How to Start your Own SBA Department (and how to grow MBL assets without having to start one) Powerpoint to accompany the free White Paper now available at www.sbafinancenews,com

1. Starting Your Own SBA Department With Tim Thomas, IBI Credit Union Services; Tucker Herring, The Liberty Group; Vern Hansen, JR Bruno & Associates

3. Why SBA? High Initial Profitability At First $4,427,000 A Year (1/Mo x $368,920) $3,320,380 Guaranteed $298,825 Nine Point Premium -$74,706 Incentive to BDO $224,119 Gain (S/T FAS 166) +$33,203 Servicing on the guaranteed part +$66,405 interest on the UN guaranteed part =$323,727 Year 1 on $53,124 in capital (8% of the $1,106,000 You Kept) = 609% ROE Y1

4. $1,095,550 in SBA 504 FIRST mortgages $931,218 85% Guarantee Sold 6% Premium $55,973 Profit Contribution (S/T FAS 166) ($164,333 Balance kept on the books) +$10,271 Annual Interest $66,255 Contribution vs $13,147 in Capital. ROE Year 1 507% SBA 504s Add Profit Initially Too

5. $10,000,000 Loan Growth Target $1,271,000 Retained on the Books $8,730,000 Shortfall Buy the Guarantee Full Faith and Credit Irrevocable for Secondary Market Buyer No Principal Risk No Accrued Interest Risk Control Principal Rrisk by Re-Underwriting and Review Thou Can Buy What Thou Dost Not Originate and Taketh No Credit Risk Just Premium Risk

6. Buy, Acquire, Expand Start Up Debt Refinance if it’s Good For You NO cash out For Profit $15MM NW/$5 MM Profit Rule 51/60 Rule Credit Elsewhee Test 7A in a Nutshell

7. Life Insurance Good Will Broker Fees 5010C Yes You can Do Construction +Perm Character Counts – Franchises All Available Collateral 7A Quirks

8. 2% of Guarantee under $150K $3% of Guarantee 151 – 700 3.5% $701-$5MM Plus 3.5% Override on $$ over $1MM PPP on 15 Plus 5/3/1 Gross Rate 6% You Service 1% SBA Gets 0.55% x its 75% Guarantee Owner gets the Rest (Colson) All Those Fees

9. RE Collateral to 25/25 P+275 Adjust Quarterly Pay Monthly 5/3/1 Prepay 90% LTV Typical Deal

10. Sample Financing Project $1,000,000 First $500,000 6.5% fixed 5 = $3,375 PI Second $400,000 5.5% Fixed 20 = $2,751 PI Down Pmt $100,000 504

11. 90% to Cost Max Purchase or Make Sense Refi Green $5.5 MM MFR $15/5 Rule 120% + Guarantee Check their Liquidity vs $ Financed Debenture (2nd) 0.65% + $2,000 10-20 Yr 2nd 1st Fully Amortized Tyo]pical 25/25 5+5 504 Quirks

12. Assess Who Has the Skills? SBA Office Contact Prepare Approval Diocumentation Credit Policy Manual Structure the Department Create Proceedures Budget Training Marketing and Sales Plan One Small Step And Then Some

13. Credit Training and/or underwriting experience to include: Working knowledge of SBA business size and eligibility requirements Understanding of utilizing SOP 5010-C as a reference Working knowledge of balance sheet, P&L and corporate/partnership tax return analysis Understanding of SBA packaging and credit requirements Understanding of personal and business cash flow analysis Understanding of the SBA approval process Ability to prospect for new clients and referral sources Ability to develop and execute marketing plan Aptitude for building new relationships with new clients and referral sources Ability to present clearly to internal customers and borrowers regarding products and services that will enhance existing relationships Present to and consult with management on business trends BDO Skill Set

14. Lenders who book assets and hold those assets in their portfolio typically pay the BDO as a percentage of the total loan amount, such as the following: Loan VolumeBasis Points Paid as Commission $0 to $3MM 40 bps $3MM to $6MM 75 bps $6MM to $10MM 100 bps $10MM+ 150 bps BDO CU COMP - Portfolio

15. Customer focused individual with expert knowledge of credit products and processes including thorough knowledge of SOP 50 10 10 5(C) Strong organizational, analytical, communication and interpersonal skills. Proven leadership abilities. Extensive knowledge of credit policy, procedures and Bank regulations. Thorough understanding of commercial credit structures, loan documentation, and related legal issues. Knowledge of SBA operating procedures and eligibility guidelines CO Skill Set

16. 5010 C Know SBA policy on Franchises, goodwill, citizenship, equity injection, life insurance, available collateral rule, felonies Use NAICS Startups – Caution See Pages 20-22 for ideas of what to do/avoid See p22 for Collateral Rules Credit Policy

17. Pick Low Default industries Select Targets Market Directly’ See Sam’s Plan Chapter 7 P-22 Marketing: Pick Your Target

18. Loan $300,000 Guaranteed Portion $225,000 Un-Guaranteed Portion 75,000 Sell the guarantee for: $22,500 Let’s look at the $225,000 guaranteed part (Pretend it’s interest only the first year) Coupon 2.75 over Prime 6.000% = $13,500 paid by the borrower SBA Fee 0.675 = $ 1,519 goes to Colson Services who master services for SBA You Service for 1.000 = $2,250 The investor, who buys the guaranteed part, gets the rest: 6%-0.675%-1%= 4.325. So your revenue on the guarantee is $22,500 premium, plus your servicing revenue of $2,250, less whatever you are paying your outside SBA servicer. Secondary Marketing

19. The Budget

20. Decisions Go For It, Hire a Consultant or CUSO and build a solid program Risk too High, Buy Guaranteed Product to supplement loan assets Keep risk Off Balance Sheet, originate for wholesalers like Zions, Midwest Business Credit Become a PLP, add Small Loan Advantage, Express

21. Servicing – Outsource or no? Processing Outsource or No? SBA Annual Audit Other Issues

22. Secondary Marketing: Tim Thomas, Director Western Region, IBI Credit Union Services, tim@isaakbond.com (303) 623-7500 Jared Livingston, Director Eastern Region, IBI Credit Union Services, jared@isaakbond.com (303) 623-7500 Consulting: Vern Hansen, JR Bruno and Associates, vern@jrbrunoassoc.com (602) 820-1337 rocessing: Vern Hansen, JR Bruno and Associates, vern@jrbrunoassoc.com (602) 820-1337 Mike O’Donnell, Colorado Lending Source mike@coloradolendingsource.org (303) 657-0010 Member Business Lending, West Jordan Ut, www.mblllc.com Recruiting: Tucker Herring, The Liberty Group tuckerh@thelibertygroup.com, (713) 961-7666 Professional Organizations: National Association of Government Guaranteed Lenders www.naggl.org National Association of Development Companies www.nadco.org Resources and Experts