Transcript SBA 504 PROGRAM - Passaic County

SBA 504 Loan Program
Long Term Fixed Asset Financing
For Small Businesses
Who are we?
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Private non-profit Certified Development Company
created to assist small businesses with their long term
credit needs and focused on economic development.
In operation since 1996
Outstanding portfolio - $262,865,000
Average loan amount PTD- $845,680
Average loan amount FYE ‘13- $995,000
Average loan amount YTD ‘14- $1,214,000
What have we done?
# 1 SBA 504 Lender in New Jersey – 18 years
Top 10 SBA Lender in New Jersey
# 35 SBA 504 volume lender YTD (300 CDC’s)
nationally
Authorized $54,088,000 in FYE ’13 and
$51,431,000 in FYE ’14
SBA 504 Loan Program
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Long Term, Below Market, Fixed Rates
 Real estate and equipment acquisition
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Facility construction, expansion,
renovation and leasehold improvements
Project soft costs
Equity injection as low as 10%
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Eligible Businesses
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For Profit Corporations, Partnerships or
Proprietorships
 Tangible Net worth < $15 million
 Two year average after tax net income
< $5 million
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Ineligible Businesses
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Nonprofit organizations
Investment companies, lending institutions,
real estate investment companies
Financing Structure
50% - First Mortgage Lender
40% - CDC 504 Loan
10%* - Equity Injection
*15% Equity Injection for Special
Purpose Property OR New Business
 *20% if both
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Maximum Loan Amount
$5,000,000 – Regular 504 loan
 $5,500,000 – Loans to Manufacturers
 $5,500,000 – “Green” projects
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No Restriction on Total Project Size!!
Eligible Uses of Proceeds
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Purchase of land
Purchase or construction of a building
Modernization, renovation, restoration, including
leasehold improvements
Purchase of machinery and equipment which has a
minimum useful life of ten (10) years
10% contingency on construction projects
Related soft costs such as construction period
interest, professional fees for accountants,
engineers, appraisers, etc.
Ineligible Uses of Proceeds
Working Capital
 Intangible Assets
 Refinancing
 Investment Real Estate
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Employment Impact
 One job per $65,000 of 504 money
One job per $100,000 to manufacturers
 Borrower meets public policy goal (i.e. minority,
WOB, veteran)
 Property located in growth/enterprise zone
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Term
 Real estate: 20 years (1st mortgage: 10 years)
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M&E: 10 years (1st position financing: 7 years)
Interest rate
 Spread over 5 & 10 year Treasuries
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NO RESTRICTION on 1st mortgage fees or rate
Security
 Generally limited to 504 asset being
financed
 Third party lender has 1st position
(not pari passu)
 Personal Guarantees
 20% or more ownership
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Construction Financing
 Permanent take out financing
 Bridge financing required until project
complete
Repayment
 Commences first day of month following
funding
 504 loan self amortizing with level monthly
payments
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Fees
 2.65% of 504 loan and legal fee added to
net 504 loan
As low as $2,500
 Third party lender pays .5% to SBA on
first mortgage
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Prepayment
 20
Year Loan: Declining 10% over ten years
 10 Year Loan: Declining 20% over five years
 Prepayment amount generally less than prepayment on
conventional loans
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Other Guidelines
 51%
occupancy required; 60% for new construction
 EPC ownership may be different than that of SBC – all
controlling principals of each must guaranty
Advantages of a 504
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Provides flexible client focused options
Competitive pricing
Longer term financing than bank loan
Helps retain capital/ manage cash flow
Allows for greater underwriting flexibility –higher LTV’s
Ability to include construction and M&E in one loan
Roll in “soft costs” (i.e. bridge fees, appraisal,
environmental)
Does not require additional collateral to be pledged
How to Proceed
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Project description and estimated project cost
Operating company and principal’s prior two years tax
returns
Interim financial statements
Current personal financial statement
Call NJBFC
(201) 346-0300
Or visit us at www.njbfc.com