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Frequently Asked Questions
What are the minimun and maximun for the SBA's part of the loan?
- Minimumm of $50,000.00
- Maximum of $1,500,000.00 (except in certain areas where the limit is $2,000,000.00)
- Women and minority owned businesses can qualify for the $2,000,000.00 limit
- Small manufactures covered by certain NAICS codes 310000, 320000 and 330000 qualify for up to $4,000,000.00
What percentage of the total project will the SBA finance?
- 40% of the project cost for a general multi-purpose facility.
- 35% of the project cost for a special purpose facility(gas station, motel, etc.)
- 35% of the project cost for a start-up business(business less than 2 years old)
- 35% of the project cost for a start-up business in a specisl purpose facility.
What is the term of the SBA 504 loan?
- 10 or 20 years for real estate
- 10 years for equipment with a life expectancy of 10 years or more
- SBA loans are fully amortized and have a fixed interest rate
What fees can a bank charge?
- Normal bank costs such as:
- Points / Loans fee
- Documentation fee
- Processing fees
- Enviromental report
- Title fees, etc.
Do I need an appraisal report?
- An appraisal is required for all SBA Loans
- The appraiser must be qualified to do commercial real estate appraisals
- The Bank will order the enviromental report, the CDC will use the Bank's report
What are the SBA's occupancy requirements for the projects
- The borrower must occupy at least 51% of an existing facility
- The borrower must occupy at least 60% of the facility if it is new cosntruction. If the other 40% is rented, the borrower must occupy some rented space during the next three years, and occupy 80% by the end of the tenth year. The balance of the building can be leased out permanently, if desired.
How long does it take to get an approval from the SBA?
- 3 to 6 week from receipt of a complete financial package and depending on SBA's backlog.
- Also, depends upon the completion of the environmental and appraisal reports
What are the SBA/CDC closing costs?
- 504 loans must be closed by a SBA approved attorney, the normal fee is $2,500.00
- The above closings costs are included in the 504 loan and are financed over the life of the loan
Can existing loans be refinanced?
- Not usually, however under certan circumstances the payoff of a "temporary/short term" loan may be eligible
- Refinancing of existing loans, to lower the interest rate are not eligible for a 504 loan
What will be used as collateral?
- The SBA loan will be secured by a second deed of trust on the subject property
- Generally the project will be the collateral. In some cases machinery, equipment and fixtures will be used along with leases assignments, or may take a junior position onother property. Occasionally, junior lien on an individual's personal residence may be required
- Personal guarantees will be required from any individuals with 20% or more ownership