4 uses of sba 504 loan program

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Purpose of the SBA 504 Loan Program Economic development program to facilitate the purchase of

owner‐occupied commercial real estate.

What is SBA’s defini on of owner‐occupied?

New Construc on 60% Owner‐Occupied 20% Lease Forever 20% Leased with

Plans to Occupy*

Ryan Richardson—Loan Program Manager —530‐225‐2760 x206

Exis ng Facility 51% Owner‐Occupied

49% Leased

2

4 Uses of the SBA 504 Loan Program 1. Purchase Land & Exis ng Building 2. Purchase Land & Construct Building

3. Expand Exis ng Facility with Refinance 4. Refinance Owner Occupied CMRE

Ryan Richardson—Loan Program Manager—530‐225‐2760 x206

3

Project Structures 1. Typical Project—50%/40%/10% 2. Single Purpose—50%/35%/15%

3. New Business—50%/35%/15% 4. New & Single Purpose—50%/30%/20%


SBA has a list of 27 single use proper es

4

SBA 504 Benefits 1. 10% Borrower Injec on* 2. Below(ish) Market Interest Rates

3. 20‐Year Fixed Rate 4. Finance Closing, So Costs & SBA Fees


5

SBA 504 Target Client

Wants to Purchase Owner‐Occupied Commercial Real Estate

Owned their business for 3‐5 years

Has a desire for a fixed interest rate

Has cash injec on

******************* Special Use Facility

Bank looking to reduce exposure


6

Size of SBA 504 Projects Largest Smallest


Borrower can have $5MM in SBA 504 assistance and assuming 50/40/10 structure the project could go up to

$12.5MM*

*technically it could go higher, but we live in Redding and I haven’t seen too many $12.5MM deals

$400M total project is a good star ng point

Easier ways to finance small projects

Good vs. Bad Profits

7

Size Restric ons (Including Affiliated Companies) 2‐Year average profit AFTER tax of $5.0MM

Tangible Net Worth of $15.0MM

What are affiliated companies?


If the borrower or guarantor have the ability to control another company through management or ownership then it is an affiliated company.

Affiliated companies are added to the opera ng company for size standard

purposes. Check Schedule E for the 1040 and get K‐1s to determine affilia on.

8

Eligible Passive Company & Opera ng Company The EPC is the borrower and they lease the land & building to the OC. The OC is the

business en ty genera ng revenue to pay the bills.

Does there have to be and EPC/OC rela onship? ‐ No


Who has to personally guarantee the loan? ‐ Anyone who owns 20% or more of the EPC and/or OC.

Does the EPC and OC have to have mirrored ownership? ‐ No

9

SBA 504 Underwri ng Criteria Job Crea on or Reten on—Mostly waived in our area

Does the project cash flow? Projec on based deals are okay (expansion or start‐up) SBA normally just takes the subject collateral as collateral.

What kind of extra paperwork is needed?

SBA 504 Applica on—Signature Only SBA Form 912—Statement of Personal History SBA Form 413—Personal Financial Statement

** Takes about an extra 10 minutes to complete **


10

How Long Does It Take To Get Approval? SCED Loan Commi ee SBA 504 Authoriza on Appraisal Approval

Environmental Approval

What are the fees associated with the SBA 504?

Approximately 2.2% of SBA loan plus $2,500 (financed into SBA loan)

Borrower pays $750 a orney opinion fee & $55 tax serv. Lender (you) to pay a 50 basis point fee on the permanent (your) por on of the loan


11

How to Find Me Ryan Richardson

Loan Program Manager 530‐225‐2760 x206 Office

530‐722‐5726 Cell—Lender’s Hotline [email protected]

scedd.org facebook.com/sced504 Twi er.com/SCED504

linkedin.com/company/superior‐california‐economic‐development/


4 uses of sba 504 loan program

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