Program Seedco South Eastern Development Company of Pennsylvania - - PowerPoint PPT Presentation

The SBA 504 Loan Program

• 25 year old Certified Development

Company (CDC) – SBA 504 Loan Program Statewide

• Work with borrowers throughout

the Commonwealth

• Partner with many Economic

Development agencies to offer the SBA 504

Seedco

South Eastern Development Company of Pennsylvania

Typical 504 Financing Structure

50/40/10 90% Financing:

• 50% Private sector loan
• 40% 504 loan
• 10% Equity (*Start-up/Special Use*)
• Bank is in first lien position with a 50% LTV
• 40% loan portion is a below market, 20 year

fixed rate

• Equity injection of 10% preserves working

capital

504 Benefits

Lender Benefits

 Blended interest rate offered to borrower  More competitive / creative financing  50% loan to value  CRA credits  No SBA documentation or reporting

Borrower Benefits

 90% + financing  20 year fixed rate  Below market fixed rates (SBA portion)  Working capital preservation

Eligible 504 Project Costs

• Land and building

acquisitions

• New construction
• Building renovations/

leasehold improvements

• Major machinery and

equipment with a minimum 10 year economic life

• Related costs, which can

include:

 Acquisition-related legal

expenses

 Bridge loan points and

interest

 Construction

contingency, up to 10%

 Professional fees  Eligible soft costs

Typically incurred within 9 months of application submission

504 Project Structure

Purchase Price $1,000,000 Appraisal/Environmental $4,500 Interim Loan Interest $5,124 Bank Fee on Bridge $4,100 Title Insurance (Bridge/504) $2,100 Transfer Tax $10,000 Total Eligible Project $1,025,824 Bank Loan @ 50% $512,912 SBA Loan @40% $410,330 Equity @ 10% $102,582

Common 504 Loans

 51% Owner Occupied Commercial/industrial

buildings

 Hotels/motels  Assisted living, personal care and nursing home

facilities

 Day care and child care facilities  Automobile and motorcycle dealerships  Gas Stations/convenience stores  Fitness centers  Restaurants  Agricultural Expansions (dairy, poultry, hog)

504 Lending Limits

UP TO 40% of eligible 504 project costs:



$1,500,000 maximum



$2,000,000 maximum for projects satisfying a public policy goal



$4,000,000 maximum for manufacturing Creating (or retaining) job opportunities

 $50,000 per Job  $100,000 for Manufacturing

SOP Update – 08/01/2008 Revision

• Appraisal

 Included on the initial engagement

 Environmental

• Records search with risk assessment vs. Phase I
• Reliance letter
• Change of ownership/Special use
• Borrowed equity injection
• Franchise Agreement

Stimulus – 02/17/2009 Update

• Job Requirement

 Increase from $50,000 to $65,000

• Third Party Lender Fee
• 0.5% eliminated for 2009
• CDC Fee
• 1.5% CDC fee eliminated for 2009

504 Rates & Fees

• March Funding

 5.6% Fixed for 20 years

• Third Party Lender Fee
• 0.5% eliminated for 2009
• CDC Fee
• 1.5% CDC fee eliminated for 2009
• Underwriters Fee – 0.25%
• Funding Fee – 0.4%

Bottlenecks

• Borrower’s Team Contacts

– Attorney, CPA, Insurance, etc.

• Title Insurance
• Life Insurance / Assignment
• Organizational Documents
• Construction / Sub-Contractors
• Lien Waivers
• Personal History (Form 912)
• Franchise agreement / Other contracts

Communication - Try to address any special circumstance at the initial review of the project