| |
SBA 504 LOAN
(Commercial Real Estate & Equipment)
90% Fixed-Rate
|
SBA 7(a) LOAN
(General Purpose
and Real Estate)
|
Loan Size
|
$125,000 to over $10,000,000
(includes guarantee portion)
Real Estate greater than $1M
|
$50,000 to $5,000,000
Real Estate less than $1M
|
Interest Rate
|
- Fixed rate for 5 years, then reset
- Fully amortized through the term of the loan
- Interest rates on 504 loans are set monthly at the time of funding at an increment above the current market rate for five-year and ten-year U.S. treasury issues
- Split into 2 loans: First T.D. is a
bank loan at 25/25 or 30/30 at low LTV with 5 year fixed and then reset for another 5 years.
- Second is generally 20/20 fixed with interest rate set by SBA (debenture rate) at time of funding (Debenture rate comes out monthly)
|
- Variable rate adjusted quarterly to Prime Rate plus margin (below)
- 25/25 Fully amortized through the term of the loan
- Interest rates are negotiated between the borrower and the lender subject to SBA maximums of:
Prime plus 2.25% if the loan maturity is less than 7 years
OR
Prime plus 2.75% if the loan maturity is 7 years or more
|
Eligible Business Size
|
- Business net worth not to exceed $8.5 million
- Average net profit after taxes for 2 consecutive years not to exceed $3 million
OR
- Meet 7(a) requirements
|
- Determined by industry type
- Annual sales not to exceed a range from $750,000 to $25 million for retail, service and agriculture
- Number of employees not to exceed a range from 100 to 1,000 for wholesale and manufacturing
OR
Meet 504 requirements (temporarily applicable. Requirements subject to change)
|
Terms Available and Amortization Periods
|
- 20 to 30 years fully amortized – real estate loan
- 10 years fully amortized – equipment loan
- No balloon payments
- 5 year flat preay
- Can be assumed and transferred to an equally qualified buyer without paying the prepayment penalty at sale
|
- 25/25 years – real estate
- 10/10 years – equipment, business acquisition
- 5/5 to 7/7 years – working capital
- All loans are fully amortized
- No balloon payments
- Declining Balance Prepay
5-3-1
- Loans are non-assumable
|
Loan Structure
|
- 50% bank loan
- 40% CDC loan
- 10% borrower down payment
|
- 90% bank loan
- 10% borrower down payment
|
Loan Purchase
|
- Purchase existing building
- Land acquisition and ground up construction (includes soft cost development fees)
- Expansion of existing building
- Finance building improvements
- Purchase equipment
|
- Expand, acquire or start a business
- Purchase or construct real estate
- Refinance existing business debt
- Buy equipment
- Provide working capital
- Construct leasehold improvements
- Purchase inventory
|
Loan Program Requirements
|
- 51% owner occupancy required for existing building
- 60% owner occupancy required for new construction
- Equipment with a minimum 10 year economic life
|
- 51% owner occupancy required for existing building
- 60% owner occupancy required for new construction
- All assets financed must be used to the direct benefit of the business
|
Collateral
|
- Generally, the project assets being financed are used as collateral
- Personal guaranties of the principal owners of 20% or more ownership are required
|
- Collateral is the subject assets acquired by loan proceeds
- May require pledge of personal residence if equity available
- Personal guaranties of the principal owners of 20% or more ownership are required
|
Loan Fees
|
- Fees are financed in the 504 loan
- Fees are negotiated for the 50% bank loan accompanying the 504 loan
- Various stimulus package incentives can waive some or all fees from time-to-time. Call for current requirements.
- 1 to 2.5 points plus packaging
|
- Various stimulus package incentives can waive some or all fees. from time-to-time. Call for current requirements.
- 1 to 2.5 points plus packaging
|