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SBA loan programs can help qualified businesses obtain financing even when their collateral may not meet conventional lending standards. Having the experience and the right relationships with a wide variety of capital sources allows ALB Commercial Capital to expedite the process and approval of SBA loans. The information below is an overview of the SBA 504 loan programs features.
The SBA 504 Loan program is a powerful economic development loan program that offers small businesses another avenue for business financing, while promoting business growth, and job creation. This program is a proven success and win-win-win for the small business, the community and participating lenders.
The 504 Loan Program provides approved small businesses with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization. 504 loans are made available through Certified Development Companies (CDCs), SBA’s community-based partners for providing 504 Loans.About CDCs
A Certified Development Company (CDC) is a nonprofit corporation that promotes economic development within its community through 504 Loans. CDCs are certified and regulated by the SBA, and work with SBA and participating lenders (typically banks) to provide financing to small businesses, which in turn, accomplishes the goal of community economic development.504 Loan Structure
504 Loans are typically structured with SBA providing 40% of the total project costs, a participating lender covering up to 50% of the total project costs, and the borrower contributing 10% of the project costs. Under certain circumstances, a borrower may be required to contribute up to 20% of the total project costs.
Interest rate options include variable, 3 and 5 year fixed rate options for the Conventional 1st Deed of Trust/Mortgage. Your interim loan typically mirrors 1st Deed of Trust/Mortgage. For your CDC/SBA 2nd Deed of Trust/Mortgage your rate is tied to the market rate for the 5 and 10 year US Treasury with rates fixed at the time of debenture funding for the life of the loan. Fees total approximately 3% of the SBA Debenture and may be financed with loan proceeds. The majority of these fees are not currently being charged as part of the American Reinvestment and Recovery Act.
*Up to $6,000,000 of aggregate financing
It normally takes between 45 to 90 days after the 1st Deed of Trust Conventional loan for the SBA to fund the SBA 2nd Deed of Trust/Mortgage. To ensure a smooth close, most lenders either require or offer an interim loan of 120 days which is paid off with the SBA Debenture. Typically, the interest rates on the 120-day interim note mirror the rate on the 1st TD conventional loan.
If your tangible net worth is less than $7.5 million and your average net income doesn’t exceed $2.5m after taxes for the preceding two years and you operate your business for profit, then you could be eligible for the 504-loan program.
Some examples of where you wouldn’t be eligible to use proceeds include for working capital, inventory or debt consolidation, repayment or refinancing. Loans can’t be made for speculation purposes nor for investment in rental real estate.
To find out if you qualify for the SBA 504 loan program call our office at 800-510-2214 to speak with one of our commercial loan Advisors or click here to set up a free consultation to get pre-qualified. Disclaimer: Loan program parameters subject to change without notice.