• Industrial companies that may have capacity or efficiency limitations or need to install new equipment at their current facility. May include industries such as commercial printers, machine shops, freights & transport, wholesalers, food distributors, and manufacturers.
• Office buildings and condos that may need a substantial build-out and/or furnishings such as doctors, dentists, chiropractors, physical therapists, accountants, lawyers, architects, graphic designers, etc.
• Retail companies such as motels, restaurants, car washes, farmer’s markets, boutiques, auto repair shops, gas stations, and convenience stores.

 

Most small businesses qualify for the 504 Loan Program.  The business must:

• Be operating a for-profit business
• Be organized as a corporation, sole proprietorship, partnership, LLC, etc.
• Be located in the U.S.
• Have a tangible net worth of less than $20 million and profit after taxes of less than $6.5 million (including affiliates)
• Have a successful track record and growth potential
• Occupy majority of project property (or owner-occupied property)

Projects that qualify must, according to SBA guidelines, promote economic development, which generally means the creation or retention of jobs.

Yes. Soft costs (e.g. appraisals, environmental, construction interest, closing costs, etc.) can be financed into the 504 loan, which allows small businesses to preserve working capital.

Borrower Closing Costs:
Borrower is responsible for paying for closing items, including, but not limited to, credit reports, title work, recording and search fees.  Growth Corp will charge the borrower 1% of the 504 loan amount, with a minimum of $2,500, to cover these costs upon loan approval and refund any balance at funding.

504 loans must be prepaid in full and there is no penalty if pre-payment occurs in the second half of the term (e.g., years 11-20 for a 20 year loan).  During the first half of the loan term, the pre-payment penalty declines over time, beginning at one year’s interest.

With the 504 Loan Program, lenders will generally process their loan as they would with any other

• Provide the interim funding until the deed is recorded and 504 bonds are sold
• The bank’s term of loan (commitment) must be ½ of Growth Corp’s bond, but no less than seven years (equipment) or ten years (real estate).
  o   Usually a 10-year commitment on real estate
  o   Likely 5-year adjustment (but can be floating or fixed)
  o   Amortization is usually 20-25 years
• Bank gets first lien on all project assets
• Bank’s loan cannot be cross collateralized with any debts
• Advance is always based on the project costs
  o   Appraisal usually comes in at or around 90% of land and building cost
• For changes of ownership, project costs need to be equal or less than the appraised value.
• Bank is asked to provide copies of its own loan documents

Recipient Information
The appraisal report must be addressed to and list within the body of the report as an intended user: U.S. Small Business Administration (SBA). A letter of redirection will not be sufficient. SBGC and SBA should be identified as follows:

Format
The SBA requires a Complete Appraisal for real estate projects $250,000 or greater.   Projects $1,000,000 or greater require a State Certified Appraiser.  At a minimum, both the “cost” and “comparable sales” valuations are to be used to determine the fair market value of the property.  The appraisal must be in compliance with USPAP and include the appraiser’s license, or certificate, and experience.  If appraisal contains an enterprise or going concern value, the appraiser must allocate separate values for each component of the transaction i.e. land, building, equipment, intangibles, etc.  For projects involving substantial renovations or construction, the SBA requires the appraisal to be prepared on an “as-completed” basis. Upon completion of the renovations, the appraiser will be required to attest that the cost and specifications of improvements originally presented have been completed. The report cannot be addressed to the buyer or seller.

Timing
Please send the appraisal report to SBGC as soon as it is completed. SBGC and the SBA each need to review and approve the report. The appraisal report must be dated no earlier than one year from the date of the “SBA Authorization”. If the report is older than one year, an update will be required prior to the closing of the SBGC/SBA loan.

Delivery
SBGC prefers to receive the report via email as an Adobe PDF file. If an electronic version is not available, please overnight a hard copy of the report to SBGC’s Springfield office at 2401 West White Oaks Drive, Springfield, IL 62704-7423.

If you have any questions or concerns, please do not hesitate to contact our Closing Department.

SBA requires an assessment of the environmental risk on all commercial property within one year of SBA loan approval. The minimum that a company can do is an Environmental Questionnaire along with a Record Search Risk Assessment (RSRA) performed by a professional environmental firm.
• If the property is determined to be an elevated risk due to either historic usage of the property, or a high risk industry on a neighboring property that might lead to contamination on the property, a Phase I must be ordered.
• The Phase I must recommend that no further action is needed on the property. If further testing or remediation is recommended, the remediation must be completed as well as Phase II testing.
• The Phase II must recommend that no further action is needed on the property. If further testing or remediation is recommended, the remediation must be completed.

All Phase I and Phase II Environmental Reports will require the SBA Reliance Letter. This reliance letter lists both GROWTH CORP, and the U.S. Small Business Administration (SBA), affirms the environmental professional’s credentials, and requires proof of errors and omissions insurance in the amount of at least $1,000,000.00 per claim. The reliance letter must follow the specific format required by the SBA; no changes to the language are allowed. If the environmental company will not sign the reliance letter, GROWTH CORP/SBA will not be able to use the report(s).  Keep in mind, gas stations and convenience stores are subject to much more rigorous environmental requirements. Please contact a Loan Officer for further details.