Financial Information

Tennessee Small Cities CDBG
Industrial Grant/Loan Program

Financing of industrial projects in Smithville and DeKalb County is an important factor in attracting new firms to the area and encouraging new firms to expand.

Tennessee allocates on an annual basis a significant amount of the available Small Cities CDBG dollars for an industrial grant and loan program. These funds are awarded for grants and loans to assist industries in locating or expanding in Tennessee and providing Tennesseans with jobs. The principle beneficiaries of these jobs must be low and moderate income persons. Grants are made for public infrastructure. Loans are made for industrial buildings, equipment and working capital.

Loan applications are taken continuously. The maximum loan most communities/companies can receive is $500,000.

Terms and Rates

Maximum Term on Buildings: 15 Years

Maximum Term on Equipment: 7 Years

Maximum Interest Rate
                                     1-5 Years:       3 PBP
                                   6-10 Years:       2 PBP
                                 11-20 Years:       1 PBP

Review and Award Process

Application is made through the State of Tennessee:

Tennessee Department of Economic and Community Development
6th Floor, Rachel Jackson State Office Building
320 6th Avenue North
Nashville, Tennessee 37243-0405
615 741-6201

Tennessee Department of Economic and Community Development Web Page

Advantages of a 504 loan

High leveraged of fixed assets (10% down payment).
Fixed interest rate on 40% of project.
Long term financing of fixed assets (10 or 20 years).
Lower overall interest rate in most cases.

Project Funding

50% must come from the private sector. This can be a bank, savings and loan, an individual, or other non-federal source.

Term can be 20 years, but cannot be less then 7.5 years or one half of the SBA Share, whichever is longer.

Lender will set the interest rate.

Collateral will be the first mortgage on the assets being purchased and personal guaranty of business owners.

40% funding from the sale of SBA guaranteed debentures.

Terms can be 10 to 20 years.

Interest rate is based on the cost of money to the government, approximately 1% over prime. The rate is fixed at the loan closing.

Collateral will include second lien on the assets being purchased and personal guaranty of business owners.

One job should be created or retained for every $15,000 of SBA involvement.

10% from a variety of sources which may include the small business being assisted, Certified Development Company or HUD grant.

If in the form of a loan the term must be equal to SBA's debenture.

Interest rate is set by lender.

Collateral will include a third lien on the assets being purchased.

Project Size

The 504 Program allows for the funding of larger projects then other SBA programs.

40% of the project not to exceed $750,000

Example:
                50% Private Sector              $ 937,500
                40% SBA                              $ 750,000
                10% Other                            $ 187,500

                TOTAL                                 $1,875,000

Eligible Businesses For-profit corporation, partnership or proprietorship. Net worth not exceeding $6 million. Average net profit after tax not exceeding $2 million for the last 2 years.	Ineligible Businesses Passive investment companies Not-for-profit corporation Unregulated media firms Lending institutions Gambling operations Real estate investment companies
Ineligible Purposes Working capital Debt consolidation repayment Refinancing Venture capital
Applications, Loan Servicing and Administration The Certified Development Corporation for DeKalb County is: Cumberland Area Development Corporation Earl Carwile 1224 Burgess Falls Road Cookeville, Tennessee 38501 931 432-4111 Additionally, a revolving loan program is available through the Cumberland Area Development Corporation with a maximum loan of 40% of the total project, not to exceed $150,000. This program is administered with a similar application process and rules applying to the SBA 504 program. For further information on the Small Business Administration, contact: Small Business Administration Ron Reed Suite 1012 Parkway Towers James Robertson Parkway Nashville, Tennessee 37219 615 736-7804

Certified Development Company
504 Loan Program

The 504 Certified Development Company (CDC) Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community or region. CDC's work with the SBA and private-sector lenders to provide financing to small businesses. There are about 290 CDC's nationwide. Each CDC covers a specific area.
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped. The maximum SBA debenture generally is $750,000 (up to $1 million in some cases). The program is designed to enable small businesses to create and retain jobs; the CDC's portfolio must create or retain one job for every $35,000 provided by the SBA.
WHAT FUNDS MAY BE USED FOR:
Proceeds from 504 loans must be used for fixed asset projects such as: purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; construction of new facilities, or modernizing, renovating or converting existing facilities; or purchasing long-term machinery and equipment.
The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.
TERMS, INTEREST RATES AND FEES:
Interest rates on 504 loans are pegged to an increment above the current market rate for five-year and 10-year U.S. Treasury issues. Maturities of 10 and 20 years are available. Fees total approximately three (3) percent of the debenture and may be financed with the loan.
COLLATERAL:
Generally, the project assets being financed are used as collateral. Personal guaranties of the principal owners are also required.
ELIGIBLE BUSINESSES:
To be eligible, the business generally must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, the business qualifies as small if it does not have a tangible net worth in excess of $6 million and does not have an average net income in excess of $2 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate.

7A Loan Guaranty Program

General Description
The 7(a) Loan Guaranty Program is one of SBA's primary lending programs. It provides loans to small businesses unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders that provide loans which are, in turn, guaranteed by the SBA -- the Agency has no funds for direct lending or grants.

Most lenders are familiar with SBA loan programs so interested applicants should contact their local lender for further information and assistance in the SBA loan application process. Information on SBA loan programs, as well as the management counseling and training services offered by the Agency, is also available from the local SBA office.

Loan Amounts Available Under SBA Loan Programs

For most SBA loans there is no legislated limit to the total amount of the loan that may be requested from the lender. However, the maximum amount the SBA can guaranty is generally $750,000. Thus, with a lender requesting the maximum SBA guaranty of 75 percent, the total loan amount available under this program generally would be limited to $1 million. However, there are some exceptions as presented below in the discussion of specialized loan programs.

Short Term Loans and Revolving Lines of Credit
CAPLines Loan Program

CAPLines is the umbrella program under which the SBA helps small businesses meet their short-term and cyclical working-capital needs. A CAPLines loan can be for any dollar amount (except for the Small Asset-Based Line described below).
There are five short-term working-capital loan programs for small businesses under the CAPLines umbrella:

SEASONAL LINE: These are advances against anticipated inventory and accounts receivable help during peak seasons when businesses experience seasonal sales fluctuations. Can be revolving or non-revolving.

CONTRACT LINE: Finances the direct labor and material cost associated with performing assignable contract(s). Can be revolving or non-revolving.

BUILDERS LINE: If you are a small general contractor or builder constructing or renovating commercial or residential buildings, this can finance direct labor-and material costs. The building project serves as the collateral, and loans can be revolving or non-revolving.

STANDARD ASSET-BASED LINE: This is an asset-based revolving line of credit for businesses unable to meet credit standards associated with long-term credit. It provides financing for cyclical growth, recurring and/or short-term needs. Repayment comes from converting short-term assets into cash, which is remitted to the lender. Businesses continually draw from this line of credit, based on existing assets, and repay as their cash cycle dictates. This line generally is used by businesses that provide credit to other businesses. Because these loans require continual servicing and monitoring of collateral, additional fees may be charged by the lender.

SMALL ASSET-BASED LINE: This is an asset-based revolving line of credit of up to $200,000. It operates like a standard asset-based line except that some of the stricter servicing requirements are waived, providing the business can consistently show repayment ability from cash flow for the full amount.

The SBA Express

The SBAExpress -

Makes it easier and faster for lenders to provide small business loans of $150,000 or less.
Allows lenders to use their own forms and processes to approve loans guaranteed by the U.S. Small Business Administration.
Provides a rapid response from the SBA - within 36 hours of receiving your complete application. Count on it!
Lets lenders take advantage of electronic loan processing.
Helps lenders provide smaller revolving loans.

How It Works

Lenders participating in SBAExpress can -

Use their own forms and processes to approve loans in amounts up to $150,000,
Provide minimal paperwork to the SBA to obtain a 50 percent guaranty on the loan, and
Take most servicing actions without prior approval by the SBA

Lender Participation

You may be eligible to become an SBAExpress lender if -

You are currently in the SBA's Preferred Lenders Program or, in selected geographic regions, participate in the SBA's 7(a) Lending Program; and,
You meet other participation and loan portfolio standards.

SBALowDoc Loan Program

The New SBALowDoc -

Further streamlines the making of small business loans.
Increases the maximum loan amount to $150,000.
Calls for a response from the SBA within 36 hours of receiving a complete application.
Allows for an SBA guarantee of up to 80 percent for loans up to $100,000, and up to 75 percent for loans over $100,000 up to $150,000.
LowDoc was launched as a pilot program in 1993 to simplify the loan application process for small businesses. The New SBALowDoc is even quicker and easier.

How It Works
Once a small business borrower meets the lender's requirements for credit, the lender may request a guaranty from the SBA through SBALowDoc procedures. It's a quick, two-step process:

The borrower completes the front of the SBA's one-page application, and the lender completes the back.
The lender submits a complete application to the SBA and receives an answer within 36 hours.

The New SBALowDoc allows lenders to take advantage of electronic loan processing.
Interest Rates
Interest rates can be negotiated between the borrower and lender, may be fixed or variable, are tied to the prime rate (as published in the Wall Street Journal), and may not exceed the following SBA maximums:

2.25 percent over prime for loans of less than seven years, and
2.75 percent over prime for loans of seven years or longer.
Loans under $50,000 may be subject to higher rates.

Collateral

To secure the loan, the borrower must pledge available business and personally owned assets. Loans are not declined when inadequate collateral is the only unfavorable factor.
Personal guaranties of the principals are required.

Maturity
Length of time for repayment depends on -

Ability to repay, and
The use of the loan proceeds.

Maturity is usually 5 to 10 years. For fixed-asset loans it can be up to 25 years.

Eligibility
A business is usually eligible for the New SBALowDoc if -

The purpose of the loan is to start or grow a business;
The existing business employs no more than 100 people, has average annual sales for the preceding three years not exceeding $5 million, and the business including affiliates; the business and its owners have good credit; and the business owners are of good character.

Smaller Business Loans
Community Express

Community Express

Community Express is a pilot SBA loan program that was developed in collaboration with the National Community Reinvestment Coalition (NCRC) and its member organizations. Under the pilot, which will initially by limited to selected NCRC lenders, an SBAExpress like program will be offered to pre-designated geographic areas serving mostly New Markets small businesses. The program will also include technical and management assistance, which is designed to help increase the loan applicant's chances of success.

How It Works

Similar to SBAExpress, but

Focuses primarily on Low and Moderate Income areas and SBA's New Markets
Maximum Loan amount is $250,000
Standard SBA 7(a) guaranty applies (SBAExpress guaranty limited to 50%)
Technical assistance arranged/provided by lenders

Participants use mostly own documents and procedures
Loans centrally processed in Sacramento within 36 hours
Applications may be processed via fax or Internet
Loans will be centrally serviced by Fresno or Little Rock
Program presently limited to selected lenders and areas, but will be opened in FY 2000 to additional areas and all qualified PLP lenders

Collateral

Similar to SBAExpress, lenders may approve unsecured loans up to $25,000.

For loans over $25,000, lenders may follow their existing collateral policy.

Maturity

Loan maturity generally is five to 10 years, and up to 25 years for fixed-asset loans. Length of time for repayment depends on the borrower's ability to repay and the use of the loan proceeds.

Interest Rates

Lenders and borrowers can negotiate the interest rate. Rates are tied to the prime rate (as published in the Wall Street Journal) and may be fixed or variable, but they may not exceed SBA maximums:

2.25 percent over prime, for loans of less than seven years, and
2.75 percent over prime, for loans of seven years or longer.

Loans under $50,000 may be subject to slightly higher rates.

Maximum Loan Amount

The maximum loan amount for Community Express is $250,000.

Small Business Eligibility

Community Express loans help small businesses start, build or grow. To qualify for the program, a business must meet the SBA's size standards and fall within specific geographic areas usually Low and Moderate Income areas. The size standards are based on the average number of employees over the preceding 12 months or the average sales over the previous three years. The Agency publishes size standards for specific standard industrial classification (SIC)codes:

Manufacturing - from 500 to 1,500 employees
Wholesaling - 100 employees
Services - from $2.5 million to $21.5 million in annual receipts
Retailing - from $5 million to $21 million in annual receipts
General Construction - from $13.3 million to $17 million in annual receipts

International Trade Loans

General Information
If your business is preparing to engage in or is already engaged in international trade, or is adversely affected by competition from imports, the International Trade Loan Program is designed for you.
Maximum Amount
The SBA can guarantee up to $1,250, 000 for a combination of fixed-asset (facilities and equipment) financing and Export Working Capital Program (EWCP) assistance. The fixed-asset portion of the loan guaranty cannot exceed one million ($1,000,000.00) dollars and the non-fixed asset portion cannot exceed seven hundred fifty thousand ($750,000.00) dollars.
Eligibility

The applicant must establish that the loan will significantly expand or develop an export market, is currently adversely affected by import competition, will upgrade equipment or facilities to improve competitive position, or must be able to provide a business plan that reasonably projects export sales sufficient to cover the loan.
Although most small businesses are eligible for SBA loans, some types of businesses are ineligible and a case-by-case determination must be made by the Agency. Eligibility is generally determined by four factors:

TYPE OF BUSINESSES ELIGIBLE:
The vast majority of businesses are eligible for financial assistance from the SBA. However, applicant businesses must operate for profit; be engaged in, or propose to do business in, the United States or its possessions; have reasonable owner equity to invest; and, use alternative financial resources first including personal assets. It should be noted that some businesses are ineligible for financial assistance.
SIZE OF BUSINESSES ELIGIBLE:
The Small Business Act defines an eligible small business as one that is independently owned and operated and not dominant in its field of operation. The Act also states that in determining what is a small business, the definition shall vary from industry to industry to adequately reflect industry differences. The SBA has therefore developed size standards that define the maximum size of an eligible small business.
As apparent from the following general description of SBA's size standards, most businesses are considered small. However, these represent general definitions that in some cases are further defined by specific SIC code.
Industry Size Retail and Service $3.5 to $20 million Construction $7.0 to $17 million Agriculture $0.5 to $19 million Wholesale No more than 100 employees Manufacturing 500 to 1,500 employees

If a potential borrower is close to these standards, size eligibility should be discussed with the local SBA office. Also note that the standards for a particular business may change from time to time and some exceptions do apply.
When affiliations exist with other companies (for example, through common ownership, directorships, or by contractual arrangements), the primary business activity must be determined both for the applicant business as well as for the entire affiliated group. In order to be eligible for financial consideration, the applicant must meet the size standard for its primary business activity and the affiliated group must meet the standard for its primary business activity.
USE LOAN PROCEEDS:
The proceeds of a SBA International Trade loan may be used to acquire, construct, renovate, modernize, improve or expand facilities and equipment to be used in the United States to produce goods or services involved in international trade, and to develop and penetrate foreign markets.
PROCEEDS OF A SBA INTERNATIONAL TRADE LOAN CANNOT BE USED FOR DEBT PAYMENT.
SPECIAL CIRCUMSTANCES:
Certain other considerations apply to the types of businesses and applicants eligible for SBA loan programs.

Financial Institutions
Institution	Assets
DeKalb Community Bank 567 West Broad Street Smithville, Tennessee 37166 615 597-4663 www.dekalbcommunitybank.com	$51,359,846
First American National Bank (AmSouth Bancorporation) 200 West Main Street Smithville, Tennessee 37166 (615) 473-6641 www.fanb.com	$54,000,000
Liberty State Bank 735 South Congress Blvd Smithville, Tennessee 37166 615 597-2265 Fax: 615 597-2277	$56,379,335
Union Planters Bank 299 West Broad Street Smithville, Tennessee 37166 615 597-7884 www.unionplanters.com	$87,808,314