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The SBA 504 Loan Program

Financing the purchase, renovation, and construction of owner-occupied commercial real estate and equipment for for-profit businesses that achieve one of many economic development goals in Alaska, Oregon, Washington, and the panhandle of Idaho.

Program Highlights

  • Fixed assets financing for healthy expanding businesses

  • Terms that benefit businesses

  • Partnership between a lender, Evergreen, and the SBA

  • Promotes job creation, community development and public policy goals

Benefits for Businesses:

  • Reduce the barriers to ownership and conserve working capital for growth
     with up to 90% financing.

  • Enhance cash flow by accessing long term low rate funds.

  • Fix occupancy costs with the fixed interest rate

  • Avoid balloon payments, re-negotiation of the loan, and possibly higher payments with a 20-year term.

  • Finance project soft costs, like professional fees and permits.

  • Work with the lender of your choice or obtain multiple lender referrals.

  • Maximize the tax benefits of ownership and minimize liability with a holding company for the real estate.

Rate:

Based on current debenture bond rates that are fixed at the time of sale and usually below market. See the Effective Interest Rate page for detail.

Term:

20 years for real estate; 10 years for machinery and equipment

Typical Financing Structure:

  • 50%  Bank or Lender Loan at market terms secured by a first Deed of Trust or lien on the project property.

  • 40%  Evergreen Loan with a 20 year, fully amortized, low fixed rate secured with a second Deed of Trust on the project property. There is a prepayment penalty for the first half of the loan term.

  • 10%  Business Equity Injection from business or personal cash or home equity loan, etc.

    • Additional equity of 5% is required for start-ups and single purpose properties.  A start-up combined financing a single purpose property injects 20%.

Lender Participation

  • Minimum 10-year term on real estate or 7-year on machinery or equipment, usually its longer

  • Provides a conventional loan at current market terms

  • Funds interim/construction loan of up to 90% of project

  • Receives 504 funds to pay down the interim loan after project completion

  • Pays one-time fee to SBA of .5% of Lender’s 1st Mortgage, which is usually passed onto the borrower

Eligibility:

  • Most any type of for-profit business - manufacturing, wholesale, service, professional service or retail. See the list of ineligible businesses below.

  • Most legal entities - corporation, partnership, sole proprietor, or limited liability company

  • Project located in Alaska, Oregon, Washington, and the panhandle of Idaho

  • Business net worth under $7.5 million & net profits after taxes under $2.5 million

  • Job creation or another economic development goal requirement

  • Occupancy requirement:

    • 51% occupancy for an existing building; 60% for a new construction.

    • Multiple businesses may combine to create a holding company and in combination meet the occupancy requirement.

Permitted Project Costs:

  • Land and building purchases

  • New construction or renovation

  • Leasehold improvements

  • Heavy machinery & equipment purchase

  • Purchase of a commercial fishing vessel or party boat

  • Associated soft costs: title searches, insurance, attorney's fees, appraisals, environmental reports, architects, permits, surveys, installation of machinery, points on bridge loans, furniture and fixtures, etc.

Process

  • Approvals are obtained from the lender, Evergreen and the SBA through parallel processing. Evergreen packages and facilitates the SBA approval resulting in an "Authorization" approximately four weeks after documents are provided.

  • The lender funds an interim loan to complete the purchase and/or construction.  This allows the business to begin construction or relocation within the same timeline as a conventional loan.

  • Funding: The time between the Bank being fully disbursed on its interim loan and receipt of 504 funds to pay down the interim loan is approximately 45 to 90 days. The SBA needs time to pool all the 504 loans in the nation together in a debenture bond sale.

  • Businesses make payments to both the lender and Evergreen.

  • Evergreen services the 504 loan for the full term with the assistance of Colson Services, the Central Servicing Agent for the program.

Borrower Fees & Costs:

  • Fees are financed into the 504 loan or rolled into the monthly payment and are not out-of-pocket costs for the business

  • Program fees are 2.15% of 504 portion

  • Legal fee of $2,500 is paid to the closing attorney who is required by the SBA to certify the closing documents

  • Other costs incurred for recording fees, miscellaneous legal fees, and UCC searches estimated at up to $250

  • Servicing fees based on principal are built into the monthly payment and decline over time

  • A prepayment premium decreases each year and is gone by the second half of the loan term.

Ineligible Businesses Include:

  • Businesses engaged in lending

  • Passive holders of real estate and/or personal property

  • Life insurance companies

  • Businesses located in a foreign country or owned by aliens

  • Businesses selling through a pyramid plan

  • Businesses which restrict patronage

  • Government owned entities (excluding Native American Tribes)

  • Businesses engaged in promoting religion

  • Consumer and marketing cooperatives (producer cooperatives are eligible)

  • Businesses engaged in loan packaging

  • Businesses owned by persons of poor character

  • Businesses providing prurient sexual material

  • Businesses that have previously defaulted on a Federal loan

  • Businesses engaged in political or lobbying activities

  • Speculative businesses

Ineligible Project Costs:

  • Working capital

  • Inventory

  • Moving expenses

  • Rolling stock (cars, trucks, etc.)

  • Refinancing*

  • Bridge or interim loans

  • Points on permanent financing

  • Mortgage broker fees

* Evergreen offers Community Reinvestment Fund, USA Loan Programs in which refinancing is eligible.

If you have any questions, please call an Evergreen Loan Officer.

Evergreen is an equal opportunity lender.