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 $10,000,000- (depending on overall loan structure).
What is the maximum SBA loan amount?
- $1,500,000 or $2,000,000 if the borrower meets a SBA Public Policy Goal or $4,000,000 for manufacturing companies.
- 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 2.16% 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 $8.5 million.
- The average net profit of the business and affiliates cannot be more than $3.0 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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