Loan Programs
Frequently Asked Questions
How can the proceeds of a 504 loan be used?
504 loan proceeds can be used for major fixed-asset purchases. -Property -Building -Building Remodeling -Buildouts -Attorney Fees -Architect Fees And other property aqusition costs.
504 loan proceeds can also be used to purchase equipment.
Does the Small Business Administration make the 504 loan?
No. A commercial lender and Essential Capital make the loan. The Small Business Administration (SBA) guarantees payment of the loan to the lenders in the event you default. The SBA makes payments directly to the lender in this case.
Why should I apply for a 504 loan versus a traditional commercial loan?
Your cash flow is improved with a 504 loan because your required equity is only 10 percent when the 504 loan is used for real estate related purposes. Your equity requirement may be higher for equipment purchases.
The portion of your loan funded by Essential Capital allows for up to a 20-year fixed rate. The longer terms makes for lower payments and the fixed rate gives you peace of mind.
In many instances, commercial lenders consider loans to be too risky. The solution is to make a 504 loan with participation from Essential Capital.
Since the SBA is guaranteeing the loan, will there be a lot of red tape?
Applying for a 504 loan is much like applying for a mortgage. Once you have provided the required documentation the process is generally completed with two weeks.
Can I go directly to Essential Capital to apply for a 504 loan?
Yes. Essential Capital will provide application information and will recommend 504 loan friendly commercial lenders.
Can I deal only with Essential Capital versus Essential Capital and a commercial lender to obtain a 504 loan?
No. A 504 loan must have participation from a commercial lender. A typical 504 loan includes financing of 50% of your total project cost by a commercial lender, 40% by Essential Capital and 10% by you.
Does the 504 loan carry stipulations in addition to the use of loan proceeds?
Yes. The intent of a 504 loan is community development. If you are purchasing an existing building you will be required to occupy at least 40 percent of it. If you are purchasing new construction, you will be required to occupy at least 60 percent of it immediately and 100 percent of it within 10 years.
Also, for each $50,000 borrowed, you should add one job for the community.
Please discuss these requirements with an Essential Capital representative.
What are the basic 504 loan eligibility requirements?
Your net worth cannot exceed $7 million and your net income average for the last two years must be less than $2.5 million.
Am I eligible for a 504 loan if my business is new?
You may apply for a 504 loan; however, your equity requirement will be greater than 10 percent.
When applying for a 504 loan, what are some of the questions that I need to be prepared to answer?
-Can your business repay the loan? (Is your cash flow greater than your debt service?)
-Do you collect your receivables?
-Do you pay your bills?
-Do the business owners have good credit histories?
-Is your business operating history profitable?
-Are sales growing?
-Are profits increasing as a percentage of sales?
-Are expenses controlled?
-Do you have experienced staff?
-Are the business owners willing to personally guarantee the loan?
-Are your taxes paid?
-Have you filed all income tax returns?
What are the SBA's size standards for 7 (a) loan eligibility?
The SBA size standards are based on the borrower's industry. The following size maximums must include all affiliates, which have common ownership or control.
Size criteria by industry:
- Manufacturing-Average employment over the past twelve months cannot exceed 500-1500, depending on industry
- Wholesale-Average employment cannot exceed 100.
- Service-Maximum varies by industry but cannot exceed from $2.5 million to $14.5 million in average annual revenues over the past three years
- Retail-Maximum from $3.5 million to $13.5 million in average annual revenues, depending on segment.
- Construction-Maximum varies from $7.0 million to $17.0 million in average revenues, depending on sector
- Agriculture-Maximum varies from $.5 million to $7 million in average annual revenues, depending on segment.
What is the maximum 7(a) loan amount?
The maximum is $2 million. A borrower may have multiple loans, but they cannot total more than $1.5 million.
Are any businesses excluded from 7(a) loan eligibility?
Yes. Sellers and publishers of adult material, speculative ventures, lending and/or investment companies, and gambling (limited gambling permissible) are not eligible. Also, there are some exclusions regarding some types of clubs, schools, insurance companies, and non-transient hotels, motels, and trailer parks.
Other factors that may exclude a business are its size and the availability of funds from other sources.
Why should I apply for a 7 (a) loan?
To get the financing you need to establish or grow a successful business. Commercial lenders are more willing to make loans, when they share the risk with the SBA.
What criteria will the lender consider to make me a 7 (a) loan?
-Sufficient assets must be pledged to adequately secure the loan to the extent they are available. (receivables, inventory, equipment, real property, etc.) or may be personal assets (deposits, real property, etc.).
-Personal guarantees are required from all owners of 20% or more of the company.
-Management must be experienced and of good character.
-There must be demonstrable cash flow to repay the loan.
-Debt to equity ratio must be reasonable for the industry. Adequate collateral must be obtained.
What is the JSEB Capital Access program?
A JSEB Capital Access loan provides a line of credit to a borrower with a Jacksonville contract associated with transportation. The line of credit is used to pay invoices associated with contract fulfillment.
How do I apply for a JSEB Capital Access credit line?
Contact Essential Capital at 904-398-9411.