About TNBIDCO

[Why Seek an SBA Guaranteed loan]
[Eligibility Determination]
[Maximum Size Standards]
[Loan Purpose]
[Necessary Documentation]
[Preparation of the Application]
[Application Submission]
[Loan Closing]
[Loan Servicing and Reporting]
[Facts vs. Myths]
[Stockholder Banks]

The Tennessee Business and Industrial Development Corporation is a community development corporation owned by ten community banks and bank holding across Tennessee. TNBIDCO was created under the 1989 Tennessee BIDCO Act legislation for the purpose of expanding the availability of financial and management assistance to businesses in all parts of the state.

Licensed as a regulated financial institution by the Tennessee Department of Financial Institutions, TNBIDCO is able to provide loans on a direct basis or work through local banks using a variety of programs.

TNBIDCO is an approved lender under the U.S. Small Business Administration and is focusing on expanding the availability and use of SBA programs.

The major concern for today's small business owners is access to capital and credit. The Small Business Administration and the United States Department of Agriculture loan guarantee programs provide a key source of financing for viable small businesses that have real potential, but cannot qualify for loans from traditional sources. SBA and USDA loan guarantees, provided through private lenders and nonprofit lending institutions, give small business owners access to the same kinds of reasonably priced, long-term financing available to large businesses by virtue of their size and economic clout. Financing programs provided by SBA & USDA vary according to a borrower's financial need. These loans are made by private lenders and are guaranteed, based on the program, between 75% and 85%. There are three players in a guaranteed loan - the small business borrower, the private lender, and the federal agency issuing the guarantee.

Why Seek an SBA Guaranteed loan?

Since the SBA Guaranteed Loan Program is strictly for credit-worthy borrowers, it offers numerous advantages over conventional methods of financing:

Longer maturities - up to 25 years, usually 5-7 years for working capital and up to 25 years for real estate.
SBA places limits on interest rates
Higher loan to value ration
Lower monthly payments
Reduce exposure and minimize risk
Community Reinvestment Act Credit
Increase fee income and boost net interest margin
The guaranteed portion of any guaranteed loan is not counted against your legal lending limit
Assist financial institutions in maintaining a reasonable loan-to-deposit ratio

Eligibility Determination:

All businesses making application for a SBA or USDA loan guarantee must be an independently owned and operated for profit business. The lender must determine the service of product the business generates. This is vital in determining which NAICS code the business falls under. The lender will need to determine the number of employees a business employs. These three factors will determine eligibility of the borrowers business. For example, a wholesaling business may have up to one hundred employees and still be eligible, however, certain types of manufacturing may have as many as one thousand five hundred employees and still be eligible for assistance. The lender is encouraged to contact either the district office of the government agency issuing the guarantee or Tennessee Business & Industrial Development Corporation for assistance in determining eligibility.

Maximum Size Standards

Manufacturing: varies by industry from 500-1500 employees.
Wholesaling: up to 100 employees
Services: from $2.5 million to $14.5 million in annual receipts
Retailing: from $3.5 to $13.5 million in annual receipts
Construction: from $7.0 to $17 million in annual receipts

Loan Purpose

Once the business has been deemed as an eligible entity, the lender must determine that the purpose of the loan is eligible. Eligible purposes are similar throughout each of the programs; however, there are a few differences between the various agencies. To assist potential lenders, we have included a generic list of loan purposes that are typically approved through all of the listed agencies. We recommend verification through the district office of the agency the guarantee is to be requested or contacting Tennessee Business & Industrial Development Corporation.

To expand or modernize facilities
To purchase machinery, equipment, fixtures and leasehold improvements
To finance increased receivables and augment working capital
To refinance existing debt for compelling credit reason of benefit to borrower
To construct a new commercial building
To purchase existing land and/or building

Necessary Documentation

The documentation required to prepare an application for loan guarantee is similar to the documentation any prudent lender would require to approve a loan request. However, each program has its own "special" documents necessary to complete the package. Therefore, Tennessee Business & Industrial Development Corporation has included a brief checklist for the lenders benefit. This checklist may be found below. This checklist is intended to serve as a guide for the lender, however, no other representation is made. Items that should be provided by the lender are marked [Lender].

Business Plan
Personal Financial Statement
Personal Tax Return (for three years for ALL owners)
Business Financial Statements (last three years)
Interim Business Financial Statement (no more than 60 days old)
Business Tax Returns
Documentation of Assets Being Purchased (sales contracts/cost estimates, etc)
Description of Real Estate (warranty deed, survey, etc)
Appraisal [Lender]
EPA Phase I [Lender]
Construction Estimates
Debt Schedule
Income & Expense Projections (two years)
Franchise Agreements
Lease Agreements
Resume
Lender Narrative [Lender]

Preparation of the Application

Once the lender has reviewed the required information, and he/she has made the decision to proceed with the loan application, this information needs to be compiled into a format acceptable to the agency in which the loan note guarantee is being requested. This may be accomplished in either of two ways. First, you can retain a competent loan production firm such as Tennessee Business & Industrial Development Corporation to compile the necessary documentation to comply with all facets of the application process guarantee would be issued to obtain the forms necessary to complete the application process.

Application Submission

Once the application is compiled, signatures are collected from the borrower and the bank and sent to the district office of the agency under which the loan guarantee is requested. Once the agency receives the packet containing the complete application, a credit officer will be in contact with the bank representative and a loan authorization or conditional commitment will be issued when the credit is approved. These documents will outline all necessary forms and documents required to close and obtain the loan guarantee.

Loan Closing

The loan closing process is typically handled through the Financial Institution's attorney. We recommend that an attorney close the loan and issue an opinion of counsel stating that the loan was closed in accordance with the terms of the loan authorization/conditional commitment.

Loan Servicing and Reporting

Loan servicing is handled just like every other conventional bank loan. Basically, you monitor the items listed in the terms and conditions section of your application, for example (financials, insurance and other loan convenient requirements).

Loan reporting consist of the submission of all reports requested by the agency together with a monthly 1502 report, which is sent to Colson Servicing Corporation (Fiscal Transfer Agent), together with any payment due.

Facts vs. Myths

Over the years, frequent misconceptions have become common about SBA loans. For instance, many people mistakenly believe:

SBA Loans require mountains of paperwork
It often takes many months to get approval for the loan
The government will constantly "monitor" the business

These beliefs are not true. As long as the borrower makes a sincere and diligent effort to furnish the required information in a timely manner, an SBA Guaranteed Loan can be processed as quickly as any other type of business loan.

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