REsource Capital- - Real estate financing for growing businesses

Typically, the small business contributes 10% of the project costs. If the business is a startup (when Management has less than 2 years of ownership experience), the down payment increases to 15%. If the loan will finance a single use property, the down payment increases to 15%. If the project is for a single use property being financed for a start-up business, the down payment increases to 20%.

The applicant must be a for-profit business whose business net worth is less than $15 million and whose after tax income is $5 million or less, on average, for the last two years.

504 financing is used to acquire, construct, renovate or expand an owner occupied facility. It can also be used to acquire major machinery and equipment with a useful life of at least 10 years.

In addition to the acquisition and construction costs, the "soft costs" (appraisals, environmental, construction interest, closing costs, etc.) can also be financed in the 504 loan. Attorney fees cannot be financed. This allows the business to preserve working capital that will be needed in the larger facility.

Project sizes typically range from $200,000 to $14,000,000 with the 504 loan size ranging from $80,000 to $5,000,000 (up to $5,500,000 for energy projects/manufacturers meeting SBA defined NAICS codes). The first mortgage loan can exceed 50% of the project total, which enables larger companies to take advantage of the benefits of the 504 loan up to the maximum amount allowed.

The first trust lender processes its loan as it would any conventional loan request. SEM REsource Capital and the bank can work together to collect documents from the borrower, and SEM REsource Capital can share its credit underwriting with the bank. Once approved, the bank will utilize its own loan documents to close their loan.

Appraisals and environmental reports should be ordered naming all parties (the bank, SEM REsource Capital, and the SBA) with copies provided to SEM REsource Capital as received.

Generally, the bank provides "interim" or "bridge" financing while SEM REsource Capital's 504 loan is a permanent take-out loan. Thus, the bank would provide the full 90% financing up front during the construction, renovation, or closing period based on the 504 commitment to take out the applicable portion of the interim financing once the business occupies the property.

When the 504 loan closes, the bank will be asked to provide copies of its loan documents, provide copies of its draw schedules (for construction or renovation projects), certify that there has been no adverse change in the borrower's financial condition, and agree to various other provisions such as to provide 60 days advance written notice of default prior to foreclosure proceedings.

At SEM REsource Capital, we strive to be the 504 expert and we ensure that all SBA requirements are met so our lending partners can focus on the bank portion of the loan without having to memorize all of SBA 504 Loan intricacies.

Advantages for commercial lenders

• Reduce risk on projects - resulting in 50% loan-to-value-ratio
• Fixed or variable rate option on bank loan
• Meets economic development and community reinvestment goals
• Keeps the bank competitive by offering attractive financing for its clients

Advantages for small business

• Low down payment - helps conserve valuable operating capital
• Below market fixed rate - avoids future rate fluctuations, keeps costs of loan low
• Long-term - brings debt service in line with cash flow generated by business