FAQ for SBA Loans
 
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Frequently Asked Questions

What can the SBA 504 loan program be used for?

  • Purchase land and building
  • Land acquisition, along with building construction
  • Remodeling or rehabilitation of an existing building
  • Building expansion
  • Tenant Improvements
  • Equipment acquisition (with life expectancy of 10 years or more).

What are the minimum and maximum project costs?

  • Minimum of $250,000
  • Maximum of $18,000,000- (depending on overall loan structure).

What is the maximum SBA loan amount?

  • $5,000,000 or $5,500,000 for manufacturing companies and qualified energy efficient facilities.
  • 40% of the project cost for a multi- purpose facility; or up to
  • 35% of the project cost for a special purpose facility (restaurant, gas station, etc.); or up to
  • 35% of the project cost for a startup business (business owned less than 2 years); or up to
  • 30% of the project cost for a startup business in a special purpose facility.
  • There is no maximum loan amount for the Bank financing, but the bank must finance a minimum of 50% of the project cost for a start-up business and/or a special purpose facility.

How can the Bank loan be structured?

  • Amortization - 10 to 30 years for real estate; 7 to 10 years for equipment
  • Term - minimum of 10 years for real estate; minimum of 7 years for equipment
  • Interest rate will be at a market rate (fixed or variable).

How is the SBA loan structured?

  • The SBA loan will be fully amortized for 20 years for real estate; 10 years for equipment.

What Bank Fees are eligible for financing within the program?

  • Normal bank costs such as:
  • Interim Points/Loan fee,
  • Documentation fee,
  • Processing fee,
  • Appraisal
  • Environmental report
  • Title fees
  • etc.

What are the SBA closing costs?

  • Approximately 2.7% of the SBA loan, plus legal costs ranging from $1,000 to $2,500 all of which will be financed by SBA.

How long does it take to get an approval from SBA?

  • 2 to 3 days from receipt of a complete financial package depending on SBA's backlog.
  • GSCDC is an approved PCLP Certified Development Corporation, which allows GSCDC to approve loan requests in-house based on financial strength and urgency of the transaction. Final approval could be as quick as 24 hours from receipt of a complete financial package.

What are the occupancy requirements for the business?

  • 51% if acquiring an existing facility (49% can be permanently leased out).
  • 60% for a new construction project with the potential that the business will occupy some additional space within three years, and a total of 80% within ten years. The balance of the building (20%) can be permanently leased out.

Can the subject property be owned personally and leased to the business?

  • Yes. In addition, the ownership in the real estate does not have to be the same as the ownership of the business, but a guarantee by the business and the property owners will be required.
  • In addition, the buyer/borrower does not have to have any ownership in the business, but the business and any 20% owner of the business must be a guarantor on the SBA loan.

What about an Environmental Report?

  • An environmental questionnaire is required on all properties.
  • A TSA is required on all properties, except bare land that has never been farmed.
  • A phase I environmental report may be required if additional investigation is needed.

What about an Appraisal Report?

  • The appraiser must be qualified to prepare a commercial real estate appraisal report.
  • Submissions to SBA can be subject to receipt of an appraisal report.
  • Complete appraisals are generally required. Bank staff appraisers must be pre-approved by SBA.

What are the eligibility issues of the SBA 504 program?

  • The business, plus affiliate companies, must have a net worth of less than $15.0 million.
  • The average net profit of the business and affiliates cannot be more than $5.0 million after taxes in the last two years.
  • The business must create and/or retain jobs and/or meet one of the following Public Policy goals:

1) Expansion of an Export business (at least 10% of last year sales must be from export sales),

2) Expansion of a Minority owned business (at least 51%).

3) Woman Owned (at least 51%).

4) Veteran Owned (at least 51%).

5) Subject property is located in one of the following areas:

a) Rural community; or

b) Enterprise Zone (federal or state designated); or

c) Redevelopment Area (low/moderate income area with slum and blight); or

d) Hardship community due to federal budget cutbacks (i.e. base closures).

For additional questions and/or clarification regarding the SBA 504 program, please contact us directly .

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