SBA Loan Documentation
Every business owner and manager knows that one of the chief obstacles to expanding their business or starting a new one, is finding the financing to achieve their goals. To better serve our business clients and deliver on our commitment to 360◦ coverage, Bellanca LaBarge recognized years ago that we could help them procure the financing they require by becoming experts in the SBA 504 Loan Program.
The SBA 504 Loan Program is an economic development program that provides small businesses with long-term, fixed-rate financing for the acquisition of major fixed assets such as land, buildings, machinery, and equipment. The SBA 504 is primarily designed to assist healthy, expanding businesses that have been in operation for more than two years. In certain instances, the SBA 504 may also be used to finance start-up businesses.
Under normal circumstances the loan structure requires that the SBA lender must partner with a commercial lender, such as a bank or credit union on the SBA 504 Loan. Typically, the SBA will finance 40 percent of the project, the commercial lender will finance 50 percent and the borrower will contribute only 10 percent. In the end, the borrower has two separate loans, one with the commercial lender and one with the SBA lender.
Interest rates are fixed for the entire life of the loan and they are usually below those offered by conventional lenders. Fees for the SBA loan are typically financed with the loan and are reasonable. The advantage for small businesses is the lower down payment requirements. As noted, the small business may borrow up to 90 percent of financing needs, thus saving money for working capital. In addition, there is a longer repayment term and on real estate, the project can be financed for 20 years, making monthly loan payments more affordable. In addition, since the loan rate is fixed, there is no need to worry about variable interest rates or increases of interest during the term of the loan.
Bellanca Labarge, led by Joseph Kramer and Jim Bellanca III, assists leading SBA Lenders in the documentation and closing of about 100 of these loans each year.