SBA gives women a foot in the door; a prequalification program helps those who might have been turned down for bank loans get the expansion money they need

Nation's Business, Dec, 1997 by J. Tol Broome

For loans of less than $50,000, the maximum rate can be as high as prime plus 4.75 percent

The SBA charges guarantee and servicing fees to offset the cost of the program. These fees are paid by the lender but usually are passed along to the borrower.

When the guaranteed portion is $80,000 or less, the fee is 2 percent of the guaranteed portion. For loans with a guaranteed portion exceeding $80,000, a 3 percent guarantee fee is charged. In addition, all loans are subject to a 0.5 percent annualized servicing fee, which is applied to the outstanding balance of the SBAs guaranteed portion of the loan.

Processing fees, origination fees, application fees, points, brokerage fees, bonus points, and other such fees are prohibited.

The Intermediary's Role

Prospective borrowers in the Women's Prequalified Loan Program start by going to a local nonprofit organization that has been designated to serve as an intermediary in the program. There are more than 60 intermediary offices in 36 states, Puerto Rico, and the District of Columbia. To locate one near you, call your state SBA office.

Intermediaries often provide their services to women business owners at no charge--although they are allowed to charge up to $500 for application and packaging costs--and help steer them through the application process. In addition to direct assistance with the prequalified-loan application process, the intermediaries offer information on microloan programs--which provide small-business loans of less than $25,000, from a variety of funding sources--contacts with sources of private funding, and bank-loan services.

Jim Plum, chief credit officer with the Montana Women's Capital Fund in Helena--one of the intermediaries--was Cline's primary contact. "Rhonda had been a [microloan] client, so we had some previous contact with her," says Plum. "We saw some good growth in her business and the potential for more growth in this area."

Plum calculated financial projections for Aqua Life Industries based on its financial history. The information reflected positive financial trends, and Plum forecast that growth would benefit the company.

"We can provide some assistance in the business-plan preparation, but the owner must write it," explains Plum. "We make suggestions for phrasing, and we help with the cash-flow projections, which can be difficult for the average business owner. But we want the client to have ownership in the finished product and to understand what it means."

Besides helping with the business plan, intermediaries are required to complete the application package for the prequalified-loan request.

A Source Of Capital For You?

The SBA's Henry says the agency will continue to work to expand services available to women in business. Among those services are the 63 Women's Business Centers operating in 36 states, Puerto Rico, and the District of Columbia.

Sometimes doubling with the intermediary offices, the business centers offer a wide range of assistance. The SBA provides funding support to private partners for the first three years of operation of each center, and Henry says the SBA's goal is to have a center in every state.