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Frequently Asked Questions
What can the SBA 504 Loan Program be used for?
- Land acquisition and building construction
- Purchase and/or remodeling of existing building
- Building expansion
- Renovation and restoration of building
- Purchase of equipment with a life expectancy of 10 years or more
How is a typical SBA 504 Loan Structured?
- Bank --- 50%
- SBA/CDC --- 40%
- Borrower --- 10%. The borrower's percentage will be adjusted forv a special purpose facility or a start up business
Who processes the SBA 504 Loan?
- The Tracy/San Joaquin CDC can handle a project anywhere in the state of California.
- The CDC will do all of the undewriting, loan documentation and paperwork for the SBA loan
- The CDC can process the loan and supply the Bank with a duplicate copy of the loan package, or
- The Bank can supply the Tracy/San Joaquin CDC with a duplicate copy of the loan package
- It is important, that the Bank gets the CDC involved at the start of the process
What are the eligibility issues of the SBA 504 Loan Program?
- The business, plus all affiliate companies, must have a tangible net worth less than $7,500,000.00
- The average net profit of the business can not be more than $2.5 million dollars after taxes in the last two years
- Job creation or retention is at a rate of 1 job for every $50,000.00 of the SBA's part of the loan. Exceptions my apply.
- Must be owner occupied
- Ability to repay the loan from projected cash flow and profits
- Management ability and experience to run the business
- Check with the CDC regarding public policy goals
What businesses are ineligible?
- Nonprofit organizations, investment companies, gambling facilities and banks
What type of business qualifies for an SBA 504 Loans?
- Retail, service, wholesale, professional and manufacturer
Is there a prepayment penalty?
- Only during the first ten years of a 20 year loan and the first five years of a ten year.
- The penanlty is calculated on a sliding scale with the 1st year being the largest amount
What kind of borrowers would use this loan program?
- To preserve their capital, in most cases only 10% down will be needed
- A fixed interest rate, for the entire term of the SBA 504
- A long term of 10 or 20 years on real estate and 10 years on equipment
- A low interest rate the SBA loan(debenture) is sold on the bond market and is guaranteed by the Federal goverment