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Business Plan: This is a document generated by the borrower which reflects the economic projections for the operating company. It should include financial information, marketing plan, and demographic or economic value of the proposed or existing business.
Eligible Passive Company (EPC): This is a unique corporation formed by the borrower which often times is the owner of the operating company and receives rental payments from the operating company. In turn, the EPC is the borrower of the SBA 504 and makes payments to Preferred.
Environmental Study: This is a document provided by an environmental engineer that evaluates the environmental condition and impact of the subject property.
Loan Authorization: This is the “golden” document from the SBA granting the borrower the right to the SBA 504 loan funds. This document notifies the primary lender to release their funds for the interim or bridge loan.
Loan Closing: This is the event where the fund SBA 504 loan documents are signed by the borrower and Preferred. This occurs upon completion of the purchase of property or the project. This is also the point where the SBA moves forward to sell the associated loan debenture (bond).
Loan Funding: This event occurs 30-45 days after the closing. At this time, the SBA disburses the proceeds from the sale of the bond to the primary lender (holder of the interim loan). This event starts the amortization of the SBA 504 note.
Operating Company: This is the business entity that operates at the location being acquired and generates the income to support the repayment of the SBA 504 note.
SBA 504 Debenture: A bond representing multiple nationwide SBA 504 loans that is sold and then traded on the open bond market.
Subordination Agreements: Every lease and sublease on the Project Property is to be made subordinate, or junior, to the SBA Deed of Trust. The Borrower and the Operating Company must sign the Subordination Agreement, which relates to their lease. The Operating Company and the subtenant must sign the Subordination Agreement, which relates to their lease.
Trade Name Company: This is often the “doing business as", dba” of the operating company. Typically not an incorporated entity but used for branding or marketing.
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