FAQs for Borrowers and Lenders
Several frequently asked questions for both borrowers and lenders about SBA 504 loans are listed below with the answers.
How long does the SBA loan process take?
BCDC consistently receives the SBA’s highest ranking on efficiency and turnaround time in the industry. We will typically have the SBA approval within 2 weeks upon receipt of a complete application. Buyers should give themselves 60 days to close from execution of the purchase and sales agreement. This should allow enough time for the loan application process, appraisal and environmental review, and preparation of closing documents.
Can Equity in land be used for the borrower injection?
Yes; if the land has been owned for less than 2 years, we use the actual cost of the land towards the borrower injection. If the land has been owned for more than two years, we use the appraised value towards the injection.
What soft costs are allowed in the SBA 504 Total Project Costs?
Appraisals, Environmental Reports, engineering, architectural, moving costs for heavy machinery and equipment, interim interest on the bridge/construction loan, points on the interim loan.
How is the owner occupancy portion of a property determined?
In additional to the space that the small business will occupy, the SBA will give consideration towards common area, shared bathrooms, basement, storage, and exterior space in some cases.
What is the minimum and maximum amount that can be borrowed?
The minimum amount on the SBA 504 2nd mortgage is $25,000, which represents a $65,000 purchase. The maximum allowed on the 2nd mortgage is $5,000,000 which allows for $13,000,000 + total project cost. Bank LTV can be higher than 50% to accommodate larger projects. Maximum exposure is an aggregate amount of any existing outstanding SBA loans in addition to the new request. Green Energy Projects and Manufacturing companies can qualify for $5,500,000 per project.
What types of businesses are eligible?
Most for profit businesses are eligible for SBA financing. There are only a few exceptions including business that promote religion, sexually explicit materials, gambling facilities, and a few others.
What are the advantages to the SBA 504 loan Program?
Low down payment preserves working capital, long term below market fixed rates, fixed occupancy costs, tax advantages, building equity in real estate.
Are Partner Buyouts eligible?
Yes, under certain instances. Please contact Eberto Ranero for specifics.
Are businesses owned by non US Citizens eligible for SBA 504 financing?
Yes, as long as they are legal permanent resident aliens and we can verify their status with USCIS, they are eligible for SBA financing. For businesses owned by non US Citizens, or Non LPR, They may be eligible as long as a key employee of the business is willing to provide a personal guarantee and is an LPR or US Citizen.
Does the ownership of the real estate holding entity have to match the ownership of the operating company?