1 / 18

The SBA 504 Loan Program

The SBA 504 Loan Program. Seedco South Eastern Development Company of Pennsylvania. 25 year old Certified Development Company (CDC) – SBA 504 Loan Program Statewide Work with borrowers throughout the Commonwealth Partner with many Economic Development agencies to offer the SBA 504.

cicada
Download Presentation

The SBA 504 Loan Program

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. The SBA 504 Loan Program

  2. SeedcoSouth Eastern Development Company of Pennsylvania • 25 year old Certified Development Company (CDC) – SBA 504 Loan Program Statewide • Work with borrowers throughout the Commonwealth • Partner with many Economic Development agencies to offer the SBA 504

  3. Typical 504 Financing Structure • 50/40/10 90% Financing: • 50% Private sector loan • 40% 504 loan • 10% Equity (*Start-up/Special Use*) • Bank is in first lien position with a 50% LTV • 40% loan portion is a below market, 20 year fixed rate • Equity injection of 10% preserves working capital

  4. 504 Benefits • Lender Benefits • Blended interest rate offered to borrower • More competitive / creative financing • 50% loan to value • CRA credits • No SBA documentation or reporting • Borrower Benefits • 90% + financing • 20 year fixed rate • Below market fixed rates (SBA portion) • Working capital preservation

  5. Eligible 504 Project Costs • Land and building acquisitions • New construction • Building renovations/ leasehold improvements • Major machinery and equipment with a minimum 10 year economic life • Related costs, which can include: • Acquisition-related legal expenses • Bridge loan points and interest • Construction contingency, up to 10% • Professional fees • Eligible soft costs Typically incurred within 9 months of application submission

  6. 504 Project Structure

  7. Common 504 Loans • 51% Owner Occupied Commercial/industrial buildings • Hotels/motels • Assisted living, personal care and nursing home facilities • Day care and child care facilities • Automobile and motorcycle dealerships • Gas Stations/convenience stores • Fitness centers • Restaurants • Agricultural Expansions (dairy, poultry, hog)

  8. 504 Lending Limits • UP TO 40% of eligible 504 project costs: • $1,500,000 maximum • $2,000,000 maximum for projects satisfying a public policy goal • $4,000,000 maximum for manufacturing • Creating (or retaining) job opportunities • $50,000 per Job • $100,000 for Manufacturing

  9. SOP Update – 08/01/2008 Revision • Appraisal • Included on the initial engagement • Environmental • Records search with risk assessment vs. Phase I • Reliance letter • Change of ownership/Special use • Borrowed equity injection • Franchise Agreement

  10. Stimulus – 02/17/2009 Update • Job Requirement • Increase from $50,000 to $65,000 • Third Party Lender Fee • 0.5% eliminated for 2009 • CDC Fee • 1.5% CDC fee eliminated for 2009

  11. 504 Rates & Fees • March Funding • 5.6% Fixed for 20 years • Third Party Lender Fee • 0.5% eliminated for 2009 • CDC Fee • 1.5% CDC fee eliminated for 2009 • Underwriters Fee – 0.25% • Funding Fee – 0.4%

  12. Bottlenecks • Borrower’s Team Contacts • – Attorney, CPA, Insurance, etc. • Title Insurance • Life Insurance / Assignment • Organizational Documents • Construction / Sub-Contractors • Lien Waivers • Personal History (Form 912) • Franchise agreement / Other contracts • Communication - Try to address any special circumstance at the initial review of the project

  13. The SBA 7a Loan Program and Facilitation Services

  14. The SBA 7a Loan Program • Utilized to assist in starting, building and growing small businesses • Often utilized in situations such as start-up, projection-based, change of ownership, limited collateral, lack of equity injection; etc • Up to 90% financing • Weighted average term • Maximum funding up to $2MM • Must be owner occupied • Limited use for debt refinance

  15. SBA 7a Use of Proceeds • Purchase, construct, renovate or improve buildings • Business acquisition or expansion, including franchises • Machinery and Equipment • Leasehold improvements • Working capital

  16. SBA 7a Stimulus Changes • 90% Guarantee to a maximum of $1,500,000. • Elimination of Guarantee Fee 2-3.75% • $15,000,000,000 injected to stimulate secondary market. • Premiums banks received have increased.

  17. SEEDCO SBA 7a Loan & USDA Facilitation Services • Origination Process • Sales and marketing training consistent with your existing delivery system • SBA Approval Process • Supplement your existing underwriting process/document with SBA required components • Loan Closing • Loan Servicing • Loan Management & Administration • Work together to develop and assist management and monitoring practices • Secondary Market Sales • Liquidation • Explain process and act in and advisory capacity to assist in the submission to the SBA

  18. Questions

More Related