The SBA Patriot Express loan program is a pilot loan program being offered by the SBA to certain military affiliated persons as long as they own 51% or more of a business. It has a number of attractive features for starting, expanding, or buying an existing business. According to SBA records, there has not been much demand for Patriot Express loans to date, but the reasoning is unclear. The SBA has committed to continue the trial until the end of 2010.
Most of the SBA 7(a) procedures apply to Patriot Express loans with the primary exception being the military affiliation requirement.
According to SBA documentation, borrower eligibility (which lenders must document) will be limited to businesses that meet SBA’s standard eligibility requirements and that are 51 percent or more owned by an individual or individuals in one or more of the following groups:
- Veterans (other than dishonorably discharged).
- Service-Disabled Veterans.
- Active Duty Military service member participating in the military’s Transition Assistance Program (TAP), which is applicable to potential retirees within 24 months of separation and to discharging Active Duty members within 12 months of discharge.
- Reservists and National Guard members.
- Current spouse of above, widowed spouse of a service member who died while in service, or widowed spouse of a veteran who died of a service-connected disability.
The program pledges streamlined documentation and processing similar to the SBA Express program and provides the lender from 75 – 85% loan guarantee instead of 50% which is a feature of the SBA Express program.
The current pilot program limits the total loan size to $500,000. Additionally, the SBA has limited the number of those large loans to 2,000 during the pilot. For loans of $350,000 or less, the SBA has less stringent requirements of the lender. There is no limit to the number of loans made of less than $350,000.
Many current SBA lenders are also authorized to make Patriot Express loans. Even though the documentation is less than that of a 7 (a) loan, a lender may still charge a packaging fee.
Other fees charge are an origination fee and a loan guarantee fee. Maximum interest rates charged borrowers are similar to that of the 7 (a) program, with smaller Patriot Express loans having a slightly higher rate. For Patriot Express loans (unlike SBAExpress loans), the standard 7(a) interest rate restrictions apply: a lender may charge up to 2.25 percent over the Prime rate for maturities under seven years and 2.75 percent over Prime for maturities of seven years or longer.
This program has substantial merit and can help military veterans, their spouses and widows to pursue a dream of owning a business when they otherwise might not have access to capital.
Sam Thacker is a partner in Austin Texas based Business Finance Solutions.
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