| SBA 504:
The Money That Makes America Work|
||The Program - SBA 504:
- Commercial loans for healthy expanding businesses.
- Fixed rate below market financing.
- Financing for fixed assets: real estate, machinery and equipment.
- Term of 20 years for real estate, 10 years for machinery and equipment.
||Advantages Of 504:
- Long term below market fixed rate financing.
- Equity requirement of 10% or more for customer.
- Bank can provide 90% financing for customer.
- Bank can participate in larger transactions.
- Bank enjoys first lien, lending 50% of value at market rate and fees.
- For profit businesses.
- Tangible net worth not to exceed $7 million.
- Net profit after taxes not to exceed $2.5 million during previous
- In labor surplus areas, these ceilings increased to $8.75 million
and $3.25 million, respectively.
||Eligible Use of Funds:
- Purchase land, purchase or construct building.
- Modernize, renovate or improve building.
- Purchase machinery and equipment with 10 year useful life.
- Soft costs.
- Total project size $125,000 minimum.
- No maximum total project size.
- Job creation requirements one per $50,000 in 504 funds or meeting
other economic development goals. For loans to small manufacturers,
the job creation requirements may be one per $100,000 in loan funds.
- Maximum 504 loan size $1,500,000 or $2,000,000 under the following
Public Policy Goals:
- Business district
- Minority enterprise
- Rural development
- Adverse impact of Federal fund reductions
- Upgrading for health, safety, or environmental reasons
- Women-Owned Businesses
- Veteran-Owned Businesses
||Ineligible Borrowers Include:
- Not-for-profit organizations
- Speculative development.
- Lending institutions, insurance companies.
- Gambling concerns and private clubs.
||Ineligible Use of Funds:
- Working capital.
- Rolling stock.
- Construction period financing.
||The Product - SBA 504 Loan:
- Rate: Below market fixed rates for a term of up to 20 years.
- Structure: Healthy Expanding Business
- 50% Bank in 1st Lien
- 40% 504 in 2nd Lien
- 10% Equity
- Start-up or Special Purpose Building will require 15% equity.
- Start-up and Special Purpose Building will require 20% equity.
||Private Lander Participation:
- Minimum 10 year term on real estate, minimum 7 year term on machinery and equipment.
- Market rate and fees.
- Covenants established by lender.
- One time 1/2% fee to SBA on lender's participation, can be added to interest rate in interim loan.
- SBA Authorization 30-40 days after lender commitment.
- Mid-Atlantic packages and facilitates approval.
- Mid-Atlantic can structure using other available public financing sources.
||Fees for Small Business Owner:
- Processing Fee: 1.50% of 504 loan.
- Debenture Fees: 1.15% of 504 loan.
- All of the fees can be financed.
- Personal guaranty by 20% or greater owner.
- Key man life insurance, especially on sole proprietor.
- Anthony "Tony" Hamlett, President
- or ask to speak to a loan officer
MID-ATLANTIC BUSINESS FINANCE COMPANY
N Crain Highway
Glen Burnie MD 21061
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