Patriot express pilot loan initiative offers new benefits: the new SBA patriot express pilot loan program brings broad appeal to

The U.S. Small Business Administration recently introduced a new loan program that is targeted to benefit many U.S. citizens with military service backgrounds and those individuals seeking to transition into private-business ownership. According to the SBA, more than 14 percent of businesses in America are owned by veterans, and the SBA guarantees more than $1 billion annually in loans for veteran-owned businesses. The new SBA Patriot Express Pilot Loan program features an expedited loan application process and can be an effective resource for new franchise operators with prior military service experiences. Additionally, the new program will be available to those concepts whose initial investment ranges may be as high as $700,000.

Earlier this year, SBA announced the launch of its new Patriot Express Pilot Loan Initiative program. The program was established to support both veterans and members of the military community with resources to either establish or expand a small business. This new loan program, similar to the existing 7(a) and SBAExpress loan programs, will be directly funded through the SBA's nationwide network of participating lenders. Given the relatively small maximum loan limits, the new program will also feature the SBA program's fastest turnaround time for loan approvals. The Patriot Express loan proceeds can be broadly used for most business purposes, including start-ups, purchases, expansion, equipment purchases, working capital, inventory or owner-occupied business real estate acquisitions. The Patriot Express Loan pilot program, which became effective on June 13, will operate thru Dec. 31, 2010, at which time the SBA will then re-evaluate its performance and decide where to modify or continue the program.

The Patriot Express Pilot Loan program was structured as a hybrid between the SBA's existing 7(a) loan program and its standard SBAExpress Loan program with some of the best features being taken from both established programs. One significant difference is that the Patriot Express Pilot Loan program provides for larger maximum loan limits than the standard express loan program. Another is that the loan interest rate ranges will be less than the current range being charged by the current SBAExpress Loan program and more in alliance with the traditional larger 7(a) loan program. The combination of increased loan limits, more favorable interest rates and participating lenders able to make loans with SBAExpress Loan documents, may enable many in the military community the ability to achieve business ownership.

As the new loan program is targeted to the military community at large, its objective has significant appeal to the military men and women that are best positioned to transition their military careers to the private sector by means of starting a new or purchasing a franchised business. The new Patriot Express Pilot Loan program has a streamlined processing approach for faster loan closing, a larger maximum loan amount for larger projects and lower interest rates usually reserved for larger SBA loan transactions.

Members of the International Franchise Association's Veterans Transition Franchise Initiative, a program designed to encourage franchise ownership by offering financial incentives to honorably-discharged veterans, and the franchising community should be proactive in bringing awareness to prospective franchisee operators with military backgrounds that this additional capital resource is made available to them and sponsored by SBA and its participating national lenders.

Eligibility for the SBA Patriot Express Pilot Loan

The SBA did not limit the eligibility of this program to only a select group of veterans, but has extended the program to a much broader representation of the military community. However, the definition of eligibility is limited only to the SBA Patriot Express Pilot program and will not automatically apply as eligibility to any of the other SBA loan products and services. The SBA has broadened the eligibility of the Patriot Express Pilot program to include classification of any of the below documented military background(s):

* Veterans (other than dishonorably discharged),

* Service-disabled veterans,

* Reservists and National Guard members,

* Active-duty service members participating in the military's Transition Assistance Program,

* Current spouses of any of the above, and

* The widowed spouse of a service member or veteran who died during service or of a service-connected disability.

Streamlined Processing

The Patriot Express Pilot Loan program highlights the combination of its streamlined processing mechanism for faster loan closings, larger maximum loan limits for larger projects, and lower contractual interest rates are usually reserved for the larger SBA loan programs. Should the Patriot Express program execute on its deliverables then these newly-eligible franchise operators will also have an additional capital resource to secure project financing for franchise start-ups and acquisitions of existing units. The most notable highlights that benefit both borrowers and participating lenders of the Patriot Express Pilot Loan program in comparison with the current 7(a) and SBAExpress loan programs are detailed as follows:

* The maximum loan limits with the Patriot Express Pilot is $500,000 as compared with the maximum limits of $350,000 under the current SBAExpress loan program. The increase in maximum loan limits will grant those eligible franchise operators with access to those franchise concepts in the next higher investment tier level. After typical equity injection requirements in the 15 percent to 30 percent range, total project cost can now range as high as $700,000.

* For participating lenders, the SBA will provide a loan guaranty of up to 85 percent for Patriot Express loans up to $150,000 and a loan guaranty of up to 75 percent for loans above $150,000. This is a contrast to the current maximum 50 percent SBA loan guaranty for all SBAExpress loans. As participating lenders must still use their existing prudent collateral practice for express loans, the increased guarantee however provides greater incentive to finance larger loan requests and the next higher tier level investment of franchise systems.

* The Patriot Express Loan interest rates can be as low as prime-plus 2.25 percent which may be a typical spread charged over the prime rate within the larger 7(a) loan program to relatively lower credit risk of the borrowers and overall transaction. The Patriot Express Loan program interest rate range is generally 2.25 percent to 4.75 percent over the prime rate depending upon the size and maturity of the loan.

* The existing SBAExpress lenders and Preferred Lender Program lenders that elect to participate in the Patriot Express Pilot Loan Initiative will be required to satisfy and maintain the same proficiency and performance standards the SBA has established for participants in the SBAExpress or PLP program.

In addition to the loan program, the new Patriot Express Pilot Initiative will also include additional SBA resources for small-business operators with alliances to the military community. The program will provide this base of small-business operators with advice and counseling through the SBA district offices, the SBA's resource partners at SCORE, the Small Business Development Centers, and the Women Business Development Centers.

Should franchise companies wish to learn more about the Patriot Express Pilot Loan initiative program and how it may more particularly benefit those with military backgrounds in the franchising industry, they can visit the Web site, www.sba.gov/patriotexpress. To locate an SBA district office, go to www.sba.gov. SCORE counselors with expertise in supporting veteran entrepreneurs are available online 24 hours, seven days a week with a 48-hour response time at www.score.org/veteran.html.

Reginald (Reggie) Heard is the founder and president of Bankers One Capital. He can be reached at 203-791-9998 or reginald.heard@gmail.com.