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 contributing10% of … The CDC/504 Loan Program provides long-term, fixed rate financing of up to $5 million for major fixed assets that promote business growth and job creation. SBA 504 Debenture $ 250,000 Borrower Equity Contribution $ 500,000 •All eligible. 2. A contingency reserve for construction cost overruns, not to exceed 10% of construction costs, may be included in the calculation of total project costs for the purposes of a 504 loan application. The SBA funds up to a maximum of 40% of the project. For the purposes of this paragraph (g), “Eligible Business Expenses” are limited to the operating expenses of the business that were incurred but not paid prior to the date of application or that will become due for payment within 18 months after the date of application. If the conventional lender goes up to 70% LTV, and the borrower brings in 11% of project costs, the total costs could theoretically be $28 million. The 504 loan is typically limited to $5 million, but the first lender can lend more than 50% of the project costs. (f) For the purposes of paragraph (e), the phrase “project involves expansion of a small business concern” includes any project that involves the acquisition, construction or improvement of land, building or equipment for use by the small business concern. The SBA -backed portion of the 504 loan will be a second mortgage, financing up to 40 percent of eligible project costs… The SBA -backed portion of the 504 loan will be a second mortgage, financing up to 40 percent of eligible project costs. Costs not directly attributable and necessary for the Project may not be paid with proceeds of the 504 loan. (7) If the qualified debt is not fully satisfied by the funding provided by the Refinancing Project, the lender of the qualified debt must take one of the following actions, or some combination thereof, to address the deficiency: (i) Forgiveness of all or part of the deficiency; (ii) Acceptance of payment by the Borrower, or. (g) SBA may approve a Refinancing Project of a qualified debt subject to the following conditions and requirements: (1) The Refinancing Project does not involve the expansion of a small business; (2) The applicant for the refinancing available under this paragraph (g) has been in operation for all of the 2 year period ending on the date of application; (3) The cost to the Federal Government of making guarantees under this subsection (g) and under section 503 of the Small Business Investment Act of 1958 (15 U.S.C. n Eligible soft costs may be rolled into the project financing n For Expansion Projects – provides debt refinancing opportunity OTHER FEES n After approval, SBA requires the lender to pay a 0.50% lender fee on the first lien amount. (iii) Acceptance of a Note executed by the Borrower for the balance, or any portion of the balance. SBA 504 funds range from $50,000 to $5,000,000 and are available to businesses in South Carolina. to eligible 504 project cost is limited to $600,000 (50% of new costs). Because up to 50 percent of total project costs are covered by a bank loan, total loan maximums are actually significantly higher. to eligible 504 project cost is limited to $600,000 (50% of new costs). For other fixed assets serving as collateral for the Refinancing Project, the lien positions of the Third Party Lender and the 504 loan may be junior to any existing liens acceptable to SBA; (9) Eligible Project costs which may be paid with the proceeds of the 504 loan are the amount used to refinance the qualified debt and other costs under § 120.882(c) and (d) and eligible administrative costs under § 120.883; (10) A CDC must limit the amount of its loans under this paragraph (g) so that, during any Federal fiscal year, the amount of the new loans approved under this paragraph (g) does not exceed 50% of the total dollar amount of the CDC's 504 loans approved (including the loans approved under this paragraph (g)) during the previous fiscal year. The remaining 10 percent will be your … SBA 504 loan program offers a low fixed rate for a subordinate mortgage loan even with fees and closing costs included in the rate. 504 Loans include a negotiated rate on the bank portion, and a below-market rate (fixed) on the SBA … The SBA funds up to a maximum of 40% of the project. A. SBA 504 loans range from $50,000 to $5.5 million but may not exceed 40% of the project size. These funds generally can be used, in conjunction with bank financing, to fund up to 90% of eligible project costs. Prepayment penalties, financing fees, and other financing costs must also be added to the amount being refinanced in calculating the percentage reduction in the new installment payment. Eligible Project costs which may be paid with the proceeds of 504 loans are: (a) Costs directly attributable to the Project including expenditures incurred by the Borrower (with its own funds or from a loan) to acquire land used in the Project, or for any other expense directly attributable to the Project, prior to applying to SBA for the 504 loan; (b) In Projects involving construction, a contingency reserve for cost … (ii) That is not subject to a guarantee by a Federal agency or department; (iii) Substantially all (85% or more) of which was for an Eligible Fixed Asset. Contact a Loan Specialist Want more information about a MN SBA loan or other small business loan? Projects. Purchase/Construction. For purposes of this paragraph, “better terms or rate of interest” may include longer maturity (but always commensurate with the assets' useful life), a lower interest rate committed on the Third Party Lender Loan or projected on the 504 loan, improved collateral conditions, or less restrictive loan covenants. (i) That was incurred not less than 2 years before the date of the application for the refinancing available under this paragraph (g). SBA 504 Loan Program Debt Refinance Overview Northwest Business Development Association. The SBA 504 Loan Program provides small businesses with fixed rate financing for the purchase of long-term fixed assets. Loans are typically structured with the borrower providing anywhere from 10-20% of the costs of the project. Borrowers. A loan in conjunction with a lending partner used to purchase commercial real estate, construct a building, purchase long-term equipment or refinance eligible business assets. Loan proceeds must not be used to refinance any personal expenses. Time 60 Minutes Difficulty Intermediate Topics covered in this course: 504 Loan Closing Course Description. Equipment acquisitions with a useful life of ten years or … This program can be taken individually or as Chapter 5 of the 504 Loan Closing Course designed for attorneys and paralegals, CDC managers and staff, and bankers and bank counsel engaged in closing SBA 504 Loans or interested in learning more about integrating the closing process with loan eligibility and packaging and loan servicing. WHO IS ELIGIBLE? For SBA 504 loans, project sizes typically range from $250,000 to $10 million or more. the project cost, from a third-party lender. PROJECT … (Alternative, higher size standards are available in certain industries, i.e., manufacturing). Fair market value refers to the current appraised value of an asset that is established by an independent appraiser in accordance with the standards established by SBA in its SOPs. 697) during the fiscal year in which the guarantee is made is zero; (4) In addition to the annual guarantee fee assessed under § 120.971(d)(2), Borrower must pay SBA a supplemental annual guarantee fee to cover the additional cost attributable to the refinancing in an amount established by SBA each fiscal year. 504 loans only require a 10 percent down payment, which lowers the upfront costs for the project. Eligible Project Costs Eligible costs for SBA 504 funding are the purchase, renovation, construction or expansion of owner-occupied real estate. These include, but are not limited to, the following: (a) Debt refinancing (other than interim financing), except as provided in § 120.882(e) and (g). 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