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Pre-Qualification Loan Program
What Is It?
The Pre-Qualification Loan Program was developed to promote the SBA’s business
loan programs to current and prospective small business owners. Greater Syracuse
Business Development Corporation (GSBDC) assists prospective borrowers in developing
a viable loan application package, which can be submitted to the SBA for consideration
of a loan pre-qualification. On approval, GSBDC can assist the applicant in locating
a lender.
Eligible Projects
To be eligible for the Prequalification Loan Program, a business must be at least
51 percent owned, operated and managed by women, minorities or veterans. Also,
businesses located in a rural area are eligible.
Eligible Businesses
Most types of businesses are eligible except for projects held primarily for investment,
gambling, speculation, newspapers and non-profit organizations. All 20% owners
of the business have to pass a personal resource test.
Loan Limits
Loans under this program are limited to amounts of $250,000 or less.
Term
Length of time for repayment depends on the ability to repay, and the use of the
loan proceeds. Generally, loan maturities will be between five and ten years for
working capital loans; up to 10 years for machinery and equipment; and up to 25
years for real estate, construction or the purchase of equipment with a useful
life of 25 years.
Interest Rate
Applicants negotiate terms with the lender. Interest rates are tied to the prime
rate and may be fixed or variable; however, they cannot exceed the following maximums
established by the SBA: for loans of less than seven years, up to 2.25 percent
over prime; for loans of seven years or longer, up to 2.75 percent over prime.
(Loans under $50,000 may be subject to slightly higher rates.)
Collateral
Primary criteria for a pre-qualification are the ability to repay, a good business
plan and good credit. Normally, business assets will be pledged, and personal
assets when warranted.
All owners of 20 percent or more of the business are required to personally
guarantee the note.
The applicant must have a reasonable equity stake in the business.
Fees
There is a one-time application fee paid to GSBDC of up to $400 for this program.
Additional SBA and bank fees will be applicable if a loan is actually funded.
The Pre-Qualification Process:
Document Preparation
The business owner works with Onondaga Community College Small Business
Development Center (OCC SBDC) at (315) 498-6070 to prepare a business
plan for submissions to GSBDC, along with a complete pre-qualification
loan application.
Application Submission
GSBDC reviews credit information, performs a loan analysis, and if creditworthy,
submits application to the SBA.
Application Review
The SBA reviews the completed application to determine whether it meets the requirements
for a guaranteed loan and makes a decision regarding a loan pre-qualification.
Qualification
If the SBA approves the application, the agency issues a pre-qualification letter.
This letter states the SBA’s intent to authorize a loan guaranty. The Letter
of Commitment remains in effect for 45 days from the date of the letter.
Lender Selection
When an applicant receives the SBA’s pre-qualification letter, the GSBDC
can assist them in locating a lender offering the most competitive loan rates.
Contact
Peggy A. Adams, Executive Director
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