A look at one of our exciting small business loans in Indio
504
Program
SBA 504 loans are small-business loans offered by Certified Development Companies (us) and backed by the federal government to provide long-term financing (up to 25 years) for major business purchases like real estate or machinery.
​
This program provides fixed rate, low down payment (10%), long term loans. It is designed to preserve working capital, stabilize costs, and enhance economic development.
Financing structure of a typical $1 million project
Term length
10, 20 or 25 years, depending on the loan.
​
Interest rates
Rates are tied to the five and 10 year U.S. Treasury notes.
​
Down payment
10%, but may be higher for startups or properties that can only be used for a specific purpose, like gas stations.
​
Fees
Fees typically include SBA, CDC and bank or credit union fees, which vary (approximately 3% of the 504 portion). These fees can be rolled into the total loan amount, so a business owner’s only upfront cost is the 10% down payment.
Why is this financing special?
-
Our portion of the financing can be up to $5.5 million
-
As little as 10% down
-
Fast approval if we receive all requested information
-
Secondary collateral is rarely required
-
Long term fixed rates (10, 20 and 25 year terms)
-
Most fees can be included in the financing which means fewer out of pocket costs
-
Our loan is assumable
- We package the loan for free
- We find the bank
What can an SBA 504 loan be used for?
-
The purchase of land, including existing buildings
-
The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
-
The construction of new facilities or modernizing, renovating or converting existing facilities
-
The purchase of long-term machinery and equipment
-
To refinance existing debt
Eligibility
Business Type
THE BUSINESS MUST BE "FOR-PROFIT"
Eligible business types include:
Hotels/Motels
Office Suites
Retail Operations
Manufacturing Operations
Service Operations
Wholesale Operations
Trailer Parks (R.V. Parks)
Campgrounds
Self Storage Facilities
Residential Care Facilities (such as
nursing homes)
Equipment Rental Businesses
Marinas
Equestrian Centers
Independent Contractor Agents of
Insurance Companies
Size
The applicant business(s) and any affiliates must have a net profit after taxes of less than 5 million dollars per year averaged over the past 2 years and must have a combined tangible net worth of less than 15 million dollars. These maximums increase by 25% in a labor surplus area.
Occupancy
For purchase or renovation of existing buildings the business must occupy at least 51%
For new construction and occupancy the business must immediately occupy 60% of the new building
Guaranty
Personal guarantees are required for anyone who owns 20% or more of the operating company and Eligible Passive Concern (EPC) if applicable
​
Contact us today and we will help you determine whether your business is eligible
Keep in Mind
To be eligible your business must be:
​
"For-Profit"
Owner-Occupied
Operating in the United States (and to work with us, in Southern California)
And you must have relevant management expertise
The Loan Process
Step One
Fill out our online form to see if your small business qualifies for an SBA 504 Loan.
Step Two
Next is Pre-Application. We will reach out with forms for you to fill out, with a request for certain documents necessary for us to review and determine if your business meets the requirements for an SBA 504 Loan. We will need most of these forms and docs for every owner holding 20% or more of the equity in the company or any partner that is involved in management of the business.
So you can prepare for this part of the process, here are the docs we typically need at this stage:
​
-
Our Pre-Application Forms for Personal and Business.
-
These forms have questions that can help us determine eligibility based on your personal history and if your business meets certain job creation or public policy goals. Some of the questions we will ask are about pending lawsuits, defaulted government debt, and criminal history in order to make a character determination.
-
-
SBA Form 413
-
​This is a personal financial statement. This form will need to be signed by all principal guarantors and their spouses.
-
​
-
Previous two (2) years of personal tax returns
-
The bank that will eventually partner with us on this loan mi​ght require 3 years, but the SBA portion only requires two.
-
-
COVID Questionnaire Answers
​
-
Previous two (2) years of business tax returns for the operating company, and year-end financial statements (balance sheet and profit loss statement)
-
Again, the eventual partner bank may require 3 years​
-
​
-
Year to date month end financial statements for the operating company within 60 days (balance sheet and income statement)
​
If you do not have the financial statements prepared, and are unsure of the correct way to create them, you can check out our resource page for a small business development center near that can help guide you through the process.
Step Three
After determining eligibility, we will begin the Authorization process. This will consist of us creating the full loan package for submittal to SBA for their final approval.
​
Here is a general overview of the types of docs and information we will be collecting at this stage:
​
-
Personal resumes of all 20% or more owners and managing partners
​​
-
Form 4506-T (for the Operating Company) so we can verify your tax returns
​​
-
Copies of driver's licenses of all 20% or more owners and managing partners
​​
-
We will be running credit reports for all relevant businesses, and principals
​​
-
Business debt schedule
​​
-
Business Plan (For new businesses only)
​​
-
2 years of projections with assumptions
​​
-
Organizational docs for the EPC, OC, and guarantor affiliates (this includes the articles of incorporation/organization, bylaws/operating agreement/partnership agreement, and a certificate form we will provide)
​​
-
If there is a trust involved a listing of all trust assets and relevant trust pages
​​
-
Purchase Agreement
​​
-
Copies of existing lease(s) for the project property
​​
-
Any existing PPP and/or EIDL information for your small business
​​
-
Appraisal for project property (we can help order)
​​
-
Environmental Report on project property (we can help order)
​
-
Equipment list for any equipment purchases (if equipment is a part of the loan)
​
This is just a general overview, other forms and docs will be required based on the specifics of your deal. If you need help creating your business plan or relevant financials, you can find a list of resource partners that can guide you through putting it all together on our resource page.
Step Four
After your loan package has been assembled and approved by SBA, we will begin the Closing process. This will consist of us collecting any remaining documents, the signing of all Loan Documents, a review by SBA attorneys and finally your loan funding!
504 vs 7a
504 Loan
-
An SBA 504 loan is for real estate, tenant improvements, and equipment. It cannot finance inventory, working capital, or accounts receivable.
-
The term on a 504 Loan is for ten, twenty or twenty five years with a fixed interest rate for the term of the loan.
-
The interest rate for the 504 loan is tied to the ten or five year Treasury Bill. It is usually below conventional interest rates.
-
The 504 loan is a partnership with a third party lender such as a bank. It is structured as 50% bank, 40% EFC, 10% borrower, unless it is a new business or special purpose buildings where the down payment is increased by 5% for each.
-
The 504 loan uses the collateral being financed and typically does not use the home of the borrower or other assets.
-
There is no limit to the project size.
7a Loan
-
Can be used for any real estate, inventory, working capital, or receivables.
-
It is usually a variable rate loan, not fixed as in the 504 loan.
-
It frequently uses additional assets of the borrower beyond just the collateral of the project property, unlike in the 504 loan.
-
7a loans typically require more than 10% down.
-
7a loans are typically for shorter terms than the 504 loan.
-
7a loans are done with the bank only, there is no CDC involved.
Debt Refinance
​504 Debt Refinance without expansion
​
-
The maximum Loan to Value is 90%. The total of the interim loan and the third-party loan cannot exceed 90% of the fair market value of the fixed assets that will serve as collateral. In other words, this loan requires at least 10% equity.
​​
-
If there is a shortfall between the appraised value and the amount of debt being refinanced, the borrower may provide additional cash or eligible collateral to make up this shortfall, so that the project does not exceed the 90% Loan to Value requirement.
​​
-
All the debt proceeds must have been incurred for the benefit of the small business.
​​
-
At least 85% of the original debt proceeds were used to acquire an eligible fixed asset.
​​
-
The debt must have been secured by the eligible fixed asset(s) for at least 6 months.
​​
-
The refinance can include cash out for “Eligible Business Expenses”, however, this changes the maximum Loan to Value to 85% and the Eligible Business Expenses portion of the Project may not exceed 20% of the appraised value of the Eligible Fixed Asset(s) securing the Qualified Debt. The value of the Refinancing Project may not be increased by adding additional collateral.
​​
-
Cash out for “Eligible Business Expenses” may include salaries, rent, utilities, inventory, or other operating obligations of the business that were incurred but not paid prior to the date of application or that will become due for payment within 18 months after the date of application.
​​
-
An existing 7a loan or 504 loan may be refinanced with a new 504 loan, under certain conditions:
-
For 504, the Third Party Loan and the 504 loan must both be refinanced or the Third Party Loan must already have been paid in full.​
-
For 7a, we must be able to verify in writing that the present lender is either unwilling or unable to modify the current payment schedule.
-
In either case, when refinancing previous SBA debt, the new financing must provide a “substantial benefit” to the borrower, meaning that we need to provide at least a 10% overall payment reduction and/or there must be a balloon payment due within 5 years.
-
504 Debt Refinance with expansion
​
-
Refinance of eligible debt with expansion is possible when the amount of existing indebtedness being refinanced does not exceed the cost of the expansion. The debt being refinanced would then be added to the expansion cost to establish the total project costs.
​​
-
“Expansion” includes any Project that involves the acquisition, construction or improvement of land, building or equipment for use by the small business applicant.
​​
-
Eligible Debt means: 85% or more of the proceeds of the debt were used to acquire land, building, construct a building or to purchase equipment. In short, the assets acquired with the debt must be eligible for financing under the 504 loan program.
​​
-
Existing SBA debt may be eligible to refinance under certain circumstances.
​​
-
There must be a 10% savings on the loan payment.
Board of Directors
Draymond Crawford - Former Bank Representative
​
Jeff Sceranka - President | Enterprise Funding Corporation
Cruz Esparza - Economic Development Manager | City of Redlands
​
Bob Gedeon - Senior Vice President | Citizens Business Bank
​
Adam Russell - Senior Managing Director | Opus Bank
​
Ezekiel Bonillas - Professor of Entrepreneurship | CSU, San Bernardino
​
Chris Mata - Senior Relationship Manager | Bank of the West
​
Jeanne Batista - Owner | JM Batista Solutions
​
Russell Moore - Retired Commercial Banking Officer
Meet The Team
Loan Servicing
FOR ANY QUESTIONS ABOUT YOUR EXISTING LOAN PLEASE CONTACT DAVID POOLE:
​
David@efc504.com | (909) 792-3803 x 102
​
Mail to: 37023 Cook Street, Ste. 102, Palm Desert, CA 92211
How do I check my balance?
​
Wells Fargo does not provide monthly statements, instead you should have received an amortization schedule just after your loan funded. Your amortization schedule is a breakdown of your monthly loan payment for the life of your loan. If you want to view the payments you have made to date, contact David Poole.
​
How do I payoff my loan?
​
Loan prepayments are made once a month on the third Thursday. If you wish to pay your outstanding loan balance, please contact Enterprise Funding with a request to do so. All payoff request must be received prior to the 31st of the month prior to payoff.
​
Please include the following information in your request:
​
-
Month of expected payoff
-
Loan Number
-
Escrow or bank contact info if available
​
How much interest have I paid?
​
If you need a copy of your 1098 statement for interest paid please send email to David Poole
​
-
1098 Statements not available until after January 31st.
​
To change the reporting of interest on your loan to the IRS Complete a W-9 form and send to David Poole.
​
How can I change my account for automatic debit payment?
​
If you want to change the account that is automatically debited for your monthly payments please submit a new ACH Form and a voided check to David Poole.
​
Submitting required property insurance
​
CDC must at all times have a current copy of your Hazard Insurance, Workers Compensation and/or Business Personal Property. We ask that your insurance agent include the following on the proof of insurance.
​
-
In the form of an Acord 28 (Evidence of Commercial Property Insurance) showing Replacement Cost coverage on building and Equipment (if any)
​
-
Borrower's name, loan number, property address, policy number and expiration date
​
-
CDC and SBA named as 2nd mortgagee and loss payee
​
Enterprise Funding and U.S. Small Business Administration, and their successors and/or assigns, as their interests may appear.
​
Submitting current financials
​
Current financial information is required to be submitted on an annual basis. Please submit them to David Poole.
​
Changing the structure of the loan
​
Any changes to the structure of your loan must have prior written conset from SBA. Examples are:
​
-
Change of form
-
Assumption
​
-
Change of Ownership
​
-
Change of Management