A. The 504 loan consists of a conventional first mortgage, typically for 50 percent of the project cost, from a third-party lender. 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. Debenture soft costs are fees associated with the SBA 504 loan. Any other lien must be junior in priority to these lien positions. (11) The authority to approve the refinancing under this paragraph (g) is not delegated to PCLP CDCs; (12) The 504 loans approved under this paragraph (g) must be disbursed within 9 months after loan approval. Course Information. in compliance with the regulations governing eligible project costs, eligible administrative costs, and eligible fees as revised. FINANCING FOR PENNSYLVANIA SMALL BUSINESSES BY PENNSYLVANIA BASED … For good cause shown, SBA may authorize an increase in the percentage of Project costs covered up to 50%. Site … 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). SBA 504 loan program offers a low fixed rate for a subordinate mortgage loan even with fees and closing costs included in the rate. SBA 504 loans range from $50,000 to $5.5 million but may not exceed 40% of the project size. SBA 504 financing cannot be used to improve tenant space with specialized improvements. Our loan experts are here to help - 763.784.3337 . (2) The existing indebtedness is collateralized by fixed assets. WHAT IS AN SBA 504 LOAN? For-profit Business. SBA Loan Closings (Session 5): Project Cost, Borrower's Contribution, Fees and Use of Proceeds in SBA 504 Loans. (The only exception is if an attorney is engaged to change zoning for a property. 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. 504 loans only require a 10 percent down payment, which lowers the upfront costs for the project. For purposes of this paragraph, “substantial benefit” means that the portion of the new installment amount attributable to the debt being refinanced must be at least 10 percent less than the existing installment amount(s). Any delinquency in payment on the loan to be refinanced after approval and before debenture funding must be reported to SBA as an adverse change. The remaining 10 percent will be your … The blended rate between the lender portion and the SBA 504 loan portion makes the project … SBA 504 Loan Requirements for Borrowers, Projects, Lenders, and More. (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. Proceeds can be used for the purchase of land, building and equipment as well as finance eligible closing costs. 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 Borrower's application must include a specific description of the business expenses for which the financing is requested and an itemization of the amount of each expense. See SBA, “504 and 7(a) Loan Programs Updates,” 79 Federal Register 15642, March 21, 2014. If the Eligible Fixed Asset was originally financed through a commercial loan that would have satisfied the “substantially all” standard (the “original loan”) and that was subsequently refinanced one or more times, with the current commercial loan being the most recent refinancing, the current commercial loan will be deemed to satisfy this paragraph (iii). There are three partners in an SBA 504 loan—the borrower, a bank or other regulated lender, and a CDC. Both the CDC and the Borrower must certify in the application that the funds will be used to cover Eligible Business Expenses. SBA 504 Eligibility. SBA 504 | Use of Proceeds The information provided by these calculators is for illustrative purposes only and accuracy is not guaranteed. The default figures shown are hypothetical and may not be applicable to your individual situation. One of the most interesting things about the 504 loan program is that there is no maximum amount set. SBA 504 Eligible … More. The goal of the SBA 504 program is to create and retain jobs through long-term financing of real estate and equipment at a fixed, below-market interest rate. In order for an organization to qualify for an SBA 504 loan, their project must fall within one of these categories: Sorry, the comment form is closed at this time. Low Equity Contribution A 504 loan helps your small business conserve cash for working capital needs. 5 “Generally, a 504 loan may not exceed40 %of total Project cost plus 100 of eligible administrative costs. by Altoona Blair County Development Corp. 504 Loan . A. 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. Multiple OCs are allowed, however, all OCs making up the 51% or more occupancy must guaranty the loan. Because up to 50 percent of total project costs are covered by a bank loan, total loan maximums are actually significantly higher. Current Rates. The SBA -backed portion of the 504 loan will be a second mortgage, financing up to 40 percent of eligible project costs… The Director, Office of Financial Assistance, or his or her designee, may approve a request for extension of the disbursement period for an additional 6 months for good cause. 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. (iii) Acceptance of a Note executed by the Borrower for the balance, or any portion of the balance. The SBA 504 loan-backed portion from a CDC will act as a second mortgage, financing up to 40 percent of eligible project costs. To be eligible for an SBA 504 Loan, a small business must meet the following eligibility requirements: The business must be a for-profit, non-publicly traded company. What Are the Minimum and Maximum Amounts for an SBA 504 Loan? PCLP CDCs may not use their delegated authority to approve a loan requiring this waiver; (3) The existing indebtedness was incurred for the benefit of the small business concern for which any new Project costs are incurred. This program discusses the following topics: Eligible … A CDC can help you determine if you are eligible for an SBA 504 Loan. Bigger loans: The green 504 is a second mortgage that can be as much as $5.5 million per project. Lancaster New Era June 4 , 2008 By … If acquired within two years land will be valued at cost. Under certain circumstances, a borrower may be required to contribute up to 20% of the total project costs. While the SBA will guarantee up to $5 million for 504 loans, that only covers the CDC portion. This calculator does not have the ability to pre-qualify you for any loan program. For purposes of this section, “date of refinancing” refers to the date the 504 loan is approved by SBA. SBA portion $25,000 to $5,000,000 ($5.5 million for energy savings and small manufacturers). Borrowers. A business or other organization whose primary goal is making money (a profit), as opposed to a non profit organization which focuses a goal such as helping the community and is concerned with money only as much as necessary to keep the organization operating. Existing 7(a) and 504 loans may be refinanced under this section in accordance with SBA policies or procedures; (4) The financing will be used only for refinancing existing indebtedness or costs relating to the project financed; (5) The financing will provide a substantial benefit to the borrower when prepayment penalties, financing fees, and other financing costs are accounted for. SUBJECT: 504 Eligible Project Costs, Administrative Costs, and Fees EFFECTIVE: 11 -10 2003 SBA Information Notice No. Who is eligible for an SBA 504 loan? Rates/Terms. For certain energy-efficient projects or for projects assisting small manufacturers, the SBA 504 loan limit is $5.5 million … Eligible Fixed Assets are one or more long-term fixed assets, such as land, buildings, machinery, and equipment, acquired, constructed or improved by a small business for use in its business operations. That is, the SBA does not set a cost ceiling for your project. In addition to a cash contribution, the Borrower's contribution may be satisfied as set forth in § 120.910 or by the equity in any other fixed assets that are acceptable to SBA as collateral for the Refinancing Project, provided that there is an independent appraisal of the fair market value of the asset; (i) The portion of the Refinancing Project provided by the 504 loan and the Third Party Loan may be no more than 90% of the fair market value of the fixed assets that will serve as collateral, except that if the Borrower's application includes a request to finance the Eligible Business Expenses described in paragraph (g)(6)(ii) of this section, the portion of the Refinancing Project provided by the 504 loan and the Third Party Loan may be no more than 85% of the fair market value of the fixed assets that will serve as collateral and the Borrower may receive no more than 20% of the fair market value of the Eligible Fixed Asset(s) securing the Qualified Debt for Eligible Business Expenses; (ii) The Borrower's application may include a request to finance eligible business expenses as part of the Refinancing Project if the amount of cash funds that will be provided for the Refinancing Project exceeds the amount to be paid to the lender of the Qualified Debt. For SBA 504 loans, project sizes typically range from $250,000 to $10 million or more. (d) Repayment of interim financing including points, fees and interest. … 504 loans are available through Certified … A financial institution provides 50% of funding for project costs SBA/BLP provides a direct loan for up to 40% of financing for project costs ... To be eligible for the SBA 504 program, each business must meet the following criteria: Operate as a “for profit” business. These costs include the origination fee of 1.50%; the funding fee of ¼ of 1% and the underwriter’s fee of 1/2 of 1%. Minimum project size is $100,000. The remaining $200,000 in pre-existing debt is added to the bank’s 50% loan after the split to create a combined bank loan of $1,200,000. If the original loan was for the construction of a new building, or the acquisition, renovation, or reconstruction of an existing building, and such loan would not have satisfied the leasing policies set forth in 13 CFR 120.131 and 13 CFR 120.870(b), the current commercial loan will be deemed to satisfy these policies, provided that Borrower demonstrates compliance with 13 CFR 120.131(b) for existing buildings as of the date of application. SBA 504 – Eligible Project Costs • Land and Necessary Land Improvements • Grading • New streets, including curbs and gutters • Parking lots • Utilities • Landscaping • Building and Building … Therefore, the combined loans (conventional first and SBA second) for one project can exceed $13.3 million. HOW THIS HELPS YOU: Working in conjunction with a conventional bank the SBA 504 program allows your project to be financed with just a 10% equity injection from you. The Note is subject to any other restrictions that SBA may establish to protect its creditor position, including standby requirements; (8) The Third Party Lender must have a first lien position, and the 504 loan must have a second lien position, on all Eligible Fixed Assets securing the Refinancing Project. Debenture: is an obligation issued by a CDC and guaranteed 100 percent by SBA, the proceeds of which are used to fund a 504 loan. BLP does not guarantee any of the information obtained by this calculator. Borrower must, upon request, substantiate the use of the funds provided for business expenses through, for example, bank statements, invoices marked “paid,” cleared checks, or any other documents that demonstrate that a business obligation was satisfied with the funds provided. Such Note must be subordinate to the 504 loan if the Note and the 504 loan are secured by any of the same collateral. Eligible Project Costs Eligible costs for SBA 504 funding are the purchase, renovation, construction or expansion of owner-occupied real estate. Equipment. The Small Business Administration’s 504 Loan program is a powerful economic development program that offers small businesses, such as laundromats, another avenue for business financing, while … This calculator does not calculate the Annual Percentage Rate or Average Prime Offer Rates. The typical loan structure is the bank provides the senior secured loan at 50% of project cost; the SBA 504 loan is … The SBA 504 program provides a maximum of 40% permanent financing of eligible project costs and takes a second lien on the collateral. Project sizes range from $250,000 to $20 million. SBA will publish a notice in the Federal Register announcing the date on which the requirement of the lower Borrower contribution ended. Any unremedied delinquency after approval must be reported to SBA as an adverse change; (7) The financing under section 504 will provide better terms or rate of interest than the existing indebtedness on the date of refinancing. (b) A CDC may not use 504 loan proceeds to pay any creditor in a position to sustain a loss causing a shift to SBA … For the purposes of this paragraph (g), the terms below are defined as follows: Date of application refers to the date the 504 loan application is received by SBA. 5000-885 announced that the final rule for the Certified Development Company (CDC) 504 loan program was published on October 7, 2003 and became effective November 6, 2003. Multiple OCs are allowed, however, all OCs making up the 51% or more occupancy must guaranty the … SBA 504 loans offer 10- or 20-year fixed asset financing on up to 40% of eligible project costs to qualifying businesses. 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