SBA Program Overview

FAQ

FREQUENTLY ASKED QUESTIONS

What is the SBA?

The US Small Business Administration (SBA) is an independent Federal Agency created by Congress to assist in the commencement, expansion, growth, and prosperity of small businesses. In total each year, bank and non-bank lenders fund over $35 billion a year through their flagship program the SBA 7a program and over $12 billion through the SBA 504 program via 2^nd mortgage loans. The SBA program has been one of the most successful ever implemented by Congress in 1953. The program saw extreme growth since 2008 and is more available than any time in the program's history especially during the unprecedented events in 2020.

What is the 7a Program?

What can proceeds be used for?

Acquisition/Construction/Renovation of owner occupied commercial real estate- 51% occupancy of borrowing entity
Furniture, Fixtures and Equipment Purchase
Start Up Financing
Franchise Financing
Business Acquisition
Debt Restructure- (no owner equity can be cashed out. All collateral currently pledged must remain on any note refinances unless the loan is considered over collateralized per SBA advance rates)
Working capital/Inventory can be incorporated into the above type of loan

What is the 504 Program?

SBA 504 Loan Program Guide

Uses Proceeds may be used for the acquisition, expansion or renovation of owner-occupied commercial real estate or the purchase of M&E and FF&E. Costs may also include interim interest and professional fees related to the project.

Borrower Equity A minimum of a 10% equity injection is required. If the small business has been in operation less than 2 years or if the project is for a special use facility, the minimum injection is 15%. Should both of these apply then the equity injection is increased to 20% of the project. Note: A borrower’s second special-use 504 loan requires a 20% equity injection.

Structure The 504 loan is typically structured as follows:

50% First Mortgage Loan with the Bank
40% Second Mortgage SBA 504 Debenture through Capital Partners
10% Down payment from the Borrower

Loan Amount The 504 second mortgage cannot exceed $5 million, or $5.5 million for a Small Manufacturer or Green Energy loan. In combination with the Bank financing, projects in excess of $10 million can be financed.

Collateral Generally, the project assets being financed, personal guarantees are required from all 20% or more owners of the business.

Why Use A Guarantee Program?

#1 reason is capital preservation via higher leverage and longer terms
Up to 90% complete project financing for expansion or real estate purchases
Up to 80-90% financing for start up financing
Extended terms of up to 25 years for real estate and 10 years for equipment
Higher LTV allowed for hotel, car wash, storage facilities as compared to conventional financing
Company has a concentration in client base
Company needs to rely on projections to support repayment

Who Qualifies as a Small Business?

What is the general credit criteria?

What is your cost?

SBA Application Checklist

Borrowing Entity

SBA Business Application-
3 Years of recent Business Tax Returns with all schedules and K-1’s
YTD Financial statements within 60 days of application and Aging of A/R and A/P if applicable
Company Debt Schedule- write none if no debts
SBA Borrower Information Form 1919- company info page 2&3, each shareholder to complete page 4&5
4506T-signed by principle of company (Signed by seller of business if applicable)
Copy of drivers license

Affiliates: (any company guarantor has a 20% or greater interest)

3 Years of recent Business Tax Returns with all schedules and K-1’s
YTD Financial statements within 60 days of application and Aging of A/R and A/P if applicable
Company Debt Schedule- write none if no debts

Guarantor Information: (Applies to any owners with 20% or greater interest)

SBA Resume
SBA Personal Financial Statement- must be signed jointly with spouse.
Provide copies of all company and personal bank statements for the most recent 2 months verifying any cash liquidity or investments.
3 Years Personal Tax Returns with all schedules and copy of extension if filed for most recent year.
4506 T Form- SIGN ONLY, do not complete
Copy of drivers license

Other items if applicable

Copy of all business and personal accounts for the past two months to included checking, savings, money market, investment, retirement accounts. Lenders are required to verify available liquidity to meet equity injections. Gift letters from family and friends may be used in lieu of personal equity but must be verified by two months' bank statements as well.
Copy of LOI or purchase contract
Copy of architect and city approved plans and specs
Contractor Bids
Equipment/FF&E Bids
Copy of notes being refinanced
Business Plan with 2 years of projections with detailed assumptions.
STR Report

Transaction Types

Real Estate Acquisition

Construction & Refinance

Partner Buyouts

Debt Refinance

Start Up

Business Acquisition

Franchise

Special Use Assets

Gas Station

Hotel

Day Cares

Automotive

Storage Facilities

What People Say About Melanie

“Melanie Brown has an unmatched depth of experience in SBA lending combined with a can do attitude. She is my go to SBA lender.”

— Matthew Levin, CCIM

Senior Advisor | SVN Commercial Real Estate Advisors.

"Hands down Melanie is the best in the industry. She has been our number one source for SBA financing for over 20 years. She is responsive and looks for a way to get our clients deals closed"

— Tom Wilson and Scott Hutchinson

Wilson & Hutchinson Realty

"Hi Melanie, I can’t believe it was a short time ago when we talked, and I was scrambling to find a lender for my deal. In that short period, your recommended lender got my deal done and you guys both deserve a lot of credit! Finding people in business who can really get things done, is not easy and I feel lucky to have met you through LinkedIn. I am still shocked that my deal got done, in record time, and during a pandemic to boot! I really appreciate the help and can guarantee you two will ALWAYS have the first look at any of my deals and I will try to send as much referral business as possible! "

— Terrence B.

"Melanie Brown saved our deal! After attempting to get our project funded through a multitude of lenders, Melanie was able to pair us up with a lender that could get it done! Melanie helped us work through our projections and some vital cash injection questions that we had. She was able to re-work some of our project costs, which saved us money as well!
We will 100! be using Melanie for all future deals."

- Jason F.

"During the middle of the current pandemic, my partners and I were in the middle of developing our site for our new brewery. Even though we had a commitment letter in hand from a local lender to fund the balance of the project, they pulled out of the deal and we were left scrambling for financing. Our landlord was given Melanie's name as an expert resource for SBA financing. Melanie quickly analyzed the situation and presented the deal to several lenders. Our group was able to quickly secure a level of interest which turned into an LOI and then a commitment. We are scheduled to close within the next week and we are incredibly relieved to have our financing secured. Melanie has the connections to be a valuable resource to anyone looking for SBA financing. "

-Craig M.

CONTACT ME

The US Small Business Administration (SBA) is an independent Federal Agency created by Congress to assist in the commencement, expansion, growth, and prosperity of small businesses. .

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