for one year (monthly breakdown).
  
• Current personal financial statement for each principal of business having 20% or more ownership.
  
• Itemized use of proceeds.
  
• Collateral with an estimate of current market value and liens against collateral.
  
• Comprehensive, well documented, carefully researched Business Plan.
  
• Schedule of business, debt, record of accounts receivable and payable.
  
• Personal and business tax returns for last three years.
  
• Copy of lease and any contracts or agreements pertinent to application.
  
• Your first contact must be made through a non-profit intermediary.

Non-profit intermediaries serve as a bridge between the entrepreneur and the SBA. Often times the intermediary must approve the loan application and will charge a nominal service fee for qualified loans.

Local SBA intermediaries include:

Silicon Valley Small Business Development Center
(Santa Clara & San Mateo Counties)
298 S. South Sunnyvale Blvd., Suite 204
Sunnyvale, CA 94107
408.736.0680

Oakland Business Development Corporation
510.763.4297

San Francisco Renaissance
415.541.8580

South of Market Foundation
415.512.9676

Women's Initiative for Self Employment (WISE)
415.247.9473

SBA Eligibility

The business must be for-profit and qualify as a small business under the SBA size standard criteria (almost all local businesses would qualify). The applicant must be of good character and demonstrate sufficient management expertise and commitment to provide reasonable assurance of a successful business operation.

The applicant must have a historical earnings and cash flow record or probable future earnings that demonstrate the ability to repay the loan. As a rule, the SBA requires that the borrower have a minimum capital injection for a new business Start Up or business acquisition equal to one-third of the total project cost.

Specific SBA Loan Programs for Local Businesses

Some SBA loan programs that local businesses would likely want to access are the following:

SBA Micro-Loan Program

• SBA makes loans to non-profit intermediaries who lend $500 to $25,000 to entrepreneurs.
  
• Interest rates and terms vary.
  
• Loan proceeds may be used for purchase of fixed assets or for working capital.
  
• Significant advantage of this program is that certain lending requirements may be more relaxed than in conventional commercial borrowing.
  
• Start Ups and businesses without significant collateral or equity may find it easier to access credit from a microlending program.
  
• Loans made through Center for Southeast Asian Refugee Resettlement (415) 885-2743

The Low Documentation Program (LowDoc)

• Loan application is a single page between the lender and the SBA for loans under $100,000
  
• Processing time is shorter and the equity and collateral requirements are more flexible.
  
• To be eligible, business must have under $5 million in annual sales and fewer than 100 employees.

Women's Pre-Qualification Loan Program or Minority Pre-qualification Loan Program

• Loan requests can be reviewed by the SBA prior to approaching a lender for financing (2 months).
  
• If her financing request is approved, the SBA will issue a commitment letter (good for 45 days) assuring its guarantee to a lender.
  
• Maximum loan amount is $250,000.
  
• Business must be 51% owned and managed by a woman; annual sales must be below $5 million; fewer than 100 employees; no previous bankruptcies or criminal records.
  
• Startups must provide 1/3 equity injection.
  
• Rate: prime + 2.25% for loan < 7 years; prime + 2.75% for loan > 7 years.
  
• Term: 7 years for working capital, 10 years for fixed assets, 25 years for property purchases.

7(a) Loan Guaranty Program

• Maximum loan amount is $750,000 and the SBA guarantees 80% of the amount to the lender
  
• Interest rate does not exceed the prime rate plus 2.75%.
  
• Proceeds can be used for working capital, fixed assets, leasehold improvements and acquisition of commercial business property.
  
• Most lenders require a reasonable amount of collateral to provide a secondary source of repayment.
  
• Personal guarantees are required of anyone owning 20% or more of the business.
  
• The maturity of the loan is determined by the use of the loan proceeds and may vary from five to seven years for working capital, ten years for fixed assets, or twenty-five years for acquisition of commercial property.
  
• SBA charges a 2% to 3.875% guarantee fee.

SBA Participating Lenders

The Pacific Bank (415) 696-6435
Sumitomo Bank (510) 587-1760
U.S. Bank (510) 743-3075
Imperial Bank (916) 443-3293
Glendale Federal Bank (707) 578-7630
Money Store Investment (800) 722-3066
Cupertino National Bank (408) 996-1144
Fremont Bank (510) 790-5845
Bay Area Bank (415) 367-1600
Bank of Santa Clara (408) 987-9429
Bank of America Community Development Bank (510) 988-4801