SBA Loans are loans that are guaranteed by the U.S. government. With an SBA loan your business can take advantage of longer repayment terms with higher borrowing limits. Qualifying criteria are generally more flexible than conventional loans. Less cash is needed with down payments often as low as 10%. University Bank has the expertise and the resources to provide complete loan packages for most businesses.
SBA 7(a) Program
Proceeds can be used to fund equipment purchases, business acquisitions or expansion, finance permanent working capital or purchase real estate.
Features
- Loan Amounts $250,000 – $5,000,000
- Borrower investment/down payment is 10-25% of purchase.
Terms:
- Working Capital – Up to 7 years
- Equipment Loans – Up to 15 years
- Real Estate – Up to 25 years
Use of Proceeds
- Purchase land or buildings, to cover new construction as well as expansion or conversion of existing facilities
- Acquire equipment, machinery, furniture, fixtures, supplies, or materials.
- Obtain long-term working capital including the payment of accounts payable and/or the purchase of inventory
- Refinance existing business indebtedness, which is not already structured with reasonable terms and conditions
Benefits
- Longer maturity terms than conventional loan
- Same application process as a conventional loan
- Easier to qualify than conventional loans
- Lower down payments on fixed assets
- SBA fees can be financed into the loan
SBA 504 Program
SBA 504 program is a fixed cost asset economic development program designed to help small businesses acquire land, building and equipment.
Features
- No bank minimum limit on total project cost
- Minimum equity infusion of 10% (15% for start-ups or single purpose real estate and 20% if both conditions apply)
- University Bank will provide a conventional mortgage with first lien position
- A Certified Development Corporation (CDC) will partner in the financing with a second mortgage for 30% to 40% of the total project cost that is fully guaranteed by the SBA. Maximum SBA portion is $1.5 million / $2 million in special cases and $4 million for manufacturers. The CDC’s fee is 2.75% plus attorney’s fees.
- Businesses qualify if they do not have a tangible net worth in excess of $2.5 million after taxes for the proceeding two years
- 51% owner occupancy required, new construction 60%
- University Bank must approve interim financing for the SBA portion because of the SBA debenture funding process
- Prepayment penalty may apply
Terms:
- Bank Portion – minimum 7 years for equipment or 10 years for Real Estate
- SBA portion – minimum 10 years for equipment or 20 years for Real Estate
Use of Proceeds
- Real estate financing (land and building)
- Construction and improvements
- Heavy machinery
Benefits
- Lower down payments on real estate acquisition
- Same application process as a conventional loan
- Favorable terms and pricing on SBA debenture
- Business conserves capital
- Fees can be included in the total project cost