Colorado Banker - May/June 2019

8 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S FEATURE ARTICLE The SBA 504 loan program provides financing for major fixed assets, such as owner-occupied commercial real estate and long- term machinery and equipment. SBA 504 Loan Program Benefits and Eight Common Delays R ules. Regulations. Documents. Financials. Often times thesewords can be intimidat- ing to small business owners, and even to lenders. However, the process of getting a Small Business Administration (SBA) 504 loan doesn’t have to be scary! Understanding what you need up front allows for a swift approval process that will save bothyouandyour borrower the potential headache of being declined. But before jumping into the eight common delays of SBA loan approvals, let’s first provide a quick overview of the SBA 504 loan program and how this financing can benefit both you and your borrower. The SBA 504 loan program provides financ- ing for major fixed assets, such as owner-oc- cupied commercial real estate and long-term machinery and equipment. The typical SBA 504 loan structure includes a loan from a bank secured with a first lien covering 50% of the project cost, a loan from a Certified Develop- ment Company (like Colorado Lending Source) with a second lien covering 40% of the project cost, and a 10% equity injection by the borrower. Benefits of the SBA 504 loan program for small business owners include: • Long-term, below-market, fixed interest rates (10, 20, and 25-year options) • Up to 90% of the total project cost can be financed • Longer loan amortizations allows for lower monthly payments • Borrowers inject 10% on commercial real es- tate, saving capital for their business Benefits of the SBA 504 loan program for lenders include: • Lender typically takes on 50% of the total project which leads to a strong LTV • Smaller lenders can handle larger projects • Assists in risk and liquidity management, and can provide fee and interest income through selling the first mortgage on the secondary market • Can help retain and attract customers In order to keep the SBA approval process on track, we’ve outlined the most common delays that can be avoided. Here’s a list of eight situa- tions that we see most often: 1. Minimal communication from lender or bor- rower – Maintaining close communication with us ensures that we can obtain all the required documents for SBA approval. BY LAUREN KLOOCK