Business and its affiliates size standards:
- Total tangible net worth cannot be more than $20,000,000; AND
- Two year, average, after tax net income cannot exceed $6,500,000
OR - Industry size standards – gross sales or full time equivalent jobs limits for each industry.
SBA’s Affiliation Overview:
- Applicant owning > 50% of another business…affiliated.
- Another Business owning > 50% of applicant…affiliated.
- Another Business owning > 50% of both the applicant and a third business in same 3-digit NAICS…affiliated.
- Individual has > 50% ownership of both applicant & business both operating in the same 3-digit NAICS.
- If no > 50% owner, then business with 20% or more ownership in applicant in same 3-digit NAICS…affiliated.
- If no > 50% owner, then individual with 20% or more ownership in applicant AND > 50% in another business with the same 3-digit NAICS…affiliated.
- Spouses & minor children are combined when determining their ownership interest.
- SBA considers the pro rata ownership of entities. For example, John Smith, Jane Doe, and Jane Doe, Inc., each own an interest in the Applicant. Jane Doe owns 15 percent of the Applicant, and she also owns 100 percent of Jane Doe, Inc. Jane Doe, Inc. owns 50 percent of the Applicant. SBA considers Jane Doe to own 65 percent of the Applicant.
Economic Development & Public Policy Goal Requirement:
- One job created for each $90,000 (Manufacturing – $140,000) of SBA 504 loan amount; or
- Project located in rural area; or
- Operating business owned 51% by a women, veteran, or minority; or
- Manufacturer; or located in an area with a community plan for redevelopment; or
- Renewable energy project (geothermal, solar panels, energy efficient bldg., etc.); or
- Businesses affected by new federal mandated requirements, base closings; or etc.
Eligible Uses of Funds:
- Purchase bare land or land & building
- Remodel of existing building
- Construction of building
- Purchase of furniture, fixture, & equipment
- Bank “Interim” Loan Closing Costs & Interest Expense
- Appraisal Report & Environmental Reports
- Prior Land/Bldg./Equipment purchased not funded with a term note (contract or bank).
Refinance fixed asset debt up to 100% of new investments (#1 to #7 above). Refinanced debt is limited to the following debt:
- 85% of the original debt proceeds must have financed fixed assets.
- Current for last 12 consecutive months or however long debt has been in place.
- Reducing debt’s payments by 10%, or have a balloon feature, etc.
*Because the bank & Net 504 loans cannot exceed 90% of appraised value, the Soft Costs (#5 thru 7) may or may not be able to be funded within the 504 project.
Refinance fixed assets:
Eligible uses include Qualified Debt and Business Operating Expenses and must meet the following requirements and limitations:
- At least 75% of each loan must have originally purchased real estate and/or long term equipment with fixed assets as collateral.
- Loan(s) must have been in place for 6 months and current for at least 6 months.
- Borrower must have de minimus ownership change in the last two years.
- Qualified Debt can include term loans involved in a federal program (i.e. SBA, USDA, etc.).
- Qualified Debt refinancing project cannot exceed 90% of collateral value.
- Business Operating Expenses includes business expenditures incurred or due within the next 18 months and cannot exceed 20% of the appraised value. These Expenses may include salaries, rent, utilities, inventory, line of credit (includes SBA loans), FF&E, and building improvements.
- Refinancing Projects that includes Business Operating Expenses cannot exceed 85% of collateral value.