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 over
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;
- 35% of the project cost for a special purpose facility (restaurant, gas station, etc.);
- 35% of the project cost for a startup business (business owned less than 2 years);
- 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 25 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?
- Interim Points/Loan fee, Documentation fee, Processing fee, Appraisal, Environmental report, and Title fees
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.
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 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 basic SBA 504 eligibility requirements?
- 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, woman owned or veteran owned business (at least 51%); 3. 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).
Why should I consider an SBA 504 loan?
- The SBA loan benefits to a business include a low down payment, longer loan terms, and larger loan amounts than may be available through a conventional loan. In most cases, the borrower’s down payment will be 10% of project costs. In addition, interest rates on the SBA 504 loan will be below market and the rate will be fixed for the duration of the loan term (10 or 20 years).
How much paperwork is involved?
- The paperwork is comparable to that of any business loan. Loan officers at Lone Star work with borrowers to help them meet the requirements and complete the application process.
How long does it take to obtain approval?
- We can pre-qualify your application in three business days. We would like to meet with you to talk about the process and learn more about your business.
What fees are involved?
- SBA Fees: 2.15% of the SBA portion of the loan, plus a fee for the SBA-designated attorney to review the loan package. Bank Fees: Negotiated with bank, but typically 1% or 2% on the bank portion of the loan.
- ALL SBA fees and most bank fees are financed.
What costs can be financed?
- All costs that are directly attributable to the purchase or construction project can be financed, assuming that the appraisal is high enough.
How is my interest rate calculated, and can I lock in the rate today?
- The interest rate on the SBA loan is tied to the 5 or 10 year U.S. Treasury rate in effect on the date of funding and is fixed for the loan term. The rate cannot be locked in prior to funding.
Is my loan assumable?
- Yes, SBA 504 loans are fully assumable, upon qualification.
Can my equity injection (down payment) be borrowed?
- SBA prefers that the borrowers put at least 10% of their own funds into the project. In appropriate cases, the down payment can be borrowed, but owners must show that there is sufficient income to service the debt.
Is there a maximum project size?
- No, there is no maximum project size. For most projects, the maximum SBA loan is between $5 and $5.5 million, but there is no limit on the bank portion.
Can I refinance a building I already own?
- Yes under certain circumstances and if the project includes an expansion of the building. SBA 504 refinancing program facilitates the refinancing of non-SBA commercial real estate loans/mortgages. SBA 504-refinancing program is a limited time offer, expiring on September 27, 2012. For more details and eligibility criteria please contact a Lone star loan Officer at (713) 845-2408.
Can my down payment be other than cash?
- Yes, the down payment can also be in the form of the value of previously acquired land (which can include building, structures, and other site improvements that will be part of the project property).
Can you recommend a good bank to use?
Please Submit Inquiry Form for more information or call us at 713-845-2408