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:
    • Hotels/motels
    • Assisted Living, personal care and nursing home facilities
    • Day care and child care facilities
    • Automobile and motorcycle dealerships
    • Gas Station/Convenience Stores
    • Fitness Centers
    • Restaurants
    • 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! 

sba@seedcopa.com