SBA 504 Loan Facts
Loan Amount:
Eligible Borrowers:
Use of Funds:
Terms:
Collateral:
Conditions:
Eligible Borrowers:
Use of Funds:
Terms:
Collateral:
Conditions:
Up to 40% of total project cost - maximum amount of $1.5 million except maximum $2.0 million for Public Policy project, empire zone, expand exports, minority businesses, women-owned and veteran owned businesses, maximum $4.0 million for manufacturers.
Small business concern - net worth under $8.5 million; net profit after taxes under $3 million. Must be for-profit - retail, service, professional service, wholesale, manufacturer. No religious institutions. No speculative/lenders. No offshore facilities. One new job projected with every $50,000, over a two year period (for manufacturers one new job for every $100,000) with exceptions. Multiple small business concerns may join together for a project.
Capital Assets
HARD COSTS: Acquire land; construct building; acquire building; add to building; renovate building; heavy duty machinery & equipment. Includes condominiums, co-operatives, leasehold improvements and commercial vessels.
SOFT COSTS: Architect; permits; attorney; accountant; interest and points on bridge loan; environmental; appraisal; real estate broker commission; title searches and insurance.
10 or 20 years; self amortizing. Rate: below prime, fixed at auction (upon project completion.)
Subordinate to 1st mortgage lender.
Personal guarantees for each 20% or more owner or key management.
At least 50% from non-federal sources (bank/nonbank/JDA/UDC/IRB). Must have 7 year term (10 year loan); 10 year term (20 year loan). At least 10% injection from small business concern (may be land/building).
Small business concern - net worth under $8.5 million; net profit after taxes under $3 million. Must be for-profit - retail, service, professional service, wholesale, manufacturer. No religious institutions. No speculative/lenders. No offshore facilities. One new job projected with every $50,000, over a two year period (for manufacturers one new job for every $100,000) with exceptions. Multiple small business concerns may join together for a project.
Capital Assets
HARD COSTS: Acquire land; construct building; acquire building; add to building; renovate building; heavy duty machinery & equipment. Includes condominiums, co-operatives, leasehold improvements and commercial vessels.
SOFT COSTS: Architect; permits; attorney; accountant; interest and points on bridge loan; environmental; appraisal; real estate broker commission; title searches and insurance.
10 or 20 years; self amortizing. Rate: below prime, fixed at auction (upon project completion.)
Subordinate to 1st mortgage lender.
Personal guarantees for each 20% or more owner or key management.
At least 50% from non-federal sources (bank/nonbank/JDA/UDC/IRB). Must have 7 year term (10 year loan); 10 year term (20 year loan). At least 10% injection from small business concern (may be land/building).
Other Financing:
Declining prepayment penalty 1st half loan term; permanent lender only; personal resource test; start up (less than 2 years) 15% injections; special purpose building 15% injection; start up & special pupose 20% injection.
Approximately 4% of loan amount (includes LIDC attorney and title insurance). These fees are rolled into mortgage. No mortgage tax.
1/2 of 1% of permanent first mortgage from bank. If added to fees on bridge loan rather than on first, can include as part of project cost.
51% of existing building; 60% new (can permanently lease out 20% on new construction).
Anyone can own (doesn't have to be owners of the small business concern).
Approximately 4% of loan amount (includes LIDC attorney and title insurance). These fees are rolled into mortgage. No mortgage tax.
1/2 of 1% of permanent first mortgage from bank. If added to fees on bridge loan rather than on first, can include as part of project cost.
51% of existing building; 60% new (can permanently lease out 20% on new construction).
Anyone can own (doesn't have to be owners of the small business concern).
Special:
Fees:
SBA Required Bank Fee:
Owner Use:
Ownership of Realty:
Benefits of SBA 504 Loans
FOR BORROWER: FOR BANK:
Low down payment. Lets borrower preserve
cash for working capital needs.
Long term: Provides longer payout for
borrower, better for its cash flow.
Fixed rate on 504 portion: Stability and
planning for borrower.
Rate: Very low for a second mortgage loan
and when blended with bank rate, is very
attractive deal for a small business.
Fees: No New York Mortgage Tax
Low down payment. Lets borrower preserve
cash for working capital needs.
Long term: Provides longer payout for
borrower, better for its cash flow.
Fixed rate on 504 portion: Stability and
planning for borrower.
Rate: Very low for a second mortgage loan
and when blended with bank rate, is very
attractive deal for a small business.
Fees: No New York Mortgage Tax
CRA Credits.
Lower loan to value ratios.
"Insurance" - SBA 504 in second position.
Provides better cash flow and lower cash
injection for borrower.
LIDC handles all SBA application paperwork.
Enables bank to offer longer term package
than typically can.
Enhances banks lending limit.
"Deposit Strategy": Increase banks deposits
from customers who put down less on
building project.
Lower loan to value ratios.
"Insurance" - SBA 504 in second position.
Provides better cash flow and lower cash
injection for borrower.
LIDC handles all SBA application paperwork.
Enables bank to offer longer term package
than typically can.
Enhances banks lending limit.
"Deposit Strategy": Increase banks deposits
from customers who put down less on
building project.
