Our Loan Programs
We are certified by the U.S. Small Business Administration to provide and service SBA 504 Fixed Asset Loans in Texas. In addition, we cooperate with other certified development corporations throughout the U.S. to originate and service loans outside Texas.
The 504 program has the goal of creating or retaining jobs by funding projects for small businesses. Loans are available up to $1,500,000 and in some circumstances $2,000,000. Our loans are 10 or 20 years in length at favorable fixed rates. We sell SBA-guaranteed debentures on the open market to generate the funds we loan. Thus, small businesses have access, through us, to the low-cost bond markets normally available only to the largest companies.
Borrowers are required to contribute a minimum of 10% of the project cost (cash or equity), obtain a private sector loan for 50%, and we loan the difference. For example, on a qualified $3,500,000 expansion project, the borrower injects $350,000, the lender provides $1,750,000 and we provide $1,400,000.
The Borrower's portion of the project can be cash, land, buildings, existing equipment, or any other fixed assets that are part of the project. Assuming prompt availability of documentation, a typical loan can be processed from application to approval in a week or so.
Each project that we approve is intended to generate one new or retained job in the first 24 months for each $50,000 that we loan. In some circumstances, we can reduce this eligibility requirement.
The commercial lender has the first lien on 100% of the assets in the project, and we take a subordinate position, which is backed by the SBA. The lender provides interim financing, and when the project is complete, we sell debentures and disburse the funds.
The loans are made for specific projects and can include land and buildings (acquisition, construction, expansion, and renovation), fixed equipment, and eligible soft costs. Working capital for some projects can also be obtained through a companion SBA 7A loan.
Our consultation, processing, origination, and servicing fees for our loans are included in the loan and monthly payments. Our processing fee is 1.5% of the net debenture amount. Other loan costs and fees will be dependent on the nature of your specific project.
During the life of our loan, we assign a Servicing Officer as a single point of contact. Annually, our officer will contact the borrower and make the necessary reports about the business's progress, growth, and job creation.