504 UNDERWRITING TIP:

HOW CAN YOU BUY A BUSINESS USING AN SBA 504 LOAN?

1. We can only finance the portion involving real estate and eligible equipment. We can't finance goodwill, inventory, or other sales components.
2. We can't finance a transaction structured as a stock purchase. We need to have a purchase agreement for the fixed assets transaction. The seller and buyer can have a separate agreement that governs the sale of other assets.
3. We can't count existing jobs as "new jobs created" - we need to see potential for new job creation or meet a public policy goal.
4. The borrower must show strong management skills, and project reasonable cash-flow.
5. We need appraisals on real estate and equipment confirming their value, ideally borrower's at the time of approval.
6. In terms of a downpayment, the criterion we measure is the experience, not the company's history. If the management team does not have experience owning and operating this kind of business, we may need to treat it as a start-up, which requires an additional 5% down.
7. It is feasible to use SBA 7(a) financing for the part of the transaction not eligible for SBA 504 financing. We can help you look at that option.

1. The borrower wishes to buy assets of an existing business for $1.2 million; the transaction is mostly real estate, with little equipment involved, and few current assets like inventory. The property is a multi-purpose building that will appraise for $1 million.
2. The borrower owns a very similar business, and has operated it for three years.
3. The owners are willing to structure the purchase to maximize financing.
4. Our analysis indicates that the borrower can successfully cash-flow the debt.

1. There is one sales agreement for $1 million on the building, and another for $200,000 for the remaining assets.
2. We split the real estate acquisition on the standard "50-40-10" basis, so you finance $500,000, we finance $400,000, and the borrower invests $100,000.
3. The borrower provides $50,000 in owner's equity for upfront working capital.
4. You finance the remaining $200,000 through your normal lending channels; if you decide to have an SBA guarantee on that loan, we can help prepare the application.

Thank you for making March a productive month!

LENDER                    LOCATION             INDUSTRY                           PROJECT COST
Bank of America            Pineville         Funeral Home                                      $1,150,000
CIT Lending Services      Graham         Breakfast Sandwich Manufacturer            $978,620
Fidelity Bank                 Raleigh          Decorative Glass and Doors                  $1,314,000
First Citizens                 Mooresville    Martial Arts Instruction                             $742,000
First Citizens                 Clemmons     Direct Mail, Money Mailer                        $321,000
                                                                                         TOTAL               $4,505,620

Call the Self-Help loan officer nearest you to discuss a project or learn more about how you can use an SBA 504 loan to help your small business customers with expansion needs. 

Charlotte NC Region: Dale Harrold and Ralph Ansell, Self-Help, Great Aunt Stella Center, 926 Elizabeth Ave., Suite 302, Charlotte, NC 28204 * 800-394-7428

Sandhills NC Region: Allen Cofiori, Self-Help, 100 Hay St., Suite 300, Fayetteville, NC 28301 * 800-774-7966

Northeastern NC Region: Gerry Blood, Self-Help, 301 South Evans St., Suite 306, Greenville, NC 27858 * 800-893-9669

Triad NC Region: Anna Tefft, Self-Help, 122 N. Elm St., Suite 1015, Greensboro, NC 27401 and 500 West Fourth Street, Suite 200, Winston-Salem, NC 27101  * 800-269-7426

Western NC Region: Tom Byers, Self-Help, 34 Wall St., Suite 704, Asheville, NC 28801 * 800-229-7428

Contact our SBA 504 Program Director, Jim Overton, at 919-956-4473.

Or contact our SBA 504 Marketing Officer, Jamie Miyares, at 919-956-4670.