SBA Loan Program
SBA 504 Loan Program
- Borrower Benefits
- 90% financing reduces out of pocket expenses
- Below Market 10 and 20-year fixed rates on 504 portion
- Working Capital Preservation
- 9-month Project "Look-back" for projects already in process
- Flexible owner-occupied financing
- Lender Benefits
- Blended interest rate offered borrower
- 50% loan to value Bank loan
- Quick response time for approval
- Community Reinvestment Act Credit
- Community Benefits
- 504 puts excess revenues back into the community
- CDC markets program toward minority, women owned, veterans and rural areas to enhance community diversity.
- 504 Program strives to meet Public Policy Goals to enhance the vitality and economic success of a community.
504 Program allows financing for businesses that otherwise would not be able to obtain conventional financing.
- Common 504 Loans would include any owner-occupied commercial or industrial real estate or equipment financing project:
- Assisted Living, personal care and nursing home facilities
- Day care and child care facilities
- Automobile and motorcycle dealerships
- Gas Station/Convenience Stores
- Fitness Centers
- Agricultural Expansions
- Typical 504 Structure
- Conventional Structure is 50%/40%/10%
- Special Purpose or Limited Use Real Estate 50%/35%/15%
- Start-up Projects 50%/35%/15%
- Special Purpose/Limited Use & Start-up Projects 50%/30%/20%
- The 504 Program can be combined with State Loan Programs
- 504 Lending Limits
- Up to 40% of the "eligible project costs"
- $100,000 minimum
- $5,000,000 maximum SBA portion, (up to a total project of $12.5 million)
- $2,000,000 maximum SBA portion, for projects satisfying a public policy goal ( up to a total project of $5 million)
- $5,500,000 maximum SBA portion, for manufacturing or initiative facilities ( up to a total project of $13.5 million)
- Eligible 504 Project Costs
- Land and Building Acquisition
- New Construction
- Building Renovations/Leasehold Improvements
- Major Machinery and Equipment Purchases
- Related Soft Costs
- Acquisition legal expenses
- Bridge loan points and interest
- Construction Contingency
- Professional Fees
- 504 Costs
- Capitalized Costs = 2.5% added to the principal amount and included in the financing
- Bank Lender Fee = 0.5% of the 1st mortgage amount added to the bridge financing
- Out-of-Pocket Costs = $1,500, application deposit (refunded), title insurance, and CDC legal fees and recording costs for closing.
- Monthly Servicing Fees are included in the "all-in-rate"
- 504 Process
- Bank and Seedcopa secure approvals simultaneously, within 30 days or less of application
- Bank provides bridge loan for Seedcopa financing for non-construction and construction related projects.
- Bank and Seedcopa will close simultaneously for non-construction projects or Seedcopa will close after construction complete and a Certificate of Occupancy has been issued.
- Seedcopa government-backed loan will be sold within 30-60 days of closing and payoff of Bank bridge loan will occur.
- The result - borrower has two loans, one conventional loan with the Bank and one 504 loan at 90% of the project and 20-year long term fixed rates
SBA 7a Loan Program
- Maximum 7a funding up to $5,000,000
- 20-25 year term on real estate
- 10-year term on machinery and equipment
- 7-year term on working capital
- Rates based on Wall Street Journal Prime Rate
- As little as 10% equity injection
- Personal guarantee required for 20% or greater owner
- Pledging of personal assets for collateral – if required
SBA Guarantee Fee
- Up to $150M – 2%
- More than $150M – $700M – 3%
- More than $700M – $2MM – 3.5%
- Guaranteed portion exceeds $1MM, then .25% of the guaranteed amount which exceeds $1MM
Questions? Ask the experts directly!