This loan guaranty program is designed to help eligible small businesses obtain bank financing when they might not qualify for traditional financing. Loan proceeds may be used for most business purposes, including working capital, machinery and equipment, furniture and fixtures, land and buildings, leasehold improvements, and debt refinancing. Banks can request guaranties through different procedures, based on the lender’s experience and comfort with Small Business Administration (SBA) products and procedures, the lender’s level of authority provided by the SBA, and, in some circumstances, the size, type, and complexity of the loan being guaranteed.
- Standard 7(a) loan processing is used by lenders originating a small number of SBA loans annually or by lenders with less familiarity with the program. Lenders submit a full application package when they request SBA guaranty. The SBA confirms the credit decision of the originating lender with its own analysis of the application.
- The Certified Lenders Program is for experienced SBA lenders with a performing portfolio. The SBA provides expedited loan processing and services under this program. Lenders submit a full application package, just like in Standard 7(a) loan processing. Rather than reanalyzing the materials, the SBA confirms the credit decision of the originating lender.
- The Preferred Lenders Program is used by the most experienced SBA lenders. Preferred lenders have delegated authority to process, close, service, and liquidate most SBA guaranteed loans without prior SBA review.
- Express programs are processed similarly to the Preferred Lenders Program. Qualified lenders have delegated authority to make the credit and eligibility decisions. The program allows lenders to use, to the maximum extent practicable, their respective loan analyses, procedures, and documentation. In return for the expanded authority and autonomy provided by the program, lenders agree to accept a maximum SBA guaranty of 50 percent.
- Loans of $350,000 or less may be processed under 7(a) Small Loans. The lender can prescreen applications by electronically submitting certain information to the SBA. A credit score is issued. If the application receives an acceptable credit score, the borrower can use a shorter and simplified application for guaranty. The SBA offers a number of specialized lending programs under the 7(a) umbrella program.
Community Advantage is a pilot initiative aimed at increasing the number of SBA 7(a) lenders that reach underserved communities. Community Advantage is available to community-based, mission-focused financial institutions, such as community development financial institutions, SBA Certified Development Companies, and SBA nonprofit microlending intermediaries, that previously were unable to offer SBA loans. The program makes loans up to $250,000 with a maximum SBA guaranty of 85 percent (based on loan size). Lenders must maintain at least 60 percent of their SBA loan portfolios in underserved markets.
This program offers up to $5 million in term loans with a maximum 90 percent SBA guaranty for the acquisition, expansion, or improvement of fixed assets to businesses that plan to enter and expand into international markets. The program also offers these loans to those adversely affected by competition from imports and need to modernize to meet foreign competition. Loan proceeds must enable borrowers to be in a better position to compete.
Specialized Lender Programs That Allow Loans to Be Structured as Revolving Debt
CAPLines is an umbrella program that helps small businesses meet their short-term and cyclical working-capital needs. The program was revised in 2011 to help more small businesses finance contracts through an SBA revolving line of credit, providing a path to avoid high-interest rates. There are four distinct loan programs under the CAPLine umbrella: Contract Loan Program, Seasonal Line of Credit Program, Builders Line Program, and Working Capital Line Program.
SBAExpress is designed to increase the number of smaller SBA loans by offering limited paperwork and processing times. The SBA’s turnaround time is within 36 hours. Qualified lenders may make SBA eligibility determination. The program provides a 50 percent guaranty and has a maximum loan amount of $350,000. The program is open to current SBA lenders meeting certain performance standards, or non-SBA lenders with a proven track record in small ($50,000 or less) business loans.
Export Express offers a streamlined method to obtain an SBA loan or line of credit for up to $500,000. The SBA’s turnaround time is within 24 hours. The SBA guaranty ranges from 75 percent to 90 percent depending on loan size. It is the simplest export loan product offered by the SBA and allows participating lenders to use their own forms, procedures, and analyses.
This program provides lenders with up to a 90 percent guaranty on export working capital loans for businesses that can generate export sales and need additional capital to support those sales. Maximum loan amount is $5 million.
Other SBA Loan Programs
This program promotes economic development by providing small businesses with long-term, fixed-rate financing for the acquisition of major fixed assets for expansion and modernization. A lender partners with a certified development company (CDC), a specialized SBA-certified nonprofit corporation, to finance small businesses looking to expand. Each partner makes a loan to a qualifying small business. Typically, the lender’s loan is secured by a first lien covering 50 percent of a project’s total cost. The CDC’s loan is secured by a second lien for up to 40 percent of the project’s cost and is also backed by a 100 percent SBA-guaranteed debenture. The borrower contributes equity of at least 10 percent of the project’s cost. While there is no limit to total project size, the maximum CDC loan (up to 40 percent of total project costs) for most businesses is $5 million; for manufacturers, it is $5.5 million.
This program assists women, low-income, veteran, and minority entrepreneurs, and other small businesses in need of financing in amounts of $50,000 or less and business-based technical assistance. The average microloan is $13,000. The SBA makes funds available to specially designated intermediary lenders, which are nonprofit, community-based organizations with experience in lending as well as management and technical assistance. These intermediaries make loans to eligible borrowers and require a 15 percent non-federal, non-borrowed cash match.
SBICs are privately owned and managed companies licensed by the SBA. The primary benefit of becoming a licensed SBIC is that once approved, the SBA provides a two-to-one public/private-funding match on the required minimum private capital, thereby leveraging the investor’s initial equity contribution. An SBIC uses its own capital, plus funds borrowed with an SBA guaranty, to invest in qualifying small businesses. Under 13 CFR 120.10, banks may invest up to 5 percent of their capital and surplus in SBICs.
U.S. Department of Agriculture: Business and Cooperative Programs
This program helps create jobs and stimulate rural economies by providing financial backing for rural businesses. This program provides SBA guarantees up to 80 percent. Loan proceeds may be used for working capital, machinery and equipment, buildings and real estate, and certain types of debt refinancing.
This program provides affordable funding through loans, grants, and loan guarantees to develop essential community facilities in rural areas. Water and environmental projects include water systems, waste systems, solid waste, and storm drainage facilities. Community facility projects develop essential community facilities for public use in rural areas and may include hospitals, fire protection, safety, as well as many other community-based initiatives.
The IRP program is designed to alleviate poverty and increase economic activity and employment in rural communities. The program provides 1 percent low-interest loans to local lenders or intermediaries. These revolving loan funds are used to assist with financing business and economic development activity to create or retain jobs in disadvantaged and remote communities. Intermediaries are encouraged to work in concert with state and regional strategies, and in partnership with other public and private organizations that can provide complementary resources.
The U.S. Department of Agriculture's (USDA) RBCS office provides financial assistance for rural businesses and funding assistance for nonprofit organizations or CDCs that lend to rural businesses in their local areas.
USDA licenses newly formed for-profit entities as Rural Business Investment Companies (RBIC) to help meet the equity capital investment needs in rural communities. Under 7 CFR 4290.50, banks may invest up to 5 percent of their capital and surplus in RBICs.
U.S. Department of Treasury
The Treasury Department’s CDFI Fund expands banks’ capacity to provide credit, capital, and financial services to underserved populations and communities in the United States. One of the CDFI Fund’s program is the New Markets Tax Credit Program, established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities. The program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax return in exchange for making equity investments in specialized financial institutions called community development entities.
Federal Resources to Increase Small Business Exports
Export.gov brings together resources from across the U.S. government to assist U.S. businesses in planning their international sales strategies and succeed in today’s global marketplace.
Ex-Im Bank is the official export credit agency of the United States and assists in financing the export of U.S. goods and services to international markets. Ex-Im Bank does not compete with private sector lenders but provides export financing products that fill gaps in trade financing. Ex-Im Bank helps to level the playing field for U.S. exporters by matching the financing that other governments provide to their exporters. Ex-Im Bank provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing), as follows:
- The Working Capital Loan Guarantee Program provides 90 percent guarantees on working capital loans made by commercial lenders that will help businesses to grow international sales and compete more effectively in the international marketplace.
- The Supply Chain Finance Guarantee, offered to lenders, benefits U.S. exporters and their suppliers through accounts receivable financing. The program is designed to inject liquidity in the marketplace and provide suppliers, particularly small businesses, with access to capital faster and at a lower cost than through conventional lenders.
- The Medium and Long-Term Loan Guarantee Program provides guaranteed term loan financing to creditworthy international buyers for purchases of U.S. goods and services.
- The Direct Loan Program provides fixed rate loans to creditworthy international buyers for purchases of U.S. goods and services.
- The Finance Lease Guarantee Program provides guaranteed lease financing of U.S. goods and services to creditworthy international lessees when financing is not otherwise available or applicable interest rates are not economically viable.
- Export Credit Insurance allows small businesses to increase export sales by limiting international risk, offering credit to international buyers, and enabling greater access to access working capital funds.
DRC's small and medium-enterprise financing is available for businesses with annual revenues under $250 million. DRC also provides medium- to long-term funding through direct loans and loan guaranties to eligible investment projects in developing countries and emerging markets. The financing supports large-scale projects that require large amounts of capital, such as infrastructure, telecommunications, power, water, housing, airports, hotels, high-tech, financial services, and natural resource extraction industries. DRC also provides long-term working capital and multiple-year capital expenditure programs. The amount of capital needed for any project can be greater than one bank can provide on its own because of per-project limits or diversifications guidelines. In such cases, DRC works with other co-lenders, if necessary, to bring sufficient resources to a given project.
The Small Business Administration provides a number of resources to support small business exporting, including:
- The Export Express program offers flexibility and ease of use to borrowers and lenders. It is the SBA’s simplest export loan product and allows participating lenders to use their own forms, procedures, and analyses. The SBA’s goal is to answer questions in 36 hours or less. Maximum loan amount is $500,000.
- Export Working Capital Program provides lenders with up to a 90 percent guaranty on export working capital loans, so that lenders will make the necessary export working capital available. Maximum loan amount is $5 million.
- The International Trade Loan Program offers term loans of up to $5 million for the acquisition, expansion, or improvement of fixed assets to businesses that plan to start or continue exporting or that have been adversely affected by competition from imports. The loan’s proceeds must enable the borrower to be in a better position to compete for international trade.
U.S. Department of Agriculture
- USDA International Marketing Program
This program offers an array of services that give buyers and sellers of agricultural products a competitive advantage in the global marketplace.
- USDA Foreign Agricultural Service Export Credit Guarantees
This program underwrites credit extended by the private banking sector in the United States to approved foreign banks using dollar-denominated, irrevocable letters of credit to pay for food and agricultural products sold to foreign buyers. The programs encourage exports to buyers in countries where credit is necessary to maintain or increase U.S. sales but where financing may not be available without the guarantees.