Don’t let an appraisal shortfall derail your deal!  Newly implemented rules allow for up to a 10% shortfall in appraised value for SBA 504 Loans!

NEW SBA APPRAISAL RULES

On July 29, 2022, SBA released SBA_Proc_Notice_5000-835230 revising procedures relating to commercial real estate appraisals that CDCs must submit to the Sacramento Loan Processing Center (SLPC) for approval.

I. Changes to 504 Loan Program Commercial Real Estate Pre-Closing Appraisal Procedures Under current SBA procedures, if the appraisal that CDCs must submit for approval to the SLPC is less than 95% of the estimated value of the commercial real estate, the debenture must be reduced or the CDC must secure additional collateral or additional investment from the Borrower and/or guarantors. SBA is revising SOP 50 10 6, Part 2, Section C, Chapter 1, Paragraph E.2.b.i.b)i) (page 488) to change the requirement from 95% to 90% of the estimated value of the commercial real estate:

i) An appraisal must be submitted and approved by the SLPC (except on Delegated loans) prior to closing. If the appraisal comes in at less than 90% of the estimated value, the debenture must be reduced or, if available, the CDC must secure additional collateral or additional investment from the Borrower and/or guarantors that will be added to the required Borrower’s Contribution and will be sufficient to address the gap in value. If additional collateral or additional investment is not available, but the applicant demonstrates strong, consistent cash flow sufficient to support the debt, then the SLPC can approve the appraisal and the CDC may close the loan.

Learn More

Contact Growth Corp to learn more about the 504 Loan Program.  We are a mission-based Certified Development Company with over 30 years of experience in partnering with banks of all sizes in helping businesses access the capital they need to grow.