USE OF FUNDS

• Purchase of land and construction of new building including all acquisition/construction costs and relevant professional fees

• Purchase of existing building including improvements/renovations and all relevant professional fees.

• Major leasehold improvements to a leased facility provided the lease term exceeds the term of the 504 loan. Out side collateral will generally be required in leasehold situations.

• Acquisition and installation of machinery and equipment with a minimum 10 year economic life

ELIGIBILITY

• A firm operated for profit

• Up to $6 million in tangible net worth averaged over the last two fiscal years

• Up to $2 million in after-tax profits averaged over the last two fiscal years

• Borrower is the owner-occupant/user of the asset being financed or qualifies as an Eligible Passive Company (EPC)
  

• Contact NSBFC as soon as possible to determine eligibility

JOB REQUIREMENT

• One job for every $35,000 in 504 loan funds

• Both job creation AND retention satisfy the requirement

• Two years after the 504 loan closing are allowed to satisfy the requirement

• Job creation can be waived where qualified community development and/or public policy goals are met

504 PARTNERSHIP

• The complete 504 package is a combination of at least three participants: the 504 program, the private sector lender and the borrower

• Typical structure is: Private Lender - 50%, 504 Program – 40%, Borrower – 10%

• More equity is required for business <2 years old (+5%) and special purpose projects (+5%)

• 504 loan is limited to 40% of project cost, $750,000 or the private lender’s portion of the project whichever is less.

• 504 loans up to $1 million can be made to projects meeting public policy goals

• Total Project Cost ranges from $500,000 to $4 million

INTEREST RATE AND FEES

• A loan fee of 2.75% is charged on the 504 loan

• 504 loan fees are automatically financed as part of the 504 loan

• 504 loan is a fully amortizing fixed rate loan

• Rates are set when the 504 loan is closed and funded. For construction projects this can be up to 18 months from the date of approval.

• See our Monthly Update for a graph of rates over the past 12 months

TERM OF LOAN

Term of 504 Loan

20 Years Fixed – Real Estate
10 Years Fixed – Machinery, equipment and leasehold improvements

Term of Private Sector Loan:

20 Year 504 Loan – Minimum 10 year private sector loan
10 Year 504 loan – Minimum 7 year private sector loan

Private sector loan rates may be adjusted periodically

TURNAROUND TIME

• The Quality and Completeness of the Borrower’s application and his responsiveness in providing the information are the biggest factors in determining turnaround time

• 45 to 60 days is a typical process and approval time once the package has been pre-screened for eligibility and credit worthiness

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