How We Make It Easier For You
Is your small to medium sized business customer acquiring a facility or long term machinery and equipment? If so, the 504 Loan Program might be a perfect fit for you and your clients.
The 504 Loan Program allows you to offer your small business clients loans at competitive interest rates that may be limited to larger businesses. 504 loans also offer you the ability to better manage risk and offer ancillary products and services as your clients grow their business.
504 loans offer a multitude of benefits for both the borrower and the lender making them an excellent option when considering various types of commercial mortgage financing.
The low down payment allows the business to retain working capital for operations making the transition to the new facility a safer loan for the lender. At approximately 50% loan to value, the lender reduces the risks of small business lending, leaves more capacity for other loans to the business, and reduces the risks of highly improved properties (medical projects, secured facilities, etc.).
When using the 504 loan program, small to medium sized businesses are able to capitalize on growth opportunities and access the capital markets to secure long-term, fixed-rate financing.
Recent changes to the 504 program permit some refinancing of existing commercial mortgages. Find information about the 504 Refinancing here (link to Debt Refinancing)
Realizing you have a choice in CDC’s, we work hard to ensure we take care of your needs and provide a high level of service to both you and your client. Having processed over 2,100 loans, we have expertise in SBA requirements and processes allowing for faster approvals for you and your customer. Like our lending partners, we have professional, experienced staff to manage every part of the loan process.
From the initial phases of a project through the application process (we complete and submit all SBA paperwork), to closing (we have dedicated staff and six specially trained and designated 504 attorneys), to loan servicing (we offer full time staff to handle post-closing matters), we manage the SBA details, the paperwork and the loan.
All of this means a smooth and efficient process for you and your customer. To keep loans moving quickly through the process, listed below is a tip list for all of our lenders.
- Reports: SBA requires environmental reports. Please contact us when ordering a report for specific requirements. If you do not require an environmental report, let us know and we will order one. SBA will not accept a restricted appraisal, and at least two valuation methods are required. All reports must be addressed to all parties (the bank, SBA, and Business Finance Group).
- As part of the 504 closing, we are required to verify the borrower has met the equity injection required in the Authorization. The easiest way to satisfy this requirement is to have the borrower contribute the equity injection at the bank’s closing (we can verify it from the settlement statement).
- Remember to include in your pricing the required ½% fee to SBA (that’s on the bank’s permanent loan). BFG collects the fee from the bank at the time of the 504 loan closing.
- If the bank retains liens on collateral other than the project property to secure its permanent loan, SBA requires a shared lien position on the additional collateral. This shared lien position is perfected with an Intercreditor Agreement between the bank and SBA. Any guarantors taken by the bank other than 20% or more owners must also guarantee the 504 loan.
- For ground-up construction or projects involving additions or the moving of exterior walls, the title company will usually require an as-built survey to delete the survey exception from the title policy, as SBA does not accept survey exceptions in title policies.
As a reminder, the SBA collects a ½% fee on the bank’s permanent first trust loan amount! BFG will collect that fee when the 504 loan closes. Don’t forget to include the fee in your pricing!