504 Business Loans
How it Works
- The 504 program relies on a partner lender to supply the bridge loan in every transaction. SomerCor will work hand in hand with that partner lender to close the SBA 504 loan.
- The program is for take-out financing only. In a case there is construction/remodeling involved in the project, the 504 loan cannot fund until all of the project improvements have been completed and all associated construction draws are fully paid with final lien waivers.
- A SBA 504 loan will typically fund on the 2nd Wednesday of each month with the pricing of the debenture the first Thursday of the first full week of the month.
- In order for the 504 loan to fund, your SomerCor closing officer will need to finalize all the SBA documentation.
The list below will cover the typical requirements for most 504 loans. Your specific loan may require additional documentation. Please contact your SomerCor closing officer for specific details.
Bank required documentation
- A fully executed copy of the Permanent Note, Mortgage and Assignment of Rents, if applicable.
- A fully executed copy of the Interim Note, Mortgage and Assignment of Rents, if applicable.
- A fully executed copy of the Security Agreement and UCC financing statements, if equipment is involved with the loan.
- A copy of the lender’s final title policy with no construction exceptions.
- A copy of the lender’s wire instructions for the payoff of the Interim Note.
- A copy of a current ALTA survey on the property being financed. If the project involved ground up construction, the survey must be done post completion.
- Check made payable to SomerCor 504, Inc. in the amount of 0.5% of your permanent loan (termed the Participation Fee or TPL Fee)
- SomerCor will need to verify that all lender loan proceeds have been used for eligible project costs. Sufficient evidence typically includes the following items: (a) fully executed, certified, settlement statement from the lender closing; (b) front and back copies of cancelled checks coupled with associated invoices; (c) a copy of the executed Final Contractor’s Statement; (d) lender disbursement statements; (e) copies of wire transfers coupled with associated invoices.
- SomerCor will provide all associated SBA required closing documents to be executed by the lender.
Borrower required documentation:
- All organizational documents for all entities guarantying the SBA 504 loan.
- Corporation: Articles of Incorporation and Bylaws
- LLC: Articles of Organization and executed Operating Agreement
- Partnership: Executed Partnership Agreement
- Living Trust: Executed Living Trust Agreement
- Land Trust: Executed Land Trust Agreement
- Evidence of Insurance (ACCORD 27 or 28) showing that SomerCor 504, Inc. and the U.S. Small Business Administration (with proper addresses) are listed as Mortgagee and Lender’s Loss Payee showing full building & content replacement cost.
SomerCor 504, Inc., 601 S. LaSalle Street – Suite 510, Chicago Illinois 60605 and
U.S. Small Business Administration, 500 W. Madison Street – Suite 1150, Chicago Illinois 60661
Both entities should have the following after their name: “their successors and/or assigns, as their interest may appear (ATIMA)
- Certificate of Insurance (ACCORD 25-S) showing that the business entity has General Liability and Worker’s Compensation Coverage.
- If life insurance is required, please provide a full copy of the life insurance policy and an acknowledged collateral assignment on that life insurance policy naming SomerCor 504, Inc. and the U.S. Small Business Administration, with proper addresses, as assignees.
- A fully executed copy of the Lease between the holding company and business entity.
This lease must meet these requirements:
- Holding company must lease 100% of the rentable property to business entity
- The term of the lease, with options to renew exercisable solely by business entity, must be for at least the term of the SBA loan.
- The lease must be unconditionally subordinated to the SBA mortgage.
- The lease payments must be no more than is necessary to amortize debt plus pay expenses related to holding the property.
- Current interim financial statements (balance sheet and income statement) on the business entity dated & executed within 120 days of the 504 closing
- A voided check of the account that the auto debit of the SBA loan payment will be deducted from each month
- Evidence of required borrower capital contribution to project. Sufficient evidence typically includes the following items: (a) Fully executed, certified, stamped copy of the real estate settlement statement produced at the closing of the transaction; (b) front and back copies of cancelled checks coupled with associated invoices;
- SomerCor will provide all associated SBA required closing documents to the executed by the lender.