August 2007 | Small Business News
Patriot Express Loan for Military Entrepreneurs
By Steven Preston, U.S. SBA
In March, President George W. Bush established the Task Force on Returning Global War on Terror Heroes to improve delivery of federal services to military service members.
In response, after listening closely to representatives of the armed services, veterans and lenders, in June the U.S. Small Business Administration (SBA) announced its new Patriot Express Loan Pilot for the military community's entrepreneurs.
The initiative is available to more members of the military community than our other related programs: veterans, active duty personnel who are in the military's Transition Assistance Program, and all Reservists and National Guard members are eligible. In addition, the spouse of any of the above communities, or the widowed spouse of a service member who died while in the service, or of a service-connected disability, is also eligible.
With respect to the loan product itself, we've been able to put together the best parts of our 7(a) loan program (a higher SBA guarantee and more competitive interest rates) and our SBA Express product (simplified processing and greater availability), to create the most compelling and attractive product available through the SBA.
Patriot Express loans can go up to $500,000 - well above the SBA Express maximum of $350,000. Because it is an Express loan product, lenders and borrowers benefit from expedited and streamlined processing, meaning they will get an answer in most cases in a day or so. In addition, many of our largest lenders participate exclusively or primarily through our Express programs. By making Patriot Express a companion to SBA Express, we dramatically expand the points of access for veterans and thus our ability to support them.
Unlike SBA Express, the loans will carry the full 75-85 percent guaranty: an 85 percent SBA guaranty for loan amounts up to $150,000, and then a 75 percent guaranty from $150,000 to $500,000. That compares with only a 50 percent guaranty for SBA Express. That provides lenders with the support they need to reach further in extending capital to veterans.
Another advantage of Patriot Express is that it will have the same maximum interest rates of SBA's regular 7(a) loans, which are lower than SBA Express.
For example, a $100,000 loan for 6 years at the maximum SBA Express interest rate of 4.5 percent over prime would total approximately $143,580 in payments. The same loan for the same term under Patriot Express would be limited to 2.25 percent over prime or approximately $135,200 in payments. That would be a savings of almost $8,400 over six years to the borrower.
All PLP and SBA Express lenders with satisfactory loan performance will be eligible to participate in the Patriot Express Pilot Loan Initiative - that's almost 2,000 financial institutions nationwide- banks, credit unions, and non-bank lenders. SBA has created a compelling product for them and that's going to help us all reach a large number of aspiring and current military community entrepreneurs.
More information on SBA's programs is available at http://www.sba.gov.
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