What is a Certified Development Company (CDC)?
A CDC is the conduit that submits the loan to the SBA for approval and becomes the servicing agent for all approved loans. There are approximately 270 CDCs located throughout the country, each serving specific geographic regions generally defined by states.
What areas do you serve?
We service the entire state of Texas, and can assist with projects in other states.
What is the maximum loan amount?
Typically, our maximum loan amount is 40% of the total project, up to a maximum of $5,000,000 or $5,500,000. The maximum can be up to $5,500,000 if the business is a manufacturer, or achieves “Green” guidelines for energy reduction or reusable energy. This may be necessary if you do multiple projects with us (which we like!), such as opening additional restaurant or service industry chain locations. Contact us for more information on our Green Program.
Can equipment be financed?
Yes. Equipment can be included in our total project cost. Large heavy equipment can be financed without real estate for a term of 10 years.
Can soft costs be financed?
Yes. Transaction costs such as appraisal and environmental reports, title policy, loan fees, construction monitoring, interim interest, architect fees, and engineering fees are some of the soft costs that can be financed.
What cannot be financed?
We cannot finance working capital, inventory, goodwill, and ineligible closing costs.
What types of businesses are eligible?
The program is offered to a wide range of businesses in the retail, manufacturing, service, and hospitality industries. The business must be a ”for profit” enterprise with a tangible net worth not to exceed $15,000,000 and/or net profit after taxes of no more than $5,000,000 for the previous two years.
How much space does the business have to occupy?
If you are purchasing a new building, you must occupy 51%. If you are building a new building, you must occupy 60% with intentions of increasing your occupancy up to 80% over a three year period. The remaining 20% may be leased out.
I am expanding my business. Could I get an SBA loan to refinance my current property?
You can refinance existing debt related to fixed assets if you also borrow money to finance more real estate or equipment through an expansion project. The amount of debt being refinanced must be 50% or less of the total cost of expansion.
Are there other requirements for SBA loans?
If a public goal is not achieved, or your project is not certified as “Green,” you will need to hire one new full-time employee for every $65,000 that we loan.
Can I borrow part of my down payment?
Yes. This must be disclosed, and the terms reviewed, before approval.
The borrowed loan cannot be paid back at a faster rate than the SBA’s portion, and if the borrowed contribution is collateralized by assets other than the project property, the borrower must demonstrate repayment of the loan for its contribution from the cash flow of the business or other sources.
Can my loan be assumed?
Yes. Your loan can be assumed if you choose to sell your building. You will need to contact our servicing department.
Who is required to guaranty an SBA loan?
Any owners of 20% or more are required to guaranty. This includes owners of the operating company and the borrowing entity. Anyone that is a guarantor on the banks first lien loan will be required to be a guarantor on the SBA loan, regardless of ownership percentage.
What fees are involved in your process?
We request a $2,500 application deposit. which is applied towards your loan fee. Our loan fee is 1.5% of our loan amount. The bank fee is negotiated between you and the bank, but the bank’s fees can be financed into the project cost.
How long does the process take?
Once a complete package is provided and approved by the lender, we typically have your loan ready for submission to the SBA within five business days. We typically recommend at least a 45-60 day escrow to allow for sufficient time for bank and SBA approval along with third party reports; however, it can be done in less time.
When does my loan with you fund?
We will partner with a bank to provide your financing. Our lending partner will fund a bridge loan for up to 40% of the project. Once your project is completed, we will then fund up to 40% and pay off your bridge loan, creating your permanent loan for 20 years with a 20 year amortization and fixed rate.
What types of properties does the SBA consider single purpose?
Amusement parks, bowling alleys, car wash properties, cemeteries, clubhouses, cold storage facilities where more than 50% of the total square footage is equipped for refrigeration, dormitories, farms including dairy facilities, gas stations, golf courses, hospitals including (surgery centers, urgent care centers, and other health or medical facilities), hotels and motels, marinas, mines, museums, nursing homes, oil wells, quarries including gravel pits, railroads, sanitary landfills, service centers (e.g. oil and lube, brake or transmission centers) with pits and in ground lifts, sports arenas, swimming pools, tennis clubs, theaters, and wineries. Properties in this category require an additional 5% equity contribution.
All other properties are considered to be multi-purpose.
When is my rate determined?
Your loan rate is determined once your loan closes with us and has funded. The funding date is separate from the closing date and occurs once a month. Contact us for this year’s monthly funding dates, but it will typically occur the first Tuesday of each month and sale occurs toward the middle of the month. Once the rate is determined, our servicing department will be in contact with you to let you know what the current rate is, discuss your monthly payments, and discuss the timing for receipt of your fee refund.
How is the SBA’s interest rate calculated?
Each month, our funding mechanism starts with the yield on the 10 year treasury. A spread is added to that yield to sell the current debenture pool and that gives us the debenture rate. The fees are then added to come up with the effective rate over the term. See interest rate link for historical effective interest rates. Below is a breakdown of the fees charged by the SBA:
- SBA Guaranty Fee (0.5%)
- Underwriting Fee (0.4%)
- Funding Fee (0.25%)
- CDC Processing Fee (1.5%)
- Eligible Closing Costs
What are other costs I might incur when getting a loan?
You will need to have an environmental site assessment, appraisal, survey, and title policy. All of these fees are eligible project costs and can be financed into the project.
Is there a prepayment penalty on the SBA’s portion?
Yes. the 20 year debenture loan requires a 10 year prepayment penalty. The amount of the penalty depends on the debenture rate assigned to the loan. For instance, if the debenture rate for your loan is 2.5%, it would decline 10% every year for 10 years (e.g., at year 5 it would be 1.25%). After 10 years there will be no prepayment penalty.
Will life insurance be required?
This depends on whether you are a sole proprietor or if you have a management succession plan and/or other owner.