Program Seedco South Eastern Development Company of Pennsylvania - PowerPoint PPT Presentation

The SBA 504 Loan Program

Seedco South Eastern Development Company of Pennsylvania  25 year old Certified Development Company (CDC) – SBA 504 Loan Program Statewide  Work with borrowers throughout the Commonwealth  Partner with many Economic Development agencies to offer the SBA 504

Typical 504 Financing Structure 50/40/10 90% Financing:  50% Private sector loan  40% 504 loan  10% Equity (*Start-up/Special Use*) Bank is in first lien position with a 50% LTV • 40% loan portion is a below market, 20 year • fixed rate Equity injection of 10% preserves working • capital

504 Benefits Lender Benefits  Blended interest rate offered to borrower  More competitive / creative financing  50% loan to value  CRA credits  No SBA documentation or reporting Borrower Benefits  90% + financing  20 year fixed rate  Below market fixed rates (SBA portion)  Working capital preservation

Eligible 504 Project Costs Land and building Related costs , which can   acquisitions include:  Acquisition-related legal New construction  expenses Building renovations/   Bridge loan points and leasehold improvements interest Major machinery and   Construction equipment with a contingency, up to 10% minimum 10 year  Professional fees economic life  Eligible soft costs Typically incurred within 9 months of application submission

504 Project Structure Purchase Price $1,000,000 Appraisal/Environmental $4,500 Interim Loan Interest $5,124 Bank Fee on Bridge $4,100 Title Insurance (Bridge/504) $2,100 Transfer Tax $10,000 Total Eligible Project $1,025,824 Bank Loan @ 50% $512,912 SBA Loan @40% $410,330 Equity @ 10% $102,582

Common 504 Loans  51% Owner Occupied Commercial/industrial buildings  Hotels/motels  Assisted living, personal care and nursing home facilities  Day care and child care facilities  Automobile and motorcycle dealerships  Gas Stations/convenience stores  Fitness centers  Restaurants  Agricultural Expansions (dairy, poultry, hog)

504 Lending Limits UP TO 40% of eligible 504 project costs: $1,500,000 maximum  $2,000,000 maximum for projects satisfying  a public policy goal $4,000,000 maximum for manufacturing  Creating (or retaining) job opportunities  $50,000 per Job  $100,000 for Manufacturing

SOP Update – 08/01/2008 Revision  Appraisal  Included on the initial engagement  Environmental  Records search with risk assessment vs. Phase I  Reliance letter  Change of ownership/Special use  Borrowed equity injection  Franchise Agreement

Stimulus – 02/17/2009 Update  Job Requirement  Increase from $50,000 to $65,000  Third Party Lender Fee  0.5% eliminated for 2009  CDC Fee  1.5% CDC fee eliminated for 2009

504 Rates & Fees  March Funding  5.6% Fixed for 20 years  Third Party Lender Fee  0.5% eliminated for 2009  CDC Fee  1.5% CDC fee eliminated for 2009  Underwriters Fee – 0.25%  Funding Fee – 0.4%

Bottlenecks  Borrower’s Team Contacts – Attorney, CPA, Insurance, etc.  Title Insurance  Life Insurance / Assignment  Organizational Documents  Construction / Sub-Contractors  Lien Waivers  Personal History (Form 912)  Franchise agreement / Other contracts Communication - Try to address any special circumstance at the initial review of the project