Common Questions
Here are some answers to common questions about the SBA 504 Loan Program through Enterprise Development:
1. How much of my own money do I need to bring into the project?
Answer: For existing businesses, the equity (cash) requirement is 10% of the project cost. If a building is involved in the project and it is special-purpose in nature, an additional 5% equity (cash) is required. For start-ups or businesses in operation for less than two years, the equity (cash) requirement is 15% of the project cost. If a building is involved in the project and it is special-purpose in nature, an additional 5% equity (cash) is required. In some cases, existing equity in real estate can be used toward the borrower's participation.
2. Can the SBA 504 program provide 100% financing for my project?
Answer: No. The SBA 504 program from Enterprise Development can provide up to 40% of a project's financing with the participating lender providing up to 50%. Depending on the details, the borrower is responsible for a minimum of 10%. For start-up businesses or those in operation for less than two years, the maximum participation is 35%, while the participating lender and the borrower contribute the balance. If real estate is involved in the project that is special-purpose in nature, the SBA 504 loan will be reduced by 5%.
3. What is the typical loan amount through the SBA 504 loan program?
Answer: Historically, the average size of an SBA 504 loan through Enterprise Development is around $500,000. The minimum loan amount is $65,000 and the maximum loan amount is $5 million ($5.5 million for Public Policy Goal projects).
4. How long is the term of the SBA 504 loan?
Answer: For equipment with a useful life of at least 10 years, the term of the SBA 504 loan would be 10 years. For real estate projects the term of the SBA 504 loan would be either 20 or 25 years. In some cases shorter-term fixed assets may be included in the loan.
5. What is the interest rate for the SBA 504 loan?
Answer: The interest rate for the 10-year, 20-year and 25-year SBA 504 loan is based on a spread above the rate of 5 year or 10 year U.S. Treasury Bonds, respectively. The interest rates are not set until the SBA loan closes, then it becomes fixed for the life of the loan. Check here for the latest rates.
6. What types of businesses have you financed?
Answer: Enterprise Development has financed the land, building and equipment for almost every business imaginable. Some of those market segments include: Advertising and Marketing Agencies, Automobile Repair Shops, Car Washes, Screen Printing, Day Care, Funeral Homes, Restaurants, Equipment Rental, Retail Stores, Convenience Stores, Hotels, Machine Shops, Marinas and Resorts, Fitness and Recreational Centers, Urgent Cares, Vehicle Dealers, Doctor's and Dentist's Offices, Law Offices, Manufacturers and Supermarkets.
7. What are the fees associate with an SBA 504 loan? Is it a cost effective option for my project?
Answer: There are two types of fees - upfront fees that are financed in the SBA loan amount and on-going fees, which are included in the effective interest rates posted on our home page. These fees pay for the costs of the program and everyone who participates in the program contributes to ensure that the program will continue to be available to small businesses.
There is a 3% fee charged on SBA's portion of the project. 1 1/2% of those fees come to Enterprise Development Corporation as our origination fee, 1/2% of the fees goes to the SBA loss reserve for the program and 1% go to the underwriters who sell the bonds that are the source of funding for the loans. In addition to these program fees, Enterprise uses a bond attorney to close the SBA loans as they are very similar to a bond funding, and the attorney's fees of $2,500.00 can also be financed as part of the SBA loan.
Of the ongoing fees, 1.0625% goes to SBA's loss reserve for the program, .5% comes to Enterprise as a servicing fee for monitoring and servicing the loan in our portfolio and .1% goes to Wells Fargo, who collects and distributes all of the funds for the program. The ongoing fees are built into the monthly payment for your loan, and included in the effective interest rate quoted for the program.
The participating lender is also charged a one time participation fee of .5% of the permanent loan amount.
For a side by side comparison of the cost of utilizing conventional financing alone and the potential benefits that utilizing the SBA 504 Loan Program could offer your business, click here.
Here are some answers to common questions about the SBA 504 Loan Program through Enterprise Development:
1. How much of my own money do I need to bring into the project?
Answer: For existing businesses, the equity (cash) requirement is 10% of the project cost. If a building is involved in the project and it is special-purpose in nature, an additional 5% equity (cash) is required. For start-ups or businesses in operation for less than two years, the equity (cash) requirement is 15% of the project cost. If a building is involved in the project and it is special-purpose in nature, an additional 5% equity (cash) is required. In some cases, existing equity in real estate can be used toward the borrower's participation.
2. Can the SBA 504 program provide 100% financing for my project?
Answer: No. The SBA 504 program from Enterprise Development can provide up to 40% of a project's financing with the participating lender providing up to 50%. Depending on the details, the borrower is responsible for a minimum of 10%. For start-up businesses or those in operation for less than two years, the maximum participation is 35%, while the participating lender and the borrower contribute the balance. If real estate is involved in the project that is special-purpose in nature, the SBA 504 loan will be reduced by 5%.
3. What is the typical loan amount through the SBA 504 loan program?
Answer: Historically, the average size of an SBA 504 loan through Enterprise Development is around $500,000. The minimum loan amount is $65,000 and the maximum loan amount is $5 million ($5.5 million for Public Policy Goal projects).
4. How long is the term of the SBA 504 loan?
Answer: For equipment with a useful life of at least 10 years, the term of the SBA 504 loan would be 10 years. For real estate projects the term of the SBA 504 loan would be either 20 or 25 years. In some cases shorter-term fixed assets may be included in the loan.
5. What is the interest rate for the SBA 504 loan?
Answer: The interest rate for the 10-year, 20-year and 25-year SBA 504 loan is based on a spread above the rate of 5 year or 10 year U.S. Treasury Bonds, respectively. The interest rates are not set until the SBA loan closes, then it becomes fixed for the life of the loan. Check here for the latest rates.
6. What types of businesses have you financed?
Answer: Enterprise Development has financed the land, building and equipment for almost every business imaginable. Some of those market segments include: Advertising and Marketing Agencies, Automobile Repair Shops, Car Washes, Screen Printing, Day Care, Funeral Homes, Restaurants, Equipment Rental, Retail Stores, Convenience Stores, Hotels, Machine Shops, Marinas and Resorts, Fitness and Recreational Centers, Urgent Cares, Vehicle Dealers, Doctor's and Dentist's Offices, Law Offices, Manufacturers and Supermarkets.
7. What are the fees associate with an SBA 504 loan? Is it a cost effective option for my project?
Answer: There are two types of fees - upfront fees that are financed in the SBA loan amount and on-going fees, which are included in the effective interest rates posted on our home page. These fees pay for the costs of the program and everyone who participates in the program contributes to ensure that the program will continue to be available to small businesses.
There is a 3% fee charged on SBA's portion of the project. 1 1/2% of those fees come to Enterprise Development Corporation as our origination fee, 1/2% of the fees goes to the SBA loss reserve for the program and 1% go to the underwriters who sell the bonds that are the source of funding for the loans. In addition to these program fees, Enterprise uses a bond attorney to close the SBA loans as they are very similar to a bond funding, and the attorney's fees of $2,500.00 can also be financed as part of the SBA loan.
Of the ongoing fees, 1.0625% goes to SBA's loss reserve for the program, .5% comes to Enterprise as a servicing fee for monitoring and servicing the loan in our portfolio and .1% goes to Wells Fargo, who collects and distributes all of the funds for the program. The ongoing fees are built into the monthly payment for your loan, and included in the effective interest rate quoted for the program.
The participating lender is also charged a one time participation fee of .5% of the permanent loan amount.
For a side by side comparison of the cost of utilizing conventional financing alone and the potential benefits that utilizing the SBA 504 Loan Program could offer your business, click here.