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Application Information
The following describes the steps a borrower follows to apply for an SBA 504 loan.
First, the borrower contacts Preferred Lending Partners and talks to our loan officer to discuss the project. The borrower should also talk to their bank of account to see if the bank wants to participate by doing the permanent first mortgage and bridge loan. The borrower will then meet with Preferred’s loan officer and structure the deal. The borrower then submits Preferred’s loan application which consists of the same materials they submit to the bank. Basic application materials include:
- 3 years of financial statements and federal tax returns on the company (if in existence for 3 years); if there is no historical cash flow ability to service the proposed new debt, submit 2-3 years financial projections;
- Personal financial statement (assets and liabilities) on the owners of the company;
- Written history of the business, reasons for expansion, plans; Business Profile
- Copy of contract of sale or purchase agreement;
- Personal history statement of principals indicating citizenship status, etc.
Second, Preferred’s staff will investigate and evaluate the borrower and the borrower’s company. They will draw credit reports, do bank and trade checks, and visit existing and proposed operations/facilities; assess the borrower’s credit ability and character. Once their bank or other 50% first lien lender has indicated an interest in financing the 50%, the Preferred’s staff prepares a loan memorandum and presents it to Preferred's Loan Committee.
Third, upon receiving SBA's authorization the loan committee approves the project, Preferred will present the application to the SBA to acquire its authorization agreement. Preferred will issue a commitment and the primary bank will fund its first mortgage loan and the bridge loan. The borrower uses the bank's funds to complete the project. When the project (or the building purchase) is complete, the borrower presents the Certificate of Occupancy or the bridge loan lender sends a 3rd party release letter to Preferred. The borrower then completes the SBA 504 closing documentation with Preferred. This will create a request to SBA to sell their debenture. Once the money is distributed by the SBA, the loan is "funded" and Preferred wires the SBA 504 proceeds to the bridge loan lender; Amortization of the loan begins.
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