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SBA 504 Loan – Fact Sheet


sba

Owner Occupied Commercial Real Estate & Equipment

Project Loan Size:

$250,000 to over $12.5 million for certain projects

Loan Structure:

  • 50% Bank loan
  • Up to 40% SBA loan
  • 10% Borrower down payment, except special purpose or start-up (5% additional) /change of ownership (5% additional)

SBA Loan Interest Rate

  • 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

Eligible Business Size

  • Business net worth not to exceed $15 million
  • Average net profit after taxes for 2 consecutive years
    not to exceed $5 million

Terms Available and Amortization Periods

  • 20 years fully amortized – real estate loans
  • 10 years fully amortized – equipment loans
  • No balloon payments

Eligible Uses for Loan Proceeds

  • Purchase existing building
  • Land acquisition and ground-up construction (includes soft cost development fees)
  • Expansion of existing building
  • Finance building improvements
  • Purchase equipment

Loan Program Requirements

  • 51% Owner occupancy required for existing building
  • 60% Owner occupancy required for new construction
  • Equipment with a minimum 10 year economic life

Loan Program Requirements

  • 51% Owner occupancy required for existing building
  • 60% Owner occupancy required for new construction
  • Equipment with a minimum 10 year economic life

Collateral

  • Generally, the project assets being financed are used as collateral
  • Personal guaranties of any principal owners of 20% or more. Review of owners between 5 and 19.9% for no, limited, or full guarantee.

504 Debt Refinancing Program


house on packs of banknotesThe Small Business Jobs Act of 2010 temporarily expanded the ability of a small business to use the 504 Certified Development Company (CDC) Loan Program (504 Loan Program) to refinance certain qualifying existing debt. This temporary debt refinance program expired on September 27, 2012.

On December 18, 2015, Section 521 of Division E of the Consolidated Appropriations Act, 2016 (the Act) made a permanent change to the 504 Loan Program, authorizing the Program to be used for debt refinance in any year that the 504 Loan Program is at zero subsidy. SBA has received statutory authority to authorize the 504 Debt Refinance Program for up to $7.5 billion in addition to the $7.5 billion authorization for the regular 504 Program for a total 504 lending authorization of $15 billion.

SBA will begin accepting 504 Debt Refinancing Loan applications on June 24, 2016.

Loan Structure and Use of Proceeds

The refinancing loan is structured like SBA’s traditional 504 loan. Typically, a 504 project includes three elements:

  1. A loan (or first mortgage) secured with a first lien from a private-sector lender covering 50 percent of the project cost,
  2. A second mortgage secured with a second lien from an SBA Certified Development Company (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost,
  3. And a contribution of at least 10 percent equity from the small business borrower.

Borrowers are able to refinance up to 90 percent of the current appraised property value. The refinancing may also include Eligible Business Expenses, with a maximum Loan to Value of 75 percent.

 

Eligibility

To be eligible for the 504 Refinancing Program, a business must have been in operation for at least two years.

The debt to be refinanced must be a commercial loan:

  • That was incurred for the benefit of the small business concern not less than 2 years before the date of the 504 Debt Refinancing application.
  • The proceeds of which were used to acquire a 504 eligible fixed asset (i.e., owner-occupied real estate, land, equipment, etc.).
  • That is secured by 504 eligible fixed assets.
  • For which the borrower has been current on all payments for at least the last 12 months prior to application.

Existing 504 projects and government-guaranteed loans are not eligible to be refinanced.

Traditional 504 Loan Program regulations apply to the 504 Debt Refinance Program.

Commercial Mortgage Lending Without Limits

homepage7th Level provides small balance and large balance funding for virtually any commercial or investment venture. We have our own commercial mortgage investment lines in addition to extensive investment sourcing at the public and private levels to $100,000,000. Regardless of the complexities of your situation, if it can be done, we can do it best.

Commercial Mortgage lending – We can fund a wide variety of property types and we believe we can exceed your expectations as to how quickly and how efficient we can be in pricing and executing the loan for your commercial project or venture. Commercial lending does not have to be frustrating or an adventure with an unknown outcome. Please call us to let us know how we can help you and so that we can answer any questions you might have. Whether you are seeking to fund a loan for an apartment, office, hotel, or retail property, we can help.

Most Commercial mortgage loans under $3 million dollars are handled entirely by community banks or brokers such as 7th Level Mortgage. We streamline the process by only having the borrower complete one financing package, which in turn we “shop” out to 3-5 institutions on your behalf.  This saves your valuable time, money and resources in the long run.  The best part about it is we do this on your behalf FREE of Charge until you accept a loan commitment.

We offer commercial loan products on all Property types for Owners and Investors:

    • Multi Family and Apartment complex
    • Mixed Use and Single Use
    • HUD LOANS
    • Scattered Housing (multiple properties to include residential)
    • Assisted Living and Nursing Homes
    • Medical Facilities
    • Office and Office Condo
    • Acquisition and Development/ New Construction
    • Church and Religious Organizations
    • Bar/ Restaurants, Caterer Halls and Banquet Facilities
  • Accounts Receivable Loan
Commercial Loan

Advantages of a 7th Level Commercial Mortgage Loans

    • Competitive Products/ Programs
    • Lower fees and closing costs
    • More attractive rates and terms
    • NO UPFRONT COSTS or FEES
    • Appraisal fees not collected until LOAN IS APPROVED IN COMMITTEE
  • We do the shopping for you and present you with multiple offers

Sources of capital include:

  • Local Community Banks
  • Fannie Mae Freddie Mac
  • FHA/HUD Insurance Companies
  • Conduits (CMBS) Pension Funds
  • Agency Lenders Money Center Banks
  • Regional Commercial Banks Debt Funds
  • Mezzanine Funds Private Money

Our rates and terms typically beat the competition by .5% (rates vary according to transaction) with 20 and 25 year terms depending your individual cash flow, credit and equity positions. DSCR as low as 1.10, Loan to value ratios as high as 80%. If your bank has turned you down or has not gotten back to you, give us a call and let us show you what we can do for you!

Most Commercial mortgage loans under $3 million dollars are handled entirely by community banks or brokers such as 7th Level Mortgage. We streamline the process by only having the borrower complete one financing package, which in turn we “shop” out to 3-5 institutions on your behalf.  This saves you valuable time, money and resources in the long run.  The best part about it is we do this on your behalf FREE of Charge until you accept a loan commitment.


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