FAQ's

What is a CDC?

CDC stands for Certified Development Company. CDC's are non-profit corporations that are certified and regulated by the Small Business Administration to package, process, close and service 504 loans. The 504 loans are issued through a partnership between the CDC's, the private sector and third party lenders.

How many EDC's (Economic Development Council) does Seedcopa partner with?

We currently partner with 14 EDC's in Chester, Lancaster, Bucks, Montgomery and Berks counties.

What is Seedcopa's mission?

We strive to create jobs through the SBA 504 and 7(a) loan programs. 

What does IEA stand for?

IEA stands for Initial Eligibility Assessment. This preliminary document determines whether or not we will be able to finance your project. Turnaround time for IEAs are two business days.

How long does the entire process last?

We follow a 45 day process. This means that from the first meeting with the borrower and lender to the bank closing, we guarantee a 45 day completion. 

What type of projects are available for financing?

We only finance for-profit businesses. This includes owner-occupied structure, small businesses, most industries and solar projects. 

Why is a loan through Seedcopa beneficial to my business?

Businesses attain many benefits through our different loan programs. These include reduced equity injection, longer term financing, increased loan sizes, no balloon provisions and the multiple uses of funds in one loan. 

What are the main advantages of an SBA 504 loan?

The biggest advantage of a 504 loan are reduced equity injection (10%-20% of project cost) and capital preservation. This means, the less money you dish out at the beginning, the more money you have in your pocket at closing. 

How is a 504 loan deal structured?

Most loans structures are a 50/40/10 split and the 504 is no different. 90% of the financing comes from the bank and Seedcopa, while 10% is the equity injected by the borrower.

*Equity injection can vary from 10% to 20%, depending on the project and the borrower.

Are there fixed rates for projects?

Yes. Each month 20 year rates are published. 10 year rates are published every other month.

What is the project structure of a 504 loan?

The 504 loan deals with 3 distinct project structures:

  • New Project: this deals with acquisition, construction and expansion
  • Expansion Refinance: borrower must have a new/expansion project; up to 50% of the new project may be refinanced and it does not expire
  • Existing Debt Refinance: new/expansion costs are not applicable
What are some specifics of the 7(a) program to be aware of?
The 7(a) loan program is a guaranty loan program, which means that the SBA does not make loans itself, but rather guarantees that loans are made by participating lending institutions.

What projects are financeable through the 7(a) loan?

There are multiple projects that are able to be financed through the 7(a) loan. These include the purchase, construction, renovation or improvement of buildings; acquisition or expansion; machinery and equipment purchases; inventory and supplies purchase; leasehold improvements; working capital; energy conservation loans and debt refinance/restructure. 

How much space do I need to occupy in the building to receive financing?

According to SBA guidelines, for 7(a) loans, the owner needs to occupy at least 51% of the building. If constructing a new building, the occupancy rate rises to 60%. For 504 loans, occupancy rate for an existing building is 51% and for a new building it is 80%. 

What kind of equipment am I eligible to finance with the 504 and 7(a) loan programs?

Any type of equipment is eligible, but it must have a minimum useful life of 10 years for the 504 program. Regarding the 7(a) program, the term of the loan equates to the useful life of the equipment.

When working with the 7(a) program, if I choose to borrow for Machine & Equipment, Real Estate, and Working Capital, how do the bank and SBA determine the maturity?

The SBA may use a weighted average blended maturity or a maturity up to the maximum for the asset class comprising the largest percentage of Use of Proceeds.

What are the requirements for equity injection?

In general, most hard asset acquisitions of companies that have 2 years of prior tax returns are required a 10% equity injection.

*Special purchase financing requires a 15% equity injection (i.e.: golf courses, bowling alleys, swimming pools)

*All start-ups or companies with less than two years of filed Tax Returns are required to inject 15%-20% equity at the time of closing and must possess that amount at the application stage. 

Are soft costs eligible Use of Proceeds in an SBA 504 or 7(a) loan?

Yes. All soft costs are able to be added back into the loan amount to help the small business owner preserve working capital.

What is the size standard for small businesses?

The business net worth must be less than 15 million. After-tax net profit must be $5 million or less, on average, for the prior two years.

Why is the 504 loan program beneficial for lenders?

The 504 loan program is beneficial for lenders for many reasons: lower LTV, lower reserve requirements, reduced credit risk through partnership funding and the ability to gain CRA credits.