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SBA 504 Loan Program
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SBA 504 Loans are used for the purchase of real estate and/or equipment. The nature of the 504
product is to provide part of the loan at a fixed rate with the bank pricing the other part of the loan.
Funding Solutions is able to provide fixed rate financing on BOTH parts of the loan. SBA 504 loans
offer low fixed rates and low equity requirements. It is a great product for new businesses planning on
purchasing real estate or existing businesses needing to expand.
Loan Purpose
Proceeds can be used to purchase, build or renovate owner occupied commercial real estate and for
machinery and equipment.
Loan Amount
Total loan amount up to $6,000,000 split into 2 parts.
1. Conventional First Mortgage Loan: Up to $4,000,000
2. SBA 504 Debenture/Second Mortgage Loan: Up to $2,000,000
Time to Close
Commitment Letter within 3 days of completed application! Closing
within 30 – 45 days of signed commitment letter.
Loan To Value
Up to 90%.
Interest Rate
Conventional First Mortgage Loan – Adjusts monthly based on spread over 30 day LIBOR.
SBA 504 Debenture/Second Mortgage Loan – Fixed rate as set by the SBA for the term of the loan.
Interim Loan – Adjusts monthly based on spread over 30 day LIBOR. (Interim loan provided by to
cover time between loan closing and SBA 504 funding of debenture).
Term
First Mortgage Loan has a term of up to 25 years, fully amortizing.
SBA 504 Debenture/Second Mortgage Loan has a term of up to 20 years for commercial real estate,
10 years for machinery and equipment, fully amortizing.
Interim Loan has a term of up to180 days.
Prepayment Penalty
Prepayment penalties will apply.
Fees
Customary closing cost
Minimal lender fees
CDC/SBA fee on the SBA 504 Debenture/Second Mortgage Loan is set by the CDC/SBA
Good faith deposit to be used for loan closing costs.
Collateral
Loan must be fully secured by commercial real estate or a combination of commercial and residential
real estate.
Recourse
All principals who own 20% or more of the business are required to provide a full guarantee.
Principals or key managers owning less than 20% may be required to provide a guarantee on a
case-by-case basis.
The guarantee of affiliated companies may be required based on the percentage of ownership of the
affiliate and the borrower's relationship with the affiliate.
Debt Service Requirements
A minimum projected debt service coverage ratio of 1.25 times is required.
Industries
Loans can be made to all for-profit businesses except those that do not meet SBA eligibility
requirements. These are primarily firms involved in real estate investment/speculation, gambling,
adult entertainment, lending money and pyramid sales schemes. Firms involved in nuclear waste,
utilities, natural resource development, fishing vessels, biotechnology and internet technology are
also excluded from eligibility.
Other Considerations
Appraisal and Environmental Reports will be required for real estate used as collateral.
Borrowers cannot have filed for bankruptcy within the last three years.
Payment reserves are generally required.
Life insurance equal to 50% of the Conventional First Mortgage Loan will generally be required.
product is to provide part of the loan at a fixed rate with the bank pricing the other part of the loan.
Funding Solutions is able to provide fixed rate financing on BOTH parts of the loan. SBA 504 loans
offer low fixed rates and low equity requirements. It is a great product for new businesses planning on
purchasing real estate or existing businesses needing to expand.
Loan Purpose
Proceeds can be used to purchase, build or renovate owner occupied commercial real estate and for
machinery and equipment.
Loan Amount
Total loan amount up to $6,000,000 split into 2 parts.
1. Conventional First Mortgage Loan: Up to $4,000,000
2. SBA 504 Debenture/Second Mortgage Loan: Up to $2,000,000
Time to Close
Commitment Letter within 3 days of completed application! Closing
within 30 – 45 days of signed commitment letter.
Loan To Value
Up to 90%.
Interest Rate
Conventional First Mortgage Loan – Adjusts monthly based on spread over 30 day LIBOR.
SBA 504 Debenture/Second Mortgage Loan – Fixed rate as set by the SBA for the term of the loan.
Interim Loan – Adjusts monthly based on spread over 30 day LIBOR. (Interim loan provided by to
cover time between loan closing and SBA 504 funding of debenture).
Term
First Mortgage Loan has a term of up to 25 years, fully amortizing.
SBA 504 Debenture/Second Mortgage Loan has a term of up to 20 years for commercial real estate,
10 years for machinery and equipment, fully amortizing.
Interim Loan has a term of up to180 days.
Prepayment Penalty
Prepayment penalties will apply.
Fees
Customary closing cost
Minimal lender fees
CDC/SBA fee on the SBA 504 Debenture/Second Mortgage Loan is set by the CDC/SBA
Good faith deposit to be used for loan closing costs.
Collateral
Loan must be fully secured by commercial real estate or a combination of commercial and residential
real estate.
Recourse
All principals who own 20% or more of the business are required to provide a full guarantee.
Principals or key managers owning less than 20% may be required to provide a guarantee on a
case-by-case basis.
The guarantee of affiliated companies may be required based on the percentage of ownership of the
affiliate and the borrower's relationship with the affiliate.
Debt Service Requirements
A minimum projected debt service coverage ratio of 1.25 times is required.
Industries
Loans can be made to all for-profit businesses except those that do not meet SBA eligibility
requirements. These are primarily firms involved in real estate investment/speculation, gambling,
adult entertainment, lending money and pyramid sales schemes. Firms involved in nuclear waste,
utilities, natural resource development, fishing vessels, biotechnology and internet technology are
also excluded from eligibility.
Other Considerations
Appraisal and Environmental Reports will be required for real estate used as collateral.
Borrowers cannot have filed for bankruptcy within the last three years.
Payment reserves are generally required.
Life insurance equal to 50% of the Conventional First Mortgage Loan will generally be required.
| Small Business Administration (SBA) Loan |
