SBA 7a Loan Program
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The SBA 7a Program allows for financing of all types of business needs from purchasing real estate, fixed assets, working capital and business acquisitions. The SBA 7(a) loan program highlights are:
- Up to 85% Loan to Value (LTV)
- Generally adjustable rates 2% to 2.75% over WSJ Prime
- 5 Year Fixed Rate may be available
- 25 Year Amortization
- Fully Amortized Loans with NO Balloons
- Loans up to $5 million
- Closings in as little as 45 to 60 days
- Loans may be assumed, subject to approval
- SBA Loan Guarantee Fee 3% of Loan Amount
Note: The following SBA 7a example is based on rates as and available terms as of 3/20/2017. Rates and program availability may vary depending on risk factors, changing commercial rates, regional pricing variations etc.
Example Loan – $1,000,000
- Rate – 6.25%
- Fixed – 5 Years
- Amortization – 25 Years
Annual Principal & Interest – $79,793.64
Closing Cost Estimate:
- SBA Loan Guarantee Fee 3% – $30,000.00
- Bank Attorney Fee – $4,500.00
- Environmental – $1,500.00
- SBA Packaging Fee – $2,500.00
- Appraisal – $2,500 to $5,000
- Title Insurance – $6,000 to $7,500
TOTAL CLOSING COSTS – $47,000 to $51,000
SBA 504
The SBA 504 Program provides a method to finance real estate expansion projects through long-term, fixed-rate financing. The 504 is different from the 7(a) in that it is offered by the SBA in partnership with a participating lender (bank or non-bank).” The 504 loan program consists of two loans. The first loan and lien position is offered by an authorized lending institution and the second loan or second lien position is offered by the US SBA via the efforts of a certified development company (CDC).
504 eligible project costs include:
- Land and building acquisition
- Site improvements
- Building improvements
- Professional fees, including architect, appraisal, environmental
- Other costs, including title insurance, survey, points and interest on interim loan
- Machinery and equipment acquisition
The main advantages of the SBA 504 program are as follows:
- Small equity injection, as little as 15% toward the total eligible project
- Long-term financing is available, up to 25 years on loan 1 and up to 20 years on loan 2
- Very favorable, fully amortizing fixed-rate pricing on loan 2 at market
- Most closing costs are eligible for project financing
- SBA 504 loans may be assumed
The SBA 504 loan program highlights are:
- Up to 85% financing
- Fully amortized loans with no balloons
- 5 and 10 Year Fixed Rate
- Terms to 25 years
- Loans up to $15 million
