SBA 504 Interim Funding
Utilizing an SBA 504 loan for the development of commercial property is one of the smartest decisions a small business owner can make. The SBA's 504 loan program provides up to 90% of the total project cost (including land, construction or renovations, soft costs and closing costs) at long-term below-market interest rates.
Funding comes from both the SBA, through a network of 260 CDC's (Certified Development Company) and a third party lender (not necessarily a bank) originating the loan. The equity requirement for the borrower is as little as 10% and not more than 20% of the total project cost. The SBA/CDC provides up to 40% (up to $5 million, or $5.5 million for businesses and manufacturers creating energy efficient operations), and the lender provides the remaining 50%. Existing SBA limits allow a project cost of as much as $12 million dollars (slightly higher limits in certain cases as above).
In a construction project funded through the SBA 504 program the 40% from the SBA/CDC and the 50% from the lender are not provided until the construction is complete. This means that the borrower may need up to $10.8 million of interim financing. Most lenders do not provide this required interim financing. Broadway Capital stands ready to provide the required interim financing so that a borrower may take advantage of the SBA's 504 loan program.
Broadway Interim Funding Program Terms
- Borrower must be a corporate entity
- Project must include a construction component
- Budget and contractors approved by Broadway as Owner's Rep
- Draws approved and funded according to industry standard practice
- Personal guarantees of all owners required
- Collateral in addition to the project assets is required
- Permanent mortgage commitment from lender and SBA must be in place
- Most lender related and third party expenses are eligible for inclusion in the project financing