UFIG, Lending

SBA Loans

If you’re planning to start a business or expand an existing business, you might need financing help. SBA participates in a number of loan programs designed for business owners who may have trouble qualifying for a traditional bank loan.  UFIG has been providing SBA loans since 1998 offering unmatched speed and providing you the lowest possible rates.

Starting and Expanding Businesses

• Basic 7(a) Loan Program

  Gives 7(a) loans to eligible borrowers for starting, acquiring and expanding a small business. This type of loan is the most basic and the most used within SBA's business loan programs. Borrowers must apply through a participating lender institution.

• Certified Development Company (CDC) 504 Loan Program

  Provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.

• farms
• gas stations
• hotels / motels
• self storage
• restaurants
• medical offices
• automotive repair centers
• dry cleaners
• day cares
• most owner occupied business

SBA Loans could help you with your business ventures

Our research indicates that many business owners do not seriously consider Small Business Administration (SBA) loans when looking for financing. Digging into the survey findings, the data reveals a set of negative assumptions about SBA loans that do not always match the reality of what is available. Here are the top reasons business owners give for not taking advantage of SBA loans.

Myth 1: You don’t qualify.

Insufficient operating history, lack of collateral or down payment, inability to fund short loan term payment with existing cash flow -- these are all reasons that many small businesses do not qualify for traditional loans. However, these are the exact reasons that businesses may qualify for an SBA loan. Many SBA loans offer flexibility for longer terms to make payments smaller and more affordable. Others require no collateral or down payment conditions for certain types of loans, including financing for retail, real estate or businesses owned by veterans. Undercapitalized growth companies are especially in a sweet spot for the flexible terms and requirements of SBA loans.

Myth 2: SBA lines of credit require too much time-consuming paperwork.

Recent government programs designed to accelerate small business lending have simplified the process, so that preferred lenders will actually help business owners complete the paperwork. Another business owner resource is local Small Business Development Centers (SBDC) where counselors from the Service Corps of Retired Executives or SCORE, a nonprofit educational and mentorship group that works with the SBA and will help you prepare a business plan.

Myth 3: SBA loans will not meet your timeline for needing money.

Owners don’t understand how fast SBA loans can happen, particularly given recent programs designed to accelerate and streamline small business lending with preferred lenders. Many lenders with SBA expertise have streamlined their underwriting processes and secured “fast track” status for loan guarantees from the government. It is important to look at the experience and volume of SBA loans written by the lending institution.

Myth 4: SBA loans are for narrow circumstances.

The SBA backs a wide variety of loans, for example:

·   Most any owner occupied commercial real estate will qualify for SBA financing.

·  U. S. Department of Agriculture loan programs are available in many rural areas with a wide range of state and county level options.

·  Veterans and their spouses can receive preferential treatment with loans such as the SBA Patriot Express loan program that delivers favorable terms.

· Exporters may get loans quickly on favorable terms with SBA Export Express loans.

· Commercial real estate owners may qualify for low down payments and flexible spending options.

BUSINESS AND INDUSTRY GUARANTEED LOANS (B&I)

The purpose of the B&I Guaranteed Loan Program is to improve, develop, or finance business, industry, and employment and improve the economic and environmental climate in rural communities. This purpose is achieved by bolstering the existing private credit structure through the guarantee of quality loans which will provide lasting community benefits. It is not intended that the guarantee authority will be used for marginal or substandard loans or for relief of lenders having such loans.

Who May Borrow?
A borrower may be a cooperative organization, corporation, partnership, or other legal entity organized and operated on a profit or nonprofit basis; an Indian tribe on a Federal or State reservation or other Federally recognized tribal group; a public body; or an individual. A borrower must be engaged in or proposing to engage in a business that will:
 

1. Provide employment;
2. Improve the economic or environmental climate;
3. Promote the conservation, development, and use of water for aquaculture; or
4. Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems and other renewable energy systems.

Individual borrowers must be citizens of the United States (U.S.) or reside in the U.S. after being legally admitted for permanent residence. Corporations or other nonpublic body organization-type borrowers must be at least 51 percent owned by persons who are either citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence. B&I loans are normally available in rural areas, which include all areas other than cities or towns of more than 50,000 people and the contiguous and adjacent urbanized area of such cities or towns.

How May Funds be Used?
Loan purposes must be consistent with the general purpose contained in the regulation. They include but are not limited to the following:

1. Business and industrial acquisitions when the loan will keep the business from closing, prevent the loss of employment opportunities, or provide expanded job opportunities.
2. Business conversion, enlargement, repair, modernization, or development.
3. Purchase and development of land, easements, rights-of-way, buildings, or facilities.
4. Purchase of equipment, leasehold improvements, machinery, supplies, or inventory.

What is the percentage of Guarantee?
The percentage of guarantee, up to the maximum allowed, is a matter of negotiation between the lender and the Agency. The maximum percentage of guarantee is 80 percent for loans of $5 million or less, 70 percent for loans between $5 and $10 million, and 60 percent for loans exceeding $10 million

What are the Loan Amounts?
The total amount of Agency loans to one borrower must not exceed $10 million. The Administrator may, at the Administrator’s discretion, grant an exception to the $10 million limit for loans of $25 million under certain circumstances. The Secretary may approve guaranteed loans in excess of $25 million, up to $40 million, for rural cooperative organizations that process value-added agricultural commodities.

What are the Loan Terms?
The maximum repayment for loans on real estate will not exceed 30 years; machinery and equipment repayment will not exceed the useful life of the machinery and equipment purchased with loan funds or 15 years, whichever is less; and working capital repayment will not exceed 7 years.

What are the Interest Rates?
The interest rate for the guaranteed loan will be negotiated between the lender and the applicant and may be either fixed or variable as long as it is a legal rate. Interest rates are subject to Agency review and approval. The variable interest rate may be adjusted at different intervals during the term of the loan, but the adjustments may not be more often than quarterly.

Is Collateral Required?
Yes. Collateral must have documented value sufficient to protect the interest of the lender and the Agency. The discounted collateral value will normally be at least equal to the loan amount. Lenders will discount collateral consistent with sound loan-to-value policy.

Annual Renewal Fee?
The annual renewal fee is paid once a year and is required to maintain the enforceability of the guarantee as to the lender.

The rate of the annual renewal fee (a specified percentage) is established by Rural Development in an annual notice published in the Federal Register, multiplied by the outstanding principal loan balance as of December 31 of each year, multiplied by the percent of guarantee. The rate is the rate in effect at the time the loan is obligated, and will remain in effect for the life of the loan.

Annual renewal fees are due on January 31. Payments not received by April 1 are considered delinquent and, at the Agency’s discretion, may result in cancellation of the guarantee to the lender. Holders’ rights will continue in effect as specified in the Loan Note Guarantee and Assignment Guarantee Agreement. Any delinquent annual renewal fees will bear interest at the note rate and will be deducted from any loss payment due the lender. For loans where the Loan Note Guarantee is issued between October 1 and December 31, the first annual renewal fee payment will be due January 31 of the second year following the date the Loan Note Guarantee was issued.