| Florida’s Certified Development Companies
Coastal Area District
Development Authority Essential Capital Florida Business Development Corp. Florida First Capital
Finance Corp. Gulf Coast Business Finance IDS Corp. Tampa Bay Economic
Development Corp. |
» Savings
If you aren’t confident enough to put your savings on the line, no one else will likely invest in your venture either. That means cashing out your stocks, selling the boat and even taking a loan from your retirement account, if necessary.
» Credit cards
While financial advisers wince at the idea of using plastic to fund your business, the truth is that many small businesses charge their way through the first year or two of operation. That strategy became more difficult and expensive in the past year as credit card companies raised rates, increased monthly payments and cut credit limits. New credit card rules that went into effect in February limit rate increases for existing balances but do not cap rates for new charges. If you do use this option, get a card or several cards with low interest rates and read all the terms and conditions carefully. Watch due dates and make every payment on time.
» Home equity
A few years ago, this was the easiest way to get tens of thousands of dollars to start or grow a business. But the dramatic decline in Florida home prices means that there’s little equity to tap for many (or most) homeowners. In any case, banks are less likely to give home equity loans and may cut credit limits at any time. Still, for those Floridians who still have a lot of home equity, using it for the business may make sense.
» Store credit
Some retailers make it easy to furnish your office with no money down, no interest or payments for a year. Make that store’s gimmick work for you, but prepare for the day when the bill comes due.
» Investors
There are no listings and few databases for private investors. To find them, look for groups that work with investors, or “angels,” such as the University of Florida Venture Lab. Talk with friends and business associates, industry insiders in your specific field and “true believers” in what you are doing. As an example, someone starting a clean energy business might join the Florida Renewable Energy Association to meet and mingle with like-minded people with money.
» Credit unions
Some credit unions now do SBA lending. For the best success with a credit union, go to one where you have a personal account. If you aren’t already a credit union member, check with one of the SBA offices in Florida (See “Resources”) to find the names of credit unions that are active SBA lenders. Membership in credit unions has become more open in recent years, although many workplace credit unions still restrict membership to employees.
SBA Lending
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Business owners often think that U.S. Small Business Administration loans are funded by the government. They’re not. SBA loans are made by commercial lenders who only receive a federal-government guarantee for part of the loan.
When a financial institution reviews a business’s application for a loan, whether or not it is guaranteed by the SBA, the most important factor is the business’s ability to pay back the loan. That may sound like common sense, but many businesses aren’t prepared to show details of their business’s financials when they sit down with a loan officer.
Good character, proven management ability, collateral and significant owner’s equity in the business also are important considerations in a bank’s decision making.
The 2009 economic stimulus legislation authorized a temporary increase in SBA’s guarantee percentage up to 90% on guaranty loans, except those processed as SBAExpress loans, through the end of 2009. The guarantee percentage increase was later extended but was expected to expire Feb. 28, 2010. The 2009 stimulus package also authorized a temporary elimination of the guaranty fee on most 7(A) loans and 504 loans through the end of 2009. Legislation enacted in late 2009, extended the fee elimination through the end of the fiscal year, Sept. 30, 2010, or when the funds appropriated for the fee elimination are exhausted.
| » ARC Loans Funded by the 2009 economic stimulus package, these loans are designed to provide up to $35,000 in short-term relief for viable small businesses facing immediate financial hardship. The money is to be used for principal and interest payments on existing loans and debt. There are no interest charges for ARC loan borrowers. To qualify, a business must show that it has been profitable in one of the past two years and be able to project sufficient cash flow to meet current and future loan payments over a two-year period after loan approval. Businesses whose loans are already severely delinquent are not good candidates for ARC loans. For a list of lenders participating in the ARC loan program, go to sba.gov or call one of Florida’s SBA offices. |
(up to $2 million)
This is the SBA’s primary loan program. The maximum loan amount is $2 million, with a maximum loan guarantee of $1.5 million. The maximum guarantee is 85% for loans of $150,000 or less; 75% for loans over $150,000.
Fees are 2% of the guaranteed portion for loan amounts of $150,000 or less, 3% for loans from $150,000 to $700,000 and 3.5% for loans over $700,000. For loans over $1 million, an additional 0.25% guaranty fee will be charged for the portion greater than $1 million. Federal legislation authorized a temporary elimination through Sept. 30, 2010, of the borrower guarantee fee on 7(A) loans with maturities longer than 12 months.
An ongoing servicing fee of 0.55% applies to the guaranteed portion of the loan. Interest rates are negotiated with the lender, but are subject to SBA maximums.
Loan proceeds can be used for fixed assets, working capital, inventory, seasonal line of credit or, in certain cases, for refinancing debt. Real estate may be financed for up to 25 years and working capital loans for 10 years.
» SBAExpress (up to $350,000)
Lenders use their own forms and processes to approve loans with a maximum guaranty of 50%. Loan term varies. Interest rates are tied to the prime rate, but are negotiated with the lender.
» Community Express (up to $250,000)
This program is available in geographic areas serving primarily low-to moderate-income entrepreneurs, generally SBA’s Historically Underutilized Business Zones (HUBZones) and those classified as distressed through the Community Reinvestment Act (CRA). To encourage business startups, the SBA makes eligible loans of $25,000 or less, regardless or where the businesses are located.
» Patriot Express (up to $500,000)
This program is available for businesses that are 51% owned by veterans and other military-related personnel. Revolving lines of credit up to seven years (with maturity extensions permitted) are allowed. The maximum guarantee is 85% for loans of $150,000 or less and 75% for loans over $150,000. Lenders are not required to take collateral for loans up to $25,000, may use their existing collateral policy for loans over $25,000 up to $350,000, but must take collateral for loans greater than $350,000.
» CDC/504 Loan Program
This program uses long-term financing to finance fixed assets for for-profit businesses with less than $7.5 million in net worth and less than $2.5 million in after-tax profits. The money can be used for assets such as land, buildings, machinery and equipment. Funds cannot be used for working capital, inventory, debt repayment or refinancing.
Typically a bank will loan 50% of the project’s cost, a Certified Development Company provides SBA-guaranteed funds for 40% of the total cost up to $4 million for small manufacturers (SBA limit is $2 million for non-manufacturers that meet public policy goals and $1.5 million for non-manufacturers that meet job creation or community development goals) and the remaining 10% comes from the owner’s down payment.
Repayment is up to 20 years for real estate, 10 years for equipment. Interest rates are pegged to an increment above the current market rate for five-year and 10-year U.S. Treasury issues. Fees total about 3% of the loan.
 Danielle Williams, director of operations, Oceans 234, Deerfield Beach [Photo: Eileen Escarda] |
When Danielle Williams decided to remodel her upscale Deerfield Beach restaurant, Oceans 234, she relied heavily on barter, one of the oldest forms of obtaining goods and services. Williams, the restaurant’s director of operations, traded restaurant meals for more than $80,000 in new flooring, plumbing, interior design, uniforms, a logo, signs and more. The value of bartered goods added up to more than half the $150,000 total cost of remodeling. “It’s just so smart, so easy,” says Williams, who in late 2008 joined NuBarter, a Savannah-based barter network with offices in Daytona Beach, Sarasota, Tallahassee, Pompano Beach and Boca Raton.
NuBarter and other barter networks let members earn and use trade credits. So when Williams provides $500 in restaurant meals to the barter network, she can use those credits for any member’s goods and services, even if they never eat a meal at her restaurant. “It’s like having a Visa,” says NuBarter’s Karen Roumay. Barter networks charge members an annual fee, a monthly maintenance fee and collect a percentage of the value of the trade. In NuBarter’s case, the annual fee is $395 plus $15 per month in cash and $15 per month in trade credit. They collect 10% of the value of the trade in cash from the buyer.
Williams says that originally she thought she would barter only for a short period, but now that the remodel is finished she is bartering for all types of goods and services for the restaurant on an ongoing basis.
A key, she says, is knowing how much you can afford to trade each month.
Still, says Williams, “There’s no reason I would stop bartering.”