SBA loans: Myths vs. reality

SBA 504 loans are a great way to help small businesses purchase, renovate or even build new office space or commercial real estate buildings. The U.S. Small Business Administration’s 504 program offers below-market, fixed-rate financing that allows businesses to keep their working capital and use it to grow.

The typical loan structure provides up to 90 percent financing, with the business owner providing as little as 10 percent. The financing includes the participation of a lender, who provides up to 50 percent of the total project costs, and an SBA 504 loan, which provides up to 40 percent.

If you need more space to grow your business, an SBA 504 loan might be a great option. Many people hesitate to check out SBA loans because the process seems daunting or because they aren’t sure if they qualify.

Here are some common myths and realities of an SBA loan to help you determine if it is a good fit for you:

Myth #1: My business is too big to qualify for a “small business” loan.

Reality: You’d be surprised how big a small business can be. Most privately owned, for-profit businesses qualify for SBA 504 loans. Many of my clients have annual revenues between $20 and $100 million. The SBA’s definition of a “small business” is determined by its net worth and net profit. Any business (including affiliates) with less than $15 million in tangible net worth and less than $5 million in net income after taxes, averaged over the past two years, qualifies.

Myth #2: SBA 504 loans are complicated and time-consuming to apply for.

Reality: There are actually just three forms specific to the SBA 504 loan program. Your certified development company, which is the SBA lender, uses the same documentation as the companion first mortgage lender. For most loans, you just need to fill out three additional forms for the SBA portion, and your SBA lender will help you with those. They are:

1. SBA form 912: statement of personal history

2. SBA form 1244C: applicant’s acknowledgement and certification

3. SBA form 413: personal financial statement

The SBA is a second mortgage holder on the loan, so additional documentation might be required to fund it. For most loans, there are only these three additional SBA documents needed to approve and close escrow on the property.

Myth #3: SBA loans take much longer than conventional financing.

Reality: There is no need to panic if you need to get a loan funded quickly. The SBA 504 loan process is fast and efficient. I promise! I can typically prequalify a loan within 48 hours with receipt of basic information. And because we use the same paperwork as the first mortgage lender, once your loan is approved by the lender, and the appraisal and environmental reports are completed, the SBA approval is usually complete within eight business days.

Myth #4: SBA 504 loans are for small projects.

Reality: SBA programs come in all sizes… from microloans up to $50,000 to SBA 504 loans up to $25 million. SBA 504 loans are designed for commercial real estate, construction and equipment purchases. Although the SBA’s second mortgage caps at 40 percent of total project costs, not to exceed $5 million (or $5.5 million for green projects or manufacturers), there is no limit to the loan that can be provided by the first mortgage lender. So 90 percent of your financing can be achieved on most projects, no matter the size.

Myth #5: I’ve reached my SBA limit.

Reality: There is currently no limit to the total number of SBA loans you can obtain, even if you have outstanding SBA loans … as long as the maximum SBA loan amounts do not exceed $5 million. There is no longer an SBA limit for businesses that “go green” or for manufacturers. With the SBA 504 green program, any project that results in a 10 percent energy savings or produces 10 percent of its energy through solar or green resources can qualify for up to $5.5 million in SBA financing per project. An added benefit to this program is that the costs of adding solar panels or improving your energy footprint can be financed. Manufacturers also qualify for up to $5.5 million per project.

Don’t believe the myths … take a few minutes to find out for yourself and start working to achieve your business goals today!

Ann Santiago is senior vice president of TMC Financing’s Southern Nevada operations. TMC Financing is the leading certified development company in the state of Nevada. Reach her at

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