SBA 7(a) Loan Program Primer

The SBA 7(a) loan program is the SBA’s primary program for providing start-up and existing small businesses access to capital. SBA 7(a) loans are issued by commercial lenders, and are guaranteed by on average 75% by the SBA. The program is very flexible in terms of business model and use of proceeds, depending upon the 7(a) program through which the applicant is funded. The applicant must be able to demonstrate through a business plan, financial history, or other documentation that the loan’s primary source of repayment is the company’s own cash flow. The applicant must receive approval from the commercial lender and the SBA for funding.

Source: SBA.gov

There are four major SBA 7(a) loan programs:

1. SBA 7(a) Express Program
The Express Program is for applicants seeking immediate funding. On average there is a 36 hour turnaround for loan review by the SBA, and a 50% guarantee is available for loans up to $350,000. The maximum interest rate for loans greater than $50,000 is Prime + 4.5%, and Prime + 6.5% for loans less than $50,000.

2. Export Loan Program
The Export Loan Program is in place to serve a difficult niche for commercial lenders as it relates to companies that export goods and services. Typically, commercial lenders are hesitant to lend against foreign purchase orders, receivables, or inventory that is offshore.

The Export Loan Program has many intricacies through its three variants: the Exporters Express (loans and lines of credit up to $250,000), the Export Working Capital Program (loans and lines of credit up to $2,000,000), and the International Trade Loan Program (up to $1,750,000). These programs provide up to 90% guarantees with various uses of funds relating to exporting goods and services.

3. Rural Lender Advantage Program
For companies in SBA-designated rural districts, guarantees of up to 85% on loans of $350,000 or less are available. The purpose of the program is to mitigate lending risks to commercial lenders related to rural businesses.

4. Special Purpose Loans
SBA offers several special purpose 7(a) loans to aid businesses that have been impacted by NAFTA, to provide financial assistance to Employee Stock Ownership Plans, and to help implement pollution control mechanisms.

Read Full Post »

Private Equity Activity Continues to Pick Up

Private Equity funded the second busiest quarter in two years in third quarter 2010. The quarter yielded 316 investments totaling $28 billion, and 97 exits, totalling $16.8 billion. According to Pitchbook, each of those totals represents an increase from third quarter 2009, suggesting that Private Equity may be at the beginning of a recovery stage.

Source: Pitchbook

In addition to Private Equity continuing to become active, capital on the sidelines remains high. There is $485 Billion of Private Equity raised funds in the United States that has not yet been put to work. SDR believes that over the next 18 months, private equity will begin putting this money to work as the capital markets begin to stabilize. 

Source: Pitchbook

Read Full Post »

Top SBA 7(a) Lenders (2000-2010)

Year	|	Volume Leaders	|	$ Loans	|	Velocity Leaders	|	# Loans
2010		Wells Fargo		$871 Million		JP Morgan Chase		3,386
2009		Wells Fargo		$827 Million		Superior Financial		2,690
2008		CIT Small Business		$771 Million		JP Morgan Chase		6,139
2007		CIT Small Business		$882 Million		Bank of America		10,878
2006		CIT Small Business		$873 Million		Bank of America		13,089
2005		CIT Small Business		$801 Million		Bank of America		11,911
2004		CIT Small Business		$891 Million		Bank of America		12,758
2003		CIT Small Business		$754 Million		Bank of America		9,406
2002		CIT Small Business		$778 Million		Bank of America		3,917
2001		CIT Small Business		$582 Million		Fleet Bank		2,889
2000		CIT Small Business		$469 Million		Fleet Bank		2,889

For the second year in a row, Wells Fargo tops the list as the largest (gross $) lender of SBA 7(a) loans. For FYE 2010, JP Morgan Chase booked $434MM in SBA 7(a) loans, earning the bank a distant second place on this year’s list behind Wells Fargo’s $871MM.

SBA loan volumes are up across the board, but only slightly ahead of 2009 and significantly behind the heyday volumes seen from 2004 through 2007.  In 2010, JP Morgan Chase regained the top volume honors, booking 3,386 loans.

According to SBA.gov, recent government actions have produced results. Specifically, the SBA states that

compared to the depths of the recession, average weekly SBA loan volume is up over 70% and SBA secondary markets have returned closer to historical levels. In total SBA funding has supported nearly $13 billion of lending since ARRA was enacted on February 17, 2009.

As the effects of the $300 billion Small Business Assistance Bill begin to slowly ripple through the economy SDR will keep a close eye on the volume and velocity of SBA loans.

Read Full Post »

Getting Smarter – Phones are Just the Beginning

A recent article in Forbes magazine by Rich Karlgaard highlights the impending boom in the intelligence industry. From technology like smart phones, to a more intelligent workforce, Karlgaard argues that smarter businesses will dominate the future.

Some of today’s most successful entrepreneurs like Mark Zuckerberg have an impressively high IQ and many are now predicting that the next powerhouse industries will be those focused around making us smarter.  In his article, Karlgaard suggests that it won’t end with technology. The explosion in energy drinks has already proven that energy and health supplements to enhance performance could certainly be a part of the equation.

However it manifests, it certainly seems possible that the drive for smarter businesses and a more intelligent workforce may lead to the next trillion-dollar industry.

Karlgaard’s article can be found at Forbes.com.

Read Full Post »

Small Business Assistance Bill Passes Into Law

With unemployment just below ten percent and business experts criticizing President Obama’s fiscal policies, the president signed a new bill into law that claims to offer relief to small businesses.

Democrats say the bill could provide up to $300 billion in credit for small businesses and possibly create 500,000 new jobs. Republicans contest that the bill is no more than a smaller, half-hearted rework of the Wall Street bail out.

The bill’s supporters tout its core provisions of business oriented tax write-offs and a more robust loan program. Specifically, the bill extends the SBA Recovery Act, a lending program to provide small business credit. The bill also allows small businesses to write off $500,000 in equipment costs and some limited start-up costs. Additionally, self-employed entrepreneurs will be able to deduct the cost of health insurance.

The real-world effects of the new law have been a subject of hot debate and will not be immediately clear. Stay tuned to see what becomes of the small business assistance bill and how its provisions translate to entrepreneurs across the country.

Read Full Post »

What Motivates President Obama?

In a recent article published in Forbes magazine, author Dinesh D’Souza explores the mind and motivations of President Obama, providing explanations to some of his policies and decisions that on the surface seem to make little sense to observers on either side of the political aisle.

It is no mystery that the President has been out of touch with the business world and that his fiscal policy is one of a socialist bent. Yet beyond these predictable policies are long lists of actions that mystify many of his supporters.

Some of these policies include the support for offshore drilling in places like Brazil while continuing to denounce it here in our own coastal waters. Or why the President has directed NASA chief Charles Bolden to shift the organization’s effort from exploration and research to a focus on public relations with the Muslim world.

The reason? D’Souza suggests that President Obama is simply the son of a 1950s anti-colonialist who saw the western world as a bully profiting from the plunder of places like Asia and Africa. From the President’s perspective, we ought not to be exploring, drilling or progressing economically while leaving the rest of the world behind.

In reality and what the President fails to realize is that countries like China and India are emerging onto the world economy with never before seen vigor and strength. What we need now is leadership that will spur us on with competitive economic policies, not a tighter grip on the reigns.

President Obama is shaping up to be perhaps the most anti-business president in United States history. With the 2002 tax cuts set to expire, an imminent raise in capital gains tax and even more tax hikes on the way, business owners and entrepreneurs are becoming increasingly frustrated.

D’Souza’s article can be found at Forbes.com.

Read Full Post »

SDR Ventures Invests $7.5 Million in Bridge Financing for Sweetwater Canyon Club

Denver, CO – SDR Ventures, Inc. recently announced a $7.5 million bridge financing investment for Sweetwater Canyon Club.

Sweetwater Canyon Ranch  encompases about 480 acres in Garfield County, CO. The lake spans nearly 77 acres in size, making it the second largest natural lake in Colorado, second only to Grand Lake. The ranch is located 45 minutes from Eagle County Regional Airport, north of I-70 between Vail and Glenwood Springs.

Read Full Post »