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Briana's Story

SBA 504 loan

Lender's Guide

 

Briana's story is an example scenario of a successful SBA 504 loan describing a lender's partnership with SCKEDD. If you are a lender and have any questions, we encourage you to contact our lending team. 

 

Briana had built her manufacturing business to the point that her team had outgrown their current facility. They needed land and equipment.

 

The challenge was that she was growing so rapidly, she needed to preserve cash for future growth surges. If she secured a loan he needed both a low down payment and a low-interest rate to stay as liquid as possible.

 

Briana approached her local bank to seek funding. Briana’s lender reached out to SCKEDD – a local non- profit lender – and asked them to look at backing the project with an SBA 504 loan. Briana began working with the bank to get the loan to SCKEDD to package and send to the SBA. Briana was approved for an SBA 504 loan that allowed her to purchase and renovate her new business location.

 

To keep her business on the path to success, Briana meets a few times per year with her banker and the team at SCKEDD.

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SBA 504 loan - Lender's Guide

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Benefits for lenders

  • 1st lien position and low Loan-to-Value strengthens private lender’s loan portfolio

  • Low injection requirement preserves borrower’s working capital

  • Fixed interest rate helps lenders compete for more business

  • Offers creative financing to differentiate your lending institution in the marketplace

  • Secondary market provides additional income opportunities

  • CRA Credits on SBA portion of loan

  • Eligible soft costs may be rolled into the project financing

 

Sample projects

  • Office Buildings

  • Restaurants

  • Manufacturers

  • Hotels/Motels

  • Medical/Dental Facilities

  • Heavy Machinery & Equipment

  • Suppliers/Wholesalers

 

Eligible uses

  • Land

  • Acquisition of Existing Building

  • New Construction

  • Fixed Assets from Business Acquisition

  • Building Expansion/Renovation

  • Long-Term Equipment

  • Professional Fees

  • Lender’s Interim Points & Interest

  • Debt Refinance (Expansion Projects - debt refi may not exceed 50% of the new expansion costs)

 

Occupancy

  • 51% for existing facilities/buildings (renovations & expansions are eligible)

  • 60% for Ground-Up Construction Projects (must occupy 80% within ten years)

 

Interest rates and terms

  • Fixed-Rate - based on Treasury Rates

  • Fully-Amortized over life of loan (No Balloon)

  • Real Estate - may be 10, 20, or 25-year term

  • Machinery & Equipment-may be 10 or 20-year term (based on useful life)

 

Other fees

  • After approval, SBA requires the lender to pay a 0.50% lender fee on the first lien amount. 

 

Benefits for borrowers

  • Finance up to 40% of the project at a long-term, fixed-rate

  • Lower equity contribution, as little as 10% of project to preserve working capital

  • Decreased risk for lenders

  • Eligible soft costs may be rolled into the project financing

  • For Expansion Projects - provides debt refinancing opportunity

 

Who can qualify?

  • Most for-profit, owner-occupied small businesses in Kansas

  • Net worth less than $15.0 million

  • Net profit after tax (2 year average) of no more than

  • $5 million (including affiliates)

  • Manufacturers with 500 or less employees (including affiliates)

 

Borrower’s injection

  • 10% in most cases

  • 15% for Start-Up Businesses (less than two years in operation) or Special Purpose Properties

  • 20% if the project is both a Start-Up and Special Purpose Property

  • Equipment-Only loans may qualify with 10% or 15% injections

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