Small Business Administration Loans

504 Loan Program

Under the SBA 504 loan program, long term loans to assist small businesses are made by a combination of private lenders and investors utilizing partial guarantees from the Small Business Administration. Specific criteria must be met for the creation of new jobs as a result of the utilization of the financing. An approved lender, like Silver State Bank, makes the first lien loan and Certified Development Corporations are utilized to issue the secondary financing.

Eligibility

GENERAL

Management must be experienced and of good character. There must be demonstrable cash flow adequate to repay the loan, and the debt-to-equity ratio must be reasonable for the industry. Adequate collateral must be obtained. The bank will use similar criteria to those it uses to approve and process a conventional loan.

LOANS ALLOWED TO

• Buy machinery and equipment with useful life of 10 years or more
• Make leasehold improvements
• Remodel/renovate/rehabilitate
• Purchase owner-occupied commercial real estate

TYPE OF BUSINESS

Business must be for profit. Excluded are certain industries such as publishers and sellers of adult material, speculative ventures, lending and/or investment companies, and gambling (limited gambling permissible). There are also some exclusions regarding some types of clubs, some types of schools, and some types of insurance companies, and non-transient hotels, motels, and trailer parks.

SIZE OF BUSINESS

Business must not be dominant in its field. The net worth of the business must be less than $6 million and average after-tax profits over the last two years must be less than $2 million.These size maximums must include any "affiliates" (companies with common ownership or control)

CITIZENSHIP

U.S. Citizens and resident aliens are eligible.

JOB CREATION REQUIREMENT

In most cases, one new job must be created for each $35,000 of SBA (second lien) loan amount.

Loan Structure

MAXIMUM LOAN

The maximum size loan is normally $8,000,000 (see us regarding larger amounts). The loans are structured on a 50%-40%-10% basis; the bank loan is 50% of the total requirement, the SBA guaranteed debenture (second lien loan) is 40%, and the borrower puts 10% down. The maximum second loan is typically $1,500,000.

LOAN MATURITIES

Machinery & equipment: The first lien loan is usually 7 years, while the second is usually 10 years.
Real estate: The first lien loan is usually 10 years (with an amortization schedule of 20 years) while the second lien loan is usually 20 years (fully amortized).

INTEREST RATES and FEES

First lien loan: Usually 1% to 2.75% over prime, quarterly or monthly variable, tied to lowest WSJ prime rate. Fixed rates are also available. See us for further information regarding fixed rates and loan fees.
Second lien loan: Fixed rate determined by the SBA and based on U.S. Treasury yields. See us regarding loan fees. Prepayment penalties will apply for this loan.

REPAYMENT

• Monthly principal and interest payments based on simple interest
• No balloons on second lien loan
• Declining prepayment penalties on second lien note during first ten years.

EQUITY REQUIREMENTS/MINIMUM DOWN PAYMENT

10% of total project cost.

COLLATERAL

Sufficient assets must be pledged to adequately secure the loan. The collateral may be in the form of business assets or may be personal assets.

PERSONAL GUARANTEES

Personal guarantees are required from all owners of 20% or more of the company. Guarantee may include pledge of personal property.

OCCUPANCY REQUIREMENT

On existing buildings being financed, business must occupy at least 51%. On newly constructed buildings being financed, business must occupy 60%. The business may lease out 20% of the space permanently.

SILVER STATE BANK

is an experienced SBA lender. This means a faster answer and loan commitment for you. Our SBA specialists would like to talk to you about how we can assist you in building your business. They will meet with you at your office, and your request will be given specialized, individual attention. You will get an answer without wasted time and unnecessary delays.

Silver State Bank is a full service bank. Our officers are experienced in all areas of business finance, including construction and real estate loans. If you are looking for an SBA loan, we are looking for you.

Back To Top

Important Information About Procedures for Opening a New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

What this means to you: When you open an account, we will ask for your name, date of birth, and other information that will allow us to identify you. We may ask to see your driver's license or other identifying documents.

Back To Top