SBA Loans

SBA LOANS

7(a), 504 and Export

SBA loans, Owner Occupied

“Low LTV Loans”

SBA Loan vs. Bank Loan

The difference between an SBA loan and a conventional business loan from a bank is the SBA guarantee.

Contrary to what many people think, the SBA itself does not issue loans. Banks, credit unions, community development organizations, micro lending institutions, and other partners actually make the loans. For those qualifying loans, the SBA guarantees part of their repayment.

The SBA guarantee reduces the risk for lenders, allowing lenders to make loans to businesses that they would otherwise not lend to. For example, businesses with insufficient down payments or collateral for conventional bank loans may be able to qualify for a loan that’s backed by an SBA guarantee. Similarly, borrowers usually receive loans with lower interest rates and longer repayment terms than they would with conventional commercial loans.

The trade off is that the SBA, as a federal agency, is promoting certain policy agendas. This results in SBA loans having strict requirements that the borrower must meet in order to qualify for the loan, including what how the proceeds of the loan can be used. Navigating these requirements and the accompanying paperwork can be difficult and is the main reason people think of SBA loans as slow and hard to get.

At-A-Glance Comparison

 
SBA 504 LOAN

  (Commercial Real Estate & Equipment)
90% Fixed-Rate

SBA 7(a) LOAN

  (General Purpose)

  LOAN SIZE

  Minimum – $500,000
Maximum – $20 million +

  Minimum – $500,000
Maximum – $5 million

  INTEREST RATE

  • Fixed

  • Predominantly variable; some fixed-rate options

  TERMS

  • 20 years fixed on SBA 2nd
• 10 years – equipment

  •  25 years on 1st  Lien

  

  • Up to 25 years – real estate
• Up to 10 years – business acquisition, equipment
• 5 to 7 years – working capital
• Weighted average for mixed-use requests

  DOWN PAYMENT

  • 10% borrower

  • Minimum 10% borrower(often more)

   

Other Comparisons (details for lenders)

 
SBA 504 LOAN

  (Commercial Real Estate & Equipment)
90% Fixed-Rate

SBA 7(a) LOAN

  (General Purpose)

  ELIGIBLE BUSINESS SIZE

  • Business net worth not to exceed $15 million
• Average net profit after taxes for 2 consecutive years not to exceed $5 million

  • Determined by industry type
• Annual sales not to exceed range of $750,000 to $33.5 million for retail, service and agriculture
• Number of employees not to exceed range of 100 to 1,000 for wholesale and manufacturing

  LOAN STRUCTURE

  • 50% bank loan
• 40% CDC loan
• 10% borrower down payment

  • Loan structure negotiable; dependent on risk
• 10% down payment (minimum)

  PROCEEDS USE

  • Purchase existing building
• Land acquisition and ground-up construction (can include soft cost development fees)
• Expansion of existing building
• Finance building improvements
• Purchase equipment

  • Expand, acquire or start a business
• Purchase or construct real estate
• Refinance existing business debt
• Buy equipment
• Provide working capital
• Construct leasehold improvements
• Purchase inventory

  PROGRAM REQUIREMENTS

  • 51% owner occupancy for existing building
• 60% owner occupancy for new construction
• Equipment must have minimum 10-year economic life

  • 51% owner occupancy for existing building
• 60% owner occupancy for new construction
• All assets financed must be used to the direct benefit of the business

  COLLATERAL

  • Generally, project assets being financed are used as collateral
• Personal guaranties of the principal owners of 20% or more ownership are required

  • Subject assets acquired by loan proceeds
• Pledge of personal residence unless bank can justify why unnecessary
• Personal guaranties of the principal owners of 20% or more ownership are required

  FEES

  • Fees are financed in the 504 loan
• Fees are negotiated for the 50% bank loan
• Servicing fee (lowest allowed by SBA) for CDC plus a legal review fee

  • Fees can be financed in the 7a loan
• Fees vary with the size of loan paired with 504 loan
• Additional .25% charged on any loan portion above $1 million

Hours

Monday9:00AM - 6:00PM
Tuesday9:00AM - 6:00PM
Wednesday9:00AM - 6:00PM
Thursday9:00AM - 6:00PM
Friday9:00AM - 6:00PM
Saturday12:00PM - 5:00PM
SundayCLOSED

CONTACT US NOW FOR INFORMATION

Email, Give Us A Call Or Send Us A Fax

 

Email: info@ncploans.com

Toll Free: 888-640-3444

E-fax: 866-257-9609