Unlock Growth Opportunities for Your Clients
Is your business client planning to acquire a facility or capital equipment? Are they planning to acquire or expand their business? If so, the 504 Loan Program might be the ideal solution for them.
Through the 504 Loan Program, you can provide your small business clients with loans at competitive interest rates typically reserved for much larger enterprises. These loans not only help you manage risk more effectively but also enable you to offer additional products and services as your clients’ businesses expand.
504 Loans – Advantages
Borrower
- Save money with up to 90% financing
- Manage cash flow with competitive long-term fixed rates up to 25 years
- Save time with quick loan approval and full closing & servicing support
1st Trust Lender
- Use own documents / process
- No ongoing SBA reporting / fees
- Expand product offerings with up to 90% financing and lending to higher-risk industries
- Possible Community Reinvestment Act (CRA) credit
Broker
- Expand pool of qualified buyers
- Increase income / make the sale
- Satisfied buyer
Application Package / Approval Timing
Needed from Borrower
- Business tax returns
- Projections (if required)
- Personal financial statements and tax returns for owners
- History / description of business / owners’ resumes
- Cost documentation – purchase contract or letter of intent, construction / renovation estimates
Process
- Application checklist or Apply Online Here
- With a complete application package, approximately 30 days (depending on the complexity of the transaction)
Eligible Project Costs
- Owner occupied = 51% occupied by the business; 60% for new construction
- Project sizes range from $150,000 to as large as $25 million
- Project costs include:
- Real estate acquisition (existing building or land)
- Construction or renovation
- Furniture, fixtures & equipment
- Soft costs and professional fees
- Debt refinancing
- Down payment is typically 10% of the project costs
- 15% down if start-up business or special use real estate
- 20% down if start-up business and special use real estate
Business Finance Group
also serves Small Business Owners
and Existing Borrowers
FAQs
What companies are eligible for the 504 Loan?
For-profit corporations, partnerships, proprietorships, and businesses whose net worth does not exceed $20 million and after-tax profits (net) average less than $6.5 million during the previous two years.
Are non-profit companies eligible for the 504 program?
No, non-profit institutions are not eligible under the 504 program. Lending or investment firms, rental property held primarily for sale, or investment or speculation properties are also not eligible.
What are the appraisal requirements for an SBA loan?
SBA will not accept a restricted appraisal, and at least two valuation methods are required. Appraisals must be addressed to include Business Finance Group and the U.S. Small Business Administration.
Appraisers must meet certain qualifications, and appraisals may need to meet specified industry standards.
For projects with substantial construction or renovation, a letter from an architect or appraiser is required to state that the project was substantially completed according to plans.
What are the environmental requirements for an SBA loan?
A record search risk assessment, transaction screen, or Phase 1 environmental report may be required.
Does the small business have to create a required number of jobs?
Yes, but SBA allows small businesses to meet other economic development criteria if the job creation does not meet the standards.
Is there a minimum project size?
Yes, the minimum project size is $125,000.
When is a commercial mortgage considered eligible for refinancing under the new rules?
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- The loan must have been funded at least 6 months ago
- 75% of the loan proceeds must have been used to acquire real estate or equipment
- The property must be at least 51% owner-occupied
- The loan CAN be a federally guaranteed loan (an SBA 7a, 504, first trust to a 504, or a USDA loan)
Can a bank refinance its own conventional loan through the new 504 refinancing program?
Yes! The lender must provide the payment history of the loan and must certify that it does not know of any default or indication of a pending default.