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Small Business Administration 504
Coastal Community Capital is a Certified Development Company (CDC) with the U.S. Small Business Administration. We are a nonprofit corporation set up to contribute to the economic development of our Area of Operation (the Commonwealth of Massachusetts), working with SBA and private-sector lenders to provide financing to small businesses.
How It Works
The SBA 504 Loan Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. Lenders partnering with Coastal on a SBA 504 Loan will provide a loan with a senior lien covering up to 50 percent of the project cost, while Coastal will provide a loan (backed by a 100 percent SBA-Guaranteed debenture) with a junior lien covering up to 40 percent of the total project cost. The borrower is left with contributing at least 10 percent equity. Generally, partnering lenders provide "interim" financing as the 504 is a permanent loan. During the construction or renovation period, the lender would provide the full 90 percent financing based on the 504 commitment.
Why It's Important
Healthy businesses, which plan to invest in equipment or real estate to develop, expand, and grow their business, could qualify for attractive financing using the 504 Loan Program. As a lender, using the 504 Loan Program means you have first lien position with low loan-to-value, minimizing your collateral risk as well as setting your own rate and fees on the lender portion. The 504 Loan Program can help you meet policy and regulatory guidelines with the added benefit of keeping and attracting small businesses that create and retain jobs.
Benefits of Partnering With Coastal
We work with you and your client to tailor a financing package that meets program guidelines and credit criteria of your client. We work directly with your client to package, process, close, and service the 504 Loan while you process the loan as you would any loan request. We work with you to collect documents from the borrower and we can share our credit underwriting with you. Coastal provides permanent financing when the project is completed and the loan is closed, in accordance with Coastal's loan covenants and restrictions. Funding is arranged by Coastal issuing a 10 or 20 year bond that is sold to investors on Wall Street.
Other benefits include:
- First lien position and low LTV strengthens private lender's loan portfolio
- Fixed interest rate helps you compete for more business
- Creative financing to differentiate your lending institution in the marketplace
- Secondary market provides additional income opportunities
- Eligible soft costs may be rolled into the project financing
Last updated: May 16, 2012