July 10, 2007 — If you’ve served in the military and have a mind to become an entrepreneur, there is a new Small Business Administration loan-guarantee program for veterans called the Patriot Express Pilot Loan Initiative, which can make it much easier to get financing on good terms.
A couple dozen St. Croix vets took notes and asked questions when Carl Christensen of the V.I. SBA branch outlined this new program and the SBA’s other tools for business development Tuesday afternoon at the Small Business Development Center’s offices in the Sunshine Mall.
“It’s a brand-new loan program,” he said. “It came into existence barely two weeks ago. The loan process was only submitted for final approval June 24. And it is probably one of the most expansive … loan programs for veterans in the time I’ve been with the Small Business Administration.”
The loan guarantee is available for veterans; active-duty service members eligible for the military’s transition-assistance program; Reservists and National Guard members; current spouses of any of the above groups; and the widows and widowers of veterans who died directly or indirectly as a result of injuries sustained in service.
Loans can be as large as $500,000. SBA guarantees up to 85 percent for loans of $150,000 or less, and up to 75 percent for loans over $150,000 up to $500,000. For loans above $350,000, lenders must take all available collateral. It is a loan guarantee, which means SBA does not loan you the money. You get a loan from a bank that you might not otherwise qualify for or have enough collateral to guarantee yourself. The bank is assured of getting most of its money no matter what, so it is more apt to make the loan.
“Patriot Express is swift,” Christensen said. “You are not going to wait a month or two months. You are going to get results in a two-week period.”
The SBA’s literature says the Patriot Express loan guarantee is designed to be their quickest.
“One advantage of Patriot Express is banks can use their own documentation and paper,” Christensen said. “There are only two short forms that have to be submitted to the SBA. All our office does is give them an account number. The bank services the loan; you pay to the bank.”
The SBA only steps in if there is a problem.
“After an average of three months, if you cannot pay, before we pay them we are going to insist they liquidate the debt first. Then we pay 75 percent of what they could not recover.”
Interest rates on loans under this guarantee program are held down to the SBA’s lowest interest rates for business loans. The rates are generally 2.25 percent to 4.75 percent over prime, depending on the size and maturity of the loan. So far only Banco Popular has been approved within the territory to initiate these particular loans.
Christensen talked about other loan options, too. The Community Express Loan is a good option for smaller sums up to $50,000.
“This is what is called a character-based loan,” he said. “We are not really looking for collateral. … It is available to veterans, to women, to minority-owned businesses, to businesses in SBA Hub Zones — of which we are one — and low-to-moderate-income areas. And the loan can be originated anywhere.”
On the larger end of the spectrum, Christensen said, there is a third type of loan.
“You can borrow up to $10 million for land, for capital projects and construction,” he said. “It’s called a 504 CDC (certified development company) loan. If any of you pass by the restaurant 2+2 you’ll see a major construction project going on there. That’s from a 504 loan.”
Christensen listed several other medium-sized building projects on St. Croix financed through the SBA’s 504 program.
After completion of the presentation and its question-and-answer section, a few of the interested veterans stayed on to ask questions individually. One man showed Christensen photos of a largely complete concrete-block structure he’d built out of pocket over time, asking if a loan to complete construction and open up a business would fit the Patriot Express criteria.
“Fill out the application,” Christensen said. “Going by what I see and what you’ve said, it seems like a good prospect.”
Much more information on the SBA’s loan-guarantee programs and downloadable applications can be found at sba.gov. UVI’s Small Business Development Center can help with the application process and with developing a qualifying business plan. They can be reached on St. Thomas at (340) 776-3206 and on St. Croix at (340) 692-5270.
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