Negocios Now

16 Diciembre 200816 Marzo 2012 NegociosNow NegociosNowEl Especial the capital to grow Acquiring Robert Esquivel, the United States Small Business Administration's Lender Relations Chief, discusses tools for successfully accessing capital Negocios Now: How can the Small Business Administration help? Robert Esquivel: The SBA assists small-business owners in getting access to capital through our various guaranty loan programs. SBA offers guaranties typically up to 75%, but in some cases up to 90%. While some Lenders have tightened up their lending policies, our loan pro- grams will allow for flexibility in areas of collateral, terms and start-ups. For example, SBA's collateral policy means we will not turn down a loan strictly because of collateral deficiency, either lack of collateral or because of the qua- lity of the collateral. A second benefit offered through an SBA guaranty loan, is that it allows len- ders to be more flexible in regards to the length of term of the loan. Small busi- nesses appear more vulnerable because they have fewer resources than larger companies and while lenders are some- times willing to lend to small businesses, it often is on short terms. Shorter terms translate into larger payments. That strangles the small-business owner's cash flow. As far as the length of the loan, SBA terms can go up to 10 years for working capital and equipment. And SBA will allow up to 25 years for anything that deals with real estate, such as expansion, new construction, or the acquisition of real estate. And a third area where our guaran- tee offers flexibility to lenders is in their policies with start-up businesses. A lot of lenders do not offer loans to start-up businesses or brand-new businesses. The risk there is that there is no histo- rical record as far as performance. So to us, in all three categories – as long as everything else makes sense – we're willing to take that risk by offering a guarantee. the equity option more difficult, right? RE: Most more equity in projects since the real- estate crisis. NN: The real-estate crisis has made lenders are requiring Some small businesses tend to borrow from the equity they have in their homes in order to cover the short fall, but that only creates addi- tional debt. Simply offering the equity in their home as collateral is not equity in the business. Using SBA loans can allow lenders to use lower equity stan- dards that were normal prior to the cri- sis. Also our 504 loan program, in most cases only requires a 10% borrower contribution for commercial real esta- te. The 504 loan program is a fixed asset (such as real estate), long term (20 years) and fixed interest rate (currently less than 4.5%) loan program that offers the small business owner a low equity contribution requirement. In a typical 504 project, a third party lender con- tributes 50%, a Certified Development Company (SBA approved CDC) con- tributes 40% and the borrower con- tributes 10%. In return for the third party lenders' participation, SBA allows the lender a fist position on the com- mercial real estate. The 50% exposure makes this program very appealing to the lender. In return for the CDC's par- ticipation, SBA extends them a 100% guaranty. It becomes a win win situa- tion for everyone involved, especially the small business. NN: What can be done when the bank says 'no'? RE: If a bank is not interested and says no, I strongly suggest that the small-business owner ask the bank why. This way the small business can try to correct the deficiency before they approach the same bank again or go to another lender. Usually the reason that they're saying no, is because of collateral. Hopefully if they're looking at an SBA guarantee, that would take care of the concern of collateral deficiency. It may be that the lender does not offer loans to a start-up business or on the terms the small business is reques- ting. So you need to find the right len- der, one who does that type of lending. Another reason a bank might tell you no is because they may not be comfor- table with the nature of your business. So you need to go and look for another bank that is familiar with your type of industry. So there are many different reasons a bank might tell you no. Again, you need to find out what the issues are so you can correct or address those concerns. To avoid any delays due to unwarranted concerns, present a cre- dible business plan to the bank that basically outlines Management's capa- bility, equity, and repayment ability. In order to do that you need to have your projections support your cash flow and two to three-year projections. This done with tax returns and supporting information on how you are going to get to $2,000,000 in sales or $500,000 in sales. For example, if it's a restaurant, how are you going to achieve the seat or table turnover ratio projected? You rea- lly need to demonstrate your knowled- ge of the industry in order to convince the lender that you know what you're talking about. Explain the projections line by line, from your sales, to cost of goods sold, to operating cost, to the net profits. For example, you should explain where you got those numbers from for Cont. page 18 Dicembre 2008 Pag. 11 www.negociosnow.com www.negociosnow.com Foto Negocios Now Robert Esquivel, Small Business Administration's Lender Relations Chief

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