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SBA LOANS

U.S. Small Business Administration Guaranteed Loans

The U.S. Small Business Administration (SBA) is a major source of financing for small businesses in the United States. The SBA’s various loan programs have provided needed funding for thousands of small enterprises who were unable to secure loans from lending institutions on their own; indeed, businesses cannot solicit loans from the SBA unless they are unable to get funding independently.

Some of today’s most successful businesses, including Intel, Apple, and Federal Express, were each given a much needed boost in their early days by SBA loans. This record of success, coupled with the trend toward small-business start-ups and entrepreneurship in America, has encouraged both the SBA and its lending partners to continue to expand its loan programs. The SBA has subsequently set new records in various loan guarantee categories since the mid-1990s. 

The SBA offers a variety of loan programs for specific purposes. The two most prominent types of loans are the

  • 7(a) Program
  • 504 Program

We act as intermediaries “feeding” loan requests to SBA lenders. We have established relationships with local, regional and national SBA Preferred Lenders. SBA lenders are not all the same. The type of business, type of customer and loan amount play a big part in the lender’s appetite for these loans. Just because a loan was rejected by one lender, it doesn’t mean that another won’t approve it. We know what our lenders are looking for and we only submit your loan to a lender or lenders with the highest probability of approval.

Before we take a full application, we’ll ask for some basic documents to pre-qualify the loan request to make sure it meets the minimum loan requirements. If we are comfortable with the loan request, we’ll request some additional documents, put together a full loan package and submit it to a lender or lenders whose guidelines the loan request meets.

We understand that small business owners don’t necessarily have a 9 to 5 schedule, so we’re able to work around your schedule. Evening and weekend appointments are available – Our place, your place, somewhere in between or over the phone.

Below you’ll find an overview of both programs. The information listed should answer most of your questions. If you need additional information or you want us to pre-qualify your loan, feel free to contact us.

SBA 7(a) Program Overview

Summary

SBA 7(a) loans are the most common type of SBA loans. 7(a) loans are primarily used for the acquisition or refinance of commercial real estate. Projects are secured by a 1st Deed of Trust/Mortgage on commercial real estate, meeting SBA qualifications, having a maximum Loan to Value of 90%, depending on property type.

Typical Project Structure

75% to 90% LTV

10% to 25% Equity Injection

Maximum Loan Amount

$2,000,000

Maturity and Amortization*

Real Estate – Up to 25 years

Business Acquisition – Up to 10 years

Equipment Acquisition – Up to 10 years

Debt Refinancing – 7 to 10 years

Permanent Working Capital – Up to 7 years

Permanent Working Capital – Up to 7 years

*(Blended maturity and amortization will be applied depending on final structure as determined by SBA guidelines)

LTV Guidelines

Multi-Purpose Real Estate – Up to 90% LTV

Limited or Special Purpose Real Estate – Up to 80% LTV

SBA 7(a) Eligible Use of Proceeds

To purchase land or buildings, to cover new construction as well as expansion or conversion of existing facilities

To acquire equipment, machinery, furniture, fixtures, supplies, or materials.

For long-term working capital, including the payment of accounts payable and or for the purchase of inventory.

To refinance existing business indebtedness that is not already structured with reasonable terms and conditions.

For short-term working capital needs, including seasonal financing, contract performance, construction financing, export production, and for financing against existing inventory and receivable under special conditions.

To purchase an existing business.

SBA 504 Program Overview

Summary

The CDC/504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides small businesses requiring “brick and mortar” financing with long-term, fixed-rate financing to acquire commercial real estate. 504 loans are facilitated through Certified Development Companies (CDC). A CDC is a private, nonprofit corporation set up to contribute to the economic development of its community and they work with SBA and private sector lenders to provide financing to small businesses through the 504 program. Projects are secured by a 1st and a 2nd Deed of Trust/Mortgage on commercial real estate, meeting SBA qualifications, having a maximum aggregate Loan to Value between 80% and 90% depending on the property type.

Typical Project Structure

50% LTV Conventional 1st loan

30% to 40% SBA/CDC 2nd loan (depending on property type)

10% to 25% Equity Injection (depending on property type)

Maximum Loan Amount*

$4,000,000 1st loan

$1,500,000 2nd loan when meeting the job creation criteria or a community development goal

$2,000,000 2nd loan when meeting a public policy goal

$4,000,000 2nd loan for small manufacturers

*Up to $6,000,000 of aggregate financing

Interim Financing

Typically it takes 45 to 90 days after execution of the 1st DOT Conventional loan for the SBA to fund the SBA 2nd Deed of Trust/Mortgage. To facilitate a smooth closing, most lenders require/provide an interim loan for 120 days that is paid off with the SBA Debenture. Interest rates on the 120 day interim note typically mirror the rate on the 1st conventional loan.

Maturity and Amortization

Conventional 1st loan – Up to 25 years

Interim Note – Up to 120 day term with interest only payments

CDC/SBA 2nd loan – Up to 20 years

Maximum LTV

Multi-Purpose Properties – Up to 90% LTV (50% Conventional 1st / 40% CDC/SBA 2nd / 10% equity injection)

Limited or Special Purpose Properties – Up to 85% LTV (50% Conventional 1st / 35% CDC/SBA 2nd / 15% equity injection)

SBA 504 Eligibility

The subject business/borrower must be operated for profit and fall within the size standards set by the SBA (Tangible Net Worth less than $7.5MM and Average Net Income does not exceed $2.5MM after taxes for the preceding two years). Loans cannot be made to entities engaged in speculation or investment in rental real estate.

SBA 504 Eligible Use of Proceeds

To purchase land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping.

504 Loans facilitated through the CDC will be primarily used for the acquisition of commercial real estate. Other eligible uses of 504 loan proceeds such as construction of new facilities or modernizing, renovating or converting existing facilities, and the purchase of long-term machinery and equipment can be considered by the CDC in conjunction with a commercial real estate acquisition financing request.

SBA 504 Ineligible Use of Proceeds

The 504 loan program cannot be used for working capital, inventory, debt consolidation, repayment, or refinancing.

Eligible Property Types

Office: Professional, Condominium, Medical, Dental, and Veterinarian.

Industrial: Heavy and Light Manufacturing, Warehouse and R&D Flex

Special Use: Assisted Living Facilities, Adult Care, Day Care Facilities, Restaurants, Funeral Homes, Hotels/Motels.

Retail: General

Rate Option / Fees

Conventional 1st loan – Interest rate options include variable, three (3), and five (5) year fixed rate options.

Interim Loan – Typically mirrors 1st loan.

CDC/SBA 2nd loan – Rate is tied to the market rate for the five and 10 year U.S. Treasury notes with rates fixed at the time of debenture funding for the life of the loan.

Fees total approximately 3 percent of the SBA Debenture and may be financed with loan proceeds.

Underwriting Requirements

Prior Ownership and Management Experience

Minimum FICO of 680

All loans are Full Recourse and require the personal guarantee of any and all individuals or entities holding 20% ownership interest or more.

1.25x Minimum Debt Coverage Ratio (DCR) for the most recent FYE and Interim period is required.

Occupancy

The subject property must be occupied by a minimum of 51% by the small business concern (60% for new construction).

Contact Us

First Commercial Funding Corp.
1420 Renaissance Dr.
Suite 310
Park Ridge, IL 60068

Email Address
info@fcfloans.com


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  • Home
  • Conventional Loans
    • Conventional Owner-User Loans
  • Unconventional Loans
  • Rehab Loans
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  • SBA Loans
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  • Contact Us
First Commercial Funding