SBA7a Program Overview
SBA Loan Eligibility:
Most For-Profit Small Businesses, including manufacturers, wholesalers, retailers and service businesses, as well as independent or franchise businesses are eligible for 7(a) loans.
Loan Qualifications:
- Retail & service businesses with 3-year average sales not exceeding $6.5 million to $32.5 million
- Wholesale businesses with up to 100 employees
- Manufacturers with employees up to 500
Regent Bank SBA 7(a) Loan Size:
$50,000 - $2,000,000
Use of proceeds:
- Commercial real estate (purchase, construction or renovation)
- Business acquisition
- Machinery, equipment, furniture or fixtures
- Leasehold improvements
- Working CapitalStart-up (franchise, professional business/practice)
- Refinance real estate
Terms:
- Up to 25 years for real estate purchases
- Up to 10 years for business acquisitions (without real estate)
- Up to 10 years on franchise start-ups (without real estate)
Down Payments:
- As little as 10% for commercial real estate purchases
- Business acquisitions as low as 15%
- Business start-ups from 15% (franchise, professional business/practice)
- As little as 0% for most refinance
SBA 504 Program Overview
What is the 504 Loan Program?
- The SBA 504 Loan program is a powerful economic development loan program that offers small businesses another avenue for business financing, while promoting business growth, and job creation. As of February 15, 2012, the $50 Billion in 504 loans has created over 2 million jobs. This program is a proven success and win-win-win for the small business, the community and participating lenders.
- The 504 Loan Program provides approved small businesses with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization.
504 Loan Structure
504 Loans are typically structured with SBA providing 40% of the total project costs, a participating lender covering up to 50% of the total project costs, and the borrower contributing10% of the project costs. Under certain circumstances, a borrower may be required to contribute up to 20% of the total project costs.
An example of how a typical 504 loan is structured follows:
- Total 504 projects costs for a $1,000,000 project may include the following (eligibility requirements apply to the 504 portion of the project as well as the participating lending portion):
- Building Purchase
- Land
- Renovation
- Furniture and Equipment
- Soft Costs
- Total $1,000,000
- Loan Structure
- $500,000, 1stlien with bank (loan obtained from Regent Bank covering up to 50% of the total project cost)
- $400,000, 2ndlien with 504 loan, 20 year, fixed rate (funded through an SBA-guaranteed debenture, covering up to 40% of the total project cost)
- $100,000, borrower contribution (contribution from the borrower of at least 10% of the total project cost/)
How 504 Loan Funds May Be Used
The use of proceeds from 504 Loans must be used for fixed assets (and certain soft costs), including:
- The purchase of existing buildings;
- The purchase of land and land improvements, including grading, street improvements, utilities, parking lots and landscaping;
- The construction of new facilities or modernizing, renovating or converting existing facilities;
- The purchase of long-term machinery ; or
- The refinancing of debt in connection with an expansion of the business through new or renovated facilities or equipment.
504 Loan Benefits for the Small Business
The 504 Loan program offers small businesses both immediate and long-term benefits so business owners can focus on growing their business. Some of the top-level benefits include:
- 90% financing;
- Longer loan amortizations, no balloon payments;
- Fixed-rate interest rates; and
- Savings that result in improved cash flow for small businesses.
504 Loan Eligibility
To be eligible for a 504 Loan, your business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, a business qualifies if it has a tangible net worth not more than $15 million, and an average net income of $5 million or less after federal income taxes for the preceding two years prior to application.
Loans cannot be made to businesses engaged in nonprofit, passive or speculative activities. For additional information on eligibility criteria and loan application requirements, small business and lenders are encouraged to contact a Certified Development Company in their area.
504 Loan Specifics
- Maximum Loan Amount (Debenture)
- While there is no maximum project size, the maximum SBA loan amount (debenture) is $5 million. Small manufacturers or specific types of energy projects (as described in the energy project section) may qualify for a $5.5 million debenture. Generally, a business must create or retain one job for every $65,000 guaranteed by the SBA. Small manufacturers must create or retain a ratio of one job for every $100,000. As an alternative to job creation or retention, your business may qualify if it meets a community development or public policy goal as long as the CDC maintains its portfolio job average requirements.
