ABC Corporation has been leasing a 35,000 square-foot building for five years. A 50,000 square-foot building in the same industrial park has just come on the market for $3,000.000. ABC’s owner wants to make an offer on the building, but he does not have the 25% ($750,000) down payment that would be required with conventional financing. He discusses the options with his long-time commercial lender, who offers the perfect solution - an SBA 504 loan!
The lender explains; the bank will finance a $1,500,00 first mortgage for 50% of the cost, WIDC•Frontier will finance a $1,200,000 second mortgage SBA 504 for 40% of the cost. ABC’s down payment will only be $300,000, allowing the business to conserve working capital to expand the business.
* Loan amounts and down payments vary with project type and credit quality. 504 loan maximum is up to $5 million ($5.5 million for manufacturers). Projects up to $9 or $10 million are good candidates for the 504 Loan Program.
** Bank rates vary by lender. The 504 rate is set at the time of loan funding, approximately 90 days after loan closing, at the 10-year U.S. Treasury note rate plus estimated 2.2-4.2%.
*** Bank loan has minimum 10-year term and 10-to-20 year amortization. The 504 loan is a 20-year fully amortized loan and payments are estimated.
• Both loans use the same appraisal, Environmental Phase I Assessment or Record Search with Risk Assessment (RSwRA).
• The lender provides bridge financing until the 504 debentures are sold.
• Small business must meet conventional credit underwriting criteria.
• SBA 504 loan program fees are less than 3% of the loan amount