The 4-1-1 on the 504
Continued from Page 68
from owning commercial property that
can continue to generate income even after a business-owner retires.
Business-owners can reduce their initial capital outlay by leveraging the 90-per-
cent loan-to-cost financing that 504 loans
offer. The lower downpayment makes it
easier for business-owners to afford the
initial capital outlay for an acquisition or
construction project. In addition, the 504
enables borrowers to include renovations,
closing costs and other soft costs along
with furniture, fixtures and equipment in
the financing package.
The 504 loan covers 90 percent of the
total project cost, as opposed to the 70
percent to 80 percent of the property’s
purchase price or appraised value (
whichever is less) offered with conventional
commercial loans. The typical breakdown
of the funds in a 504 loan is: 50 percent
from a bank or other private lender, 40
percent from the SBA and 10 percent from
does not preclude business-owners from
also applying for funding from the SBA
7(a) program for working capital, inventory and other needs.
“The savings in interest payments, as well as in the
504 loan’s substantially lower equity requirements, are
significant. The greater long-term benefits, however, stem
from owning commercial property that can continue to
generate income even after a business-owner retires.”
The portion of the 504 loan funded
by the SBA represents some of the least-expensive financing available for small
businesses. The blended rates for the entire loan often are significantly lower than
those of conventional loans and can be
fixed for the duration of 20- to 25-year
amortizations. In addition, borrowing
from the SBA through the 504 program
The SBA 504 loan is available to almost any
type of for-profit small and midsized business in the United States, with the exception
of financial-services providers, passive real
estate investors, companies having a tangible business net worth greater than $8.5
million, or companies with net profits after
taxes that averaged more than $3 million
during the past two years.
The 504 loan requires applicants to
demonstrate job creation, export potential, or other economic-development or
public-policy goals, and the vast majority
of applicants can meet these goals.
The funds must be used for capital expenses, including land, buildings, construction and equipment. Owner-occupancy
requirements are 51 percent of the total
square footage for acquisition loans and
60 percent for new construction financing.
In addition, multiple businesses can jointly
pool 504 financing if they meet occupancy
The current lending climate makes the
504-loan program more essential and more
beneficial for small businesses than it has
been in the past 20 years. Recent changes —
as well as proposed changes — make the
program more accessible, affordable and relevant to today’s small-business owners.
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SF Partners Mortgage
Direct Commercial Portfolio Lender
Not Funding for the Secondary Market
Stated Income Commercial Lending for Owner Occupied,
Non Owner Occupied and Investor Properties
Credit Scores from 600 No lockouts
LTVs as high as 80% No pre-payment option available
Same-Day Approvals Cash Out Refi / Purchase Money
Close in 3-4 weeks 1 yr, 2 yr, 3 yr, 5 yr, 7 yr Fixed Period
Loan amounts from $200,000 and up Interest Only Available
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Continued from Page 70
areas are the most-desirable. Some lenders will even lend without any specific population requirements as long as there are
compensating factors. Make sure to spell
out clearly for the lender what it is that will
make your client’s deal successful in a particular area. Keep in mind, however, that
in today’s market, lenders consider specific states such as Michigan and Ohio as
high-risk markets because of their current
economies. If lenders agree to lend there at
all, the terms offered will be more limited
than in other areas.
Another key factor in placing a loan
is the property’s current occupancy level.
Lenders generally prefer a property near-or above-market occupancy levels. They
may accept below-market occupancy if
there is a reasonable explanation for it,
along with a positive trend in collections
over a period of time. Many lenders these
days require multifamily and commercial
properties to have at least 90-percent occupancy. Some commercial properties may
allow for occupancies as low as 75 percent
to 80 percent.
When working with commercial properties, be aware of the status of the properties’ current occupants. Tenants whose
leases are expiring within the next few
years may be closely scrutinized, and lenders may require other commitments from
the borrower upon closing. Borrowers
should contact any tenants that have leases
expiring within the next six months to one
year to determine their interest in or intent
on remaining at the property.
Lending on the following property types
Type A Multifamily, Mixed Use, Apartment Buildings, Warehouses,
O ce Buildings, Retail, Strip Malls, O ce Condos
Type B Convenience Stores, Daycares, Assisted Living Facilities, Autobody Repair,
Bars, Nightclubs, Adult Entertainment, Single-Purpose Properties
SF Partners Mortgage
800 Douglas Rd. North Tower, Ste. 500, Coral Gables, FL 33134
Despite tightened underwriting, financing for commercial mortgage loans is still
available. Every loan request is different
and will require its own method of preparation. But brokers who have an idea of
what to expect will be better prepared in
their quest for commercial funding.
Whether it is a portfolio-mortgage-lender loan, a conventional bank loan or
another financing source, the lending outlets that brokers need for multifamily and
commercial deals are readily available.
Positioning borrowers and their properties to best meet lenders’ requirements
can increase the likelihood of commercial-financing success.