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SBA-504 LOAN
(Commercial Real Estate and Equipment)
90% Fixed Rate
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SBA 7(a) LOAN
(General Purpose)
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LOAN SIZE
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$250,000 to $5,000,000
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$250,000 to $5,000,000
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INTEREST RATE
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• Fixed
• 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
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• Variable rate; some limited fixed-rate options
• Fully amortized through the term of the loan
• Interest rates are negotiated between the borrower and the lender subject to a mandated SBA ceiling and floor
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ELIGIBLE BUSINESS SIZE
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• Business net worth not to
exceed $15 million
• Average net profit after taxes for 2 consecutive years not to exceed $5 million
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• Determined by industry type
• Annual sales not to exceed range of $750,000 to $33.5 million for retail, service and agriculture
• Number of employees not to exceed range of 100 to 1,000 for wholesale and manufacturing
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TERMS AVAILABLE AND AMORTIZATION PERIODS
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• 20 years fully amortized –
real estate loan
• 10 years fully amortized –
equipment loan
• No balloon payments
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• Up to 25 years – real estate
• Up to 10 years – equipment, business acquisition
• 5 to 7 years – working capital
• All loans are fully amortized
• No balloon payments
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LOAN STRUCTURE
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• 50% bank loan
• 40% CDC loan
• 10% borrower down payment
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• Loan structure negotiable; dependent on risk
• 10% down payment (minimum)
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LOAN PURCHASE
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• Purchase existing building
• Land acquisition and ground up construction (includes soft cost development fees)
• Expansion of existing building
• Finance building improvements
• Purchase equipment
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• 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
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LOAN PROGRAM REQUIREMENTS
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• 51% owner occupancy required for existing building
• 60% owner occupancy required for new construction
• Equipment with a minimum 10 year economic life |
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• 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
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COLLATERAL
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• Generally, the project assets being financed are used as collateral
• Personal guaranties of the principal owners of 20% or more ownership are required
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• Collateral is the subject assets acquired by loan proceeds
• Requires pledge of personal residence unless bank can justify why unnecessary
• Personal guaranties of the principal owners of 20% or more ownership are required
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LOAN FEES
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• Fees are financed in the 504 loan
• Fees are negotiated for the 50% bank loan
• Servicing fee (lowest allowed by SBA) for CDC 504 plus a legal review fee
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• Fees can be financed in the 7(a) loan
• Fees vary with the size of the loan accompanying the 504 loan
• An additional .25% is charged on any loan portion above $1 million
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