SBA Loans

The Small Business Administration was established by the federal government in 1953 to help Americans start, build and grow businesses and continue to do so with their various loan programs. Small Business Administration (SBA) loans are loans that are guaranteed in part by the U.S. government’s Small Business Administration (SBA). Generations Federal Credit Union has been approved to offer SBA loan products under SBA’s 7(a), Express, Patriot Express, and 504 programs.

Eligible Business Types

Although each of the SBA’s 3 major loan programs have specific eligibility guidelines and requirements, in general, to be eligible for a SBA loan, the prospective loan recipient must have a for-profit enterprise doing business in the U.S., reasonable equity and have pursued alternative funding resources, including personal assets. The vast majority of businesses in the United States meet these requirements and are eligible to apply for Small Business Administration (SBA) loans.  However, there are some businesses that are not eligible for an SBA loan; among these types of businesses are: real estate investment firms, lenders, pyramid sales programs, gambling ventures and charitable, religious and otherwise nonprofit outfits.

SBA 7(a) Loan

This loan program is the most common and basic offered by the SBA. There are several loan options within this program to meet the financial needs of businesses with specific requirements. The proceeds from the loan can be used toward: establishing a new business or to assist in the acquisition, operation or expansion of an existing business; equipment or real estate purchases; renovations and new construction; debt refinancing (in specific circumstances); and working capital.

SBA Express Loan

The SBA Express program falls within the 7(a) loan program, which gives small business borrowers an accelerated turnaround time for SBA's review. In addition, lower interest rates are often available to you when you apply through an Express program

Patriot Express

The SBA’s Patriot Express Pilot Loan Initiative was created for veterans and members of the military community wanting to establish or expand small businesses. Eligible military community members include: veterans, service-disabled veterans, active-duty service members eligible for the military’s Transition Assistance Program, Reservists and National Guard members, current spouses of any of the previously listed and the widowed spouse of a service member or veteran who died during service or of a service-connected disability. Proceeds from this loan can be used for most business purposes, including preparing your business for the possibility of your deployment.  Patriot Express loans feature the SBA’s lowest interest rates for business loans, generally 2.25 percent to 4.75 percent over prime depending upon the size and maturity of the loan.

SBA 504 Loan

The 504 Loan Program provides long-term, fixed-rate financing intended to make it possible for a small business borrower to acquire real estate, machinery or heavy equipment for expansion or modernization, which provides economic expansion to the community. However, since funds from 504 loans can't be used for working capital or inventory, consolidating or repaying debt or refinancing, this program tends to exclude most service businesses that need to purchase land or equipment. Personal guarantees are required for 504 loans.

Call, email or submit an information request to discuss your small business lending needs.

We are an Equal Opportunity Lender. The credit union makes loans and extends credit without regard to race, color, religion, national origin, sex, handicap, or familial status.

Table of Contents:

• Expert Articles/Papers
• Infographics
• FAQs

Expert Articles/Papers:

• Business Plan Essentials: Part One
  A business plan is more than your mission statement, it's your plan for success. A good business plan determines the likelihood of receiving outside funding and credit from suppliers. It’s a roadmap for the achievement of your goals and objectives by detailing the management of your operation, finances and marketing and promotions.
• Business Plan Essentials: Part Two
  With any success you’ve found the process of writing your business plan helps you in more ways than you originally thought. The process forces you to think about your business objectively, giving you a more realistic idea of the effort required and whether it’s truly a venture you want to pursue. In addition, it sparks your creativity, leading to the formation of new business strategies.
• Going Small Provides Huge Growth
  In this current economic climate, it’s natural to have negative connotations or aversions to anything affiliated with a financial institution. What many small business owners are not aware of is that service is the core edict of a credit union and reaching out to serve small business owners is a natural extension of that purpose.

Infographics:

• The True Cost of Tax Refund Loans
  
   
• The Real Game of Life
  
   
• Enhancing Small Business Lending
  
   
• Tighten Your Wallet and Your Waist
  
   
• Building for your future, now!
  

Frequently Asked Questions:

Q. Can I apply for an SBA loan even if I’m not a member of Generations FCU?

A. Yes, we welcome loan requests from non-members. However, if your request is approved, you’ll need to become a Generations member before we can originate your loan. Membership is open to those who live, work, attend school, worship or volunteer in Bexar County, as well as their immediate families. Businesses’ must have a physical presence in Bexar County.

Q. How long must a business have operated before requesting a GFCU loan?

A. Generally, we require that a business must have been in operation for at least three years.

Q. How can I apply for an SBA loan?

A. We accept applications via mail, fax or in person at any Generations FCU branch. You can find our loan application on this website or it can be emailed to you. 

Q. What are some of the questions Generations will ask me?

A. Questions will be different for each business. In general though, we will want to know how your business is structured, how long you’ve been operating, what your total need is, how much capital has been invested by the owners and which assets are available as collateral.

Q. Must I provide a personal guarantee?

A. Yes. Individuals that own a 20% or greater share of the business will be required to provide a personal guarantee.

Q. What information do you require of SBA loan applicants?

A. Those applying for an SBA loan through Generations must supply the following:

• Compiled financial statements (including balance sheet and income statement)
• Personal tax returns
• Business tax returns
• Financial statements for any individual who owns a 20% or larger share of the business

In addition, you must be able to provide this financial documentation for at least three years prior to your application and interim, year-to-date financials.

Q. What is an SBA 504 loan?

A. The CDC/504 loan program is a long-term financing tool designed to encourage economic development within a community by providing a financing option to acquire major fixed assets for expansion or modernization. Essentially, the 504 program is a collaboration between the lender, CDC/SBA and you. The CDC/SBA permanent loan often offers competitive fixed interest rates for the term of the loan on the CDC/SBA debenture loan amount of up to 40% of the total eligible project cost

Q. What is a CDC?

A. A Certified Development Company (CDC) is a private, nonprofit corporation which is set up to contribute to economic development within its community. CDCs work with SBA and private sector lenders to provide financing to small businesses, which accomplishes the goal of community economic development.

Q. How is financing usually structured under a 504 loan?

A. Typically, a CDC/504 project includes:

• A loan secured from a private sector lender with a senior lien covering up to 50 percent of the project cost
• A loan secured from a CDC (backed by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the project cost
• A contribution from the borrower of at least 10 percent of the project cost (equity)

This type of setup means that 100% of the project cost is covered either by contribution of equity by the borrower, or the senior or junior lien.

Q. How can 504 loan funds be used?

A. Proceeds from 504 loans must be used for fixed asset projects, such as:

• The purchase of land, including existing buildings
• The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
• The construction of new facilities or modernizing, renovating or converting existing facilities
• The purchase of long-term machinery and equipment

The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt or refinancing.

Q. What are the eligibility requirements for a 504 loan?

A. To be eligible for a CDC/504 loan, your business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, a business qualifies as small if it does not have a tangible net worth in excess of $7.5 million and does not have an average net income in excess of $2.5 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate.

Q. How is the 504 loan collateralized?

A. Generally, the project assets being financed are used as collateral. Personal guaranties of the principal owners are also required.

Q. How do the terms and interest rates compare to a conventional loan?

A. Interest rates on 504 loans are pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues. Maturities of 10 and 20 years are available. Fees total approximately 3 percent of the debenture and may be financed with the loan.

Q. What are 7a loans?

A. The 7(a) Loan Program includes financial help for businesses with special requirements. For example, funds are available for loans to businesses that handle exports to foreign countries, businesses that operate in rural areas, and for other very specific purposes. There are multiple 7a loan types and more information can be found by visiting the SBA website.