FAQs - Loan Structure & Projects Costs

Can seller-subordinated financing be used as the equity portion of the project?

Yes, however, in addition to subordinating to the bank and SBA, the seller will be required to sign a Subordination Agreement disallowing principal payments on the loan. If project assets are used to secure the seller's Note, the term of that Note MUST match the term of the SBA loan. However, if the seller's Note is secured by a non-project asset, the term need not match the SBA loan term.

Are SBA loans assumable?

Yes, as long as the SBA/SPEDCO have an opportunity to review both corporate and personal financial information on the proposed borrower(s) in advance of the sale. One note of caution: the release of the original borrower's personal guaranty is NOT automatic with a loan assumption.

Is it possible to purchase both real estate and equipment at the same time using an SBA loan?

Yes – in two possible ways. It is possible to prepare "companion" 504 loans – one 20– year loan for the real estate, and another 10–year loan for the equipment. Or, if the weighted useful life of the equipment does not "drag" the overall life of the project below 20 years, we can prepare a single application that includes both real estate and equipment.