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Lending Partners FAQs

WHAT IS THE FINANCING STRUCTURE?

GCDC provides up to 40% of the total project cost with an affordable, fully amortized loan.  The participating lender normally finances 50% of the cost.  To fund the 504 portion of the loan, GCDC issues an Authorization for Debenture Guarantee that is fully guaranteed by the SBA and sold on the private bond market.  GCDC will prepare all the necessary paperwork to obtain an SBA loan approval.

%

Project Cost

Source of Funds

Interest Rate

Amortization

Collateral

50%

$1,625,000

Private Lender

Fixed or Variable

15 to 30 yrs

1st Mortgage

40%

$1,300,000

GCDC

Rate: 7.74% Fixed

20 yrs Fully Amortized

2nd Mortgage

10%*

$325,000

Business Borrower

Total

$3,250,000

* New Business OR Special Purpose Building requires 15% equity.
New Business AND Special Purpose Building requires 20% equity.

WHAT ARE THE EQUITY REQUIREMENTS?

A minimum down payment of 10% is required for most 504 projects. However, a 15% down payment is necessary when a business is a start-up enterprise (less than 2 years old) or when the project property is considered special-purpose. A 20% down payment is required in situations involving both a start-up business and a special-purpose property.

WHAT BUSINESSES ARE ELIGIBLE?

An SBA 504 loan is for businesses that are:

  • An operating, for-profit business, organized as a Corporation, Sole Proprietorship, Partnership, LLC, etc.
  • Located within the U.S.
  • With affiliates, have a tangible net worth of less than $15 million and profit after tax of less than $5 million
  • Must occupy at least 51% of the subject property for existing buildings.

Once the basic eligibility criteria are met, we'll evaluate the credit-worthiness of your business.

Still not sure if you qualify? Feel free to call us. We're more than happy to answer all your questions.

WHAT PROJECTS ARE ELIGIBLE?  WHAT ARE THE COSTS?

The SBA 504 Loan Program is for fixed-asset financing. Proceeds from an SBA 504 can be used for the following:

  • Purchase of Land and Improvements, including existing buildings, modernizing, renovating, or converting existing facilities
  • New construction
  • Refinance
  • Purchase of Build-to-Suit Facilities
  • Purchase of New Long-Term Machinery and Equipment (with a useful greater than 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.  When your loan closes and your SBA 504 loan is funded, you'll incur various fees totaling approximately 1% of the financing package. These fees are financed within the SBA loan proceeds so they are NOT OUT-OF-POCKET expenses.

WHAT ARE THE OCCUPANCY REQUIREMENTS?

Occupancy Requirements

Financing of:

Initial Occupancy

Occupancy After 10 Years

Allowable Permanent Lease

Existing Building

51%

51%

49%

New Construction

60%

80%

20%

WHAT IS THE PROJECT SIZE RANGE?

Project sizes range from $162,500 to $14,000,000 with the 504 loan size ranging from $65,000 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.

WHAT ARE THE ADVANTAGES OF THE SBA 504 PROGRAM?

The SBA 504 program has many advantages for business owners. Perhaps the most immediate are the low down payment and lower interest rate. With a minimum of 10% down, your customers can get the financing they need to purchase or construct a new facility or buy long-term equipment without having to go deeply out of pocket. As the bank, you won't carry the risk of the entire loan - just 50% as the first trust deed lender. The 504 program funds 40% of the project cost (with the second deed of trust at below-market fixed interest rate).

  • 10% down payment
  • Below-market fixed interest rate
  • Fully amortizing 20-year loan
  • Bank interest rate on the first can be lower than conventional financing

Advantages to using the SBA 504 loan

Lower interest rates and a fully amortized loan allow your customers to keep their working capital for future growth and expansion. Not only are there tax advantages, but a real estate purchase with a fixed rate loan results in an overall lower and predictable occupancy cost. And of course, their property will increase in value, allowing them to realize appreciation in real estate ownership.

  • Tax advantages
  • Fixed occupancy costs
  • Appreciation in real estate purchased

Why partner with GCDC for SBA 504 loans?

All the paperwork of a SBA 504 loan can overwhelm borrowers, and even some lenders. As a leader in providing SBA 504 financing, GCDC has the experience to make the entire process simple and easy. We're with you every step of the way to answer your questions, get your customer pre-qualified in as few as 48 hours, all without a loan packaging deposit. Think of us as your personalized team of lending professionals.