The FFCFC 504 Loan Program: A Unique Alternative for Small Business Fixed Asset Financing

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1 Commercial Lenders The FFCFC 504 Loan Program: A Unique Alternative for Small Business Fixed Asset Financing The FFCFC 504 Loan Program is designed to help small business owners expand through the purchase of fixed assets either real estate or equipment at below-market, fixed interest rates and long repayment terms. This powerful and unique financing tool provides up to 90% financing and offers many advantages over conventional financing programs as well as excellent benefits for your lending organization. Loan Structure: A lender typically finances 50% of the project cost and takes a first mortgage position on the assets financed with a minimum term of 10 years for real estate and seven years for equipment. FFCFC typically finances 40% of the project cost up to a cap and takes a second mortgage position with a term of 20 years for real estate and 10 years for equipment. The 504 loan rate is fixed with level debt payments. The borrower puts in as little as 10% equity. Program Benefits: (NEW) Businesses with a maximum tangible net worth of not more than $15 million and average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years prior to application of not more than $5 million are now eligible for 504 financing (temporary until the SBA publishes a permanent regulation). (NEW)) Loan amounts up to $5 million for standard and public policy projects and $5.5 million for manufacturing and green initiative projects (SBA amounts only; no limit on overall project dollar size; permanent program change). (NEW) Debt refinancing to be used for refinancing of qualified existing debt without business expansion (pending final SBA policy; temporary two-year program). Benefits for Lenders: Expands your business loan portfolio. Minimizes collateral risk. Puts your lending organization in a first lien position with an attractive loan-to-value. Allows your lending organization to make its own credit decisions with its own loan documentation. Pricing is at the lender s discretion. FFCFC can work directly with the 504 applicant, saving your staff valuable time. Many 504 loans can be completed in 60 days, which is just as fast as a conventional loan. Pre-approval can occur within 24 to 48 hours, with commitments in days, not weeks. Ability to sell the first mortgage on the secondary market for substantial fee income and preserved liquidity. Make a deal happen that might not have worked with conventional (REV ) 504 Highlights: Purchase, construction, expansion or renovation of owner-occupied commercial real estate and/or the acquisition and installation of long-life machinery and equipment Up to 90% commercial Below-market, true fixed interest rates no ARMs. Amortization terms up to 20 years. Fees and other up front costs and expenses may be financed in the loan. Projects from $125,000 and up. About FFCFC: FFCFC is a statewide, nonprofit, federally regulated certified development company which administers the 504 loan program on behalf of the Small Business Administration. FFCFC prepares the loan documents and handles all of the details of the 504 loan, including credit underwriting, approval, closing and servicing of the loan for its life.

2 Important Changes to the FFCFC 504 Loan Program A number of very substantial benefits for America s small businesses were incorporated into the Small Business Jobs and Credit Act of 2010 (H.R. 5297), which was signed into law on Sept. 27, As a result, many more small business owners now qualify to receive Small Business Administration (SBA) 504 loans. Maximum Loan Amounts: Permanently increases the loan maximum on 504 loans, including public policy loans, to $5 million; small manufacturer and green initiative projects are increased to $5.5 million (SBA amounts only; no limit on overall project dollar size). This means larger projects are now eligible for 504 loans and borrowers who already have loans with the SBA can now return for additional funding. (Status: in progress.) Temporary Alternative Size Standard: Businesses with a maximum tangible net worth of not more than $15 million and average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years prior to application of not more than $5 million are now eligible for 504 (Status: the temporary alternative size standard will remain in effect until the SBA publishes a permanent regulation.) Debt Refinancing: Establishes a temporary two-year program of business debt refinancing to be used for refinancing of qualified existing debt without business expansion. This means small business owners holding commercial real estate loans with undesirable rates will now have the opportunity to refinance their loans using the 504 program at very desirable below-market, fixed interest rates. (Status: pending final SBA policy.) First Mortgage Pool Guarantee Program: Extends the sunset until September 2012 on the new temporary program for partial SBA guarantees on eligible pools of 504 first mortgages to be sold on the secondary market. (Status: in progress.) (REV ) 504 Highlights: Purchase, construction, expansion or renovation of owner-occupied commercial real estate and/or the acquisition and installation of long-life machinery and equipment Up to 90% commercial Below-market, true fixed interest rates no ARMs. Amortization terms up to 20 years. Fees and other up front costs and expenses may be financed in the loan. Projects from $125,000 and up. About FFCFC: FFCFC is a statewide, nonprofit, federally regulated certified development company which administers the 504 loan program on behalf of the Small Business Administration. FFCFC prepares the loan documents and handles all of the details of the 504 loan, including credit underwriting, approval, closing and servicing of the loan for its life.

3 Highlights and Key Facts of The FFCFC 504 Loan Program (NEW) Increased 504 Loan Amounts FFCFC can lend up to 40% of the project cost with the following dollar caps: $5 million for standard and public policy projects. $5.5 million for manufacturing and green initiative projects. (Note: SBA loan portions only; no limit on overall project size; permanent program change.) (NEW) Alternative Size Standard Businesses with a maximum tangible net worth of not more than $15 million and average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years prior to application of not more than $5 million are now eligible for 504 (Note: Temporary until the SBA publishes a permanent regulation.) The FFCFC 504 Loan Program is designed to help small business owners acquire fixed assets commercial real estate and/or long-life machinery and equipment without the financial hassles and high cash outlay requirements often associated with conventional financing programs. Loan Structure The key to the 504 Loan Program is its distributed credit structure: a commercial bank provides financing for 50% of the project and takes a first lien position; FFCFC provides 40% of the project financing and takes a second lien position; and the small business owner provides a down payment of just 10%. Program Highlights: Up to 90% commercial financing at below-market, fixed interest rates. Low down payment (usually 10%) preserves working capital. Long amortization terms (up to 20 years on real estate and 10 years on equipment). Projects from $125,000 and up. Use of Proceeds: Purchase, construction, expansion or renovation of commercial real estate and/or the acquisition and installation of long-life machinery and equipment. Green initiative projects (use of sustainable design; reduced energy consumption; renewable energy or fuels). (NEW) Debt refinancing may now be used for refinancing of qualified existing debt without business expansion (pending final SBA policy; temporary two-year program). Purchase of furniture, fixtures and equipment. Associated fees and soft costs (attorneys fees, architectural, engineering, surveys, etc.). Florida First Capital s Role FFCFC is central to each 504 project, typically preparing all paperwork, coordinating the activities of all project participants and structuring each project to balance the interests of both the business and the SBA. A Small Business Window to Wall Street Certified Development Companies like FFCFC fund all 504 loans through the sale of bonds, thus giving the program the economies of scale to access public capital markets. Combined with the Small Business Administration (SBA) guaranty, the 504 Loan Program enables small businesses to access funding at the lowest possible cost. (REV )

4 FFCFC 504 Loan Criteria and Eligible Use of Proceeds Getting Started On Your FFCFC 504 Loan The first step is to contact an FFCFC Loan Officer to discuss the project. Your loan officer will quickly provide you with a proposal and then work with you through the entire 504 loan process. Basic application materials include: Three years of financial statements and federal tax returns on the company. Two to three years of financial projections if no historical cash flow ability. Personal financial statement on the owners of the company. Written history of the business, reasons for expansion and plans. Copy of contract of sale. Personal history statement of principals indicating citizenship status. The following list is designed to aid in determining if a customer or prospect is a good candidate for the 504 Loan Program. This list is not intended to be the final word on whether a potential recipient will qualify or not, but rather a quick and easy reference sheet. Despite the ease of the process, there are criteria beyond the items listed here that could qualify or disqualify a candidate. Please contact an FFCFC Loan Officer for specific details. Eligibility Criteria: The borrower must be a legal entity: corporation, partnership, sole proprietor or limited liability company. The borrower must be a for-profit business located in or planning to locate in Florida. (NEW) Businesses with a maximum tangible net worth of not more than $15 million and average net income after Federal income taxes (excluding carry-over losses) for the two full fiscal years prior to application of not more than $5 million are now eligible for 504 financing (temporary until the SBA publishes a permanent regulation). The borrower s main line of business cannot be real estate development, although a construction company or other specialty contractor could be eligible. The project cannot be entirely income producing (i.e. relying on tenant income). The borrower must occupy at least 51% of the space on a purchase, and at least 60% of the space if the project is new construction. Use of Proceeds: Acquisition of vacant land for construction of a new building. Construction of a new building. Acquisition of land and existing building. Remodel, convert, expand, or renovate existing building. Green initiative projects (use of sustainable design; reduced energy consumption; renewable energy or fuels). (NEW) Debt refinancing may now be used for refinancing of qualified existing debt without business expansion (pending final SBA policy; temporary two-year program). Purchase of long-life machinery and equipment. Purchase of furniture, fixtures and equipment. Contingency reserve, not to exceed 10% of the construction costs. Associated fees and soft costs (attorneys fees, architectural, engineering, surveys, etc.). Repayment of interim points, fees and interests. Note: Costs incurred within nine months prior to the date of the 504 application to the SBA can be included in the project costs. (REV )

5 Other FFCFC 504 Loan Criteria Principals/Owners: Owners must be U.S. citizens or registered aliens with green card. Owners cannot be on probation. Liquid assets of the principles are taken into account in determining eligibility. Collateral: Generally, the project assets being financed are used as collateral. Anyone who owns 20% or more of the operating company must personally guarantee. Prepayment: There is a prepayment penalty for the first half of the 504 loan term. Contact an FFCFC Loan Officer for specific details. 504 Loan Profile: Making Small Business Financing More Affordable Here s how a 504 loan works: a project typically involves a first mortgage from a commercial lender (usually 50%) and a second mortgage from FFCFC (usually 40%). The borrower s down payment is usually only 10%, thus conserving working capital to expand the business and create jobs. Project Costs Existing Facility Example Land and Building $800,000 Renovations 100,000 Machinery 50,000 Soft and Closing Costs 50,000 Total Project Cost Project Costs New Construction Example $1 million Land $250,000 Construction 600,000 Soft and Closing Costs 150,000 Total Project Cost FFCFC 504 Loan Structure $1 million Lender First Mortgage (50%) $500,000 FFCFC Second Mortgage (40%) 400,000 Borrower Equity (10%) 100,000 Total Project Cost $1 million

6 Financing Florida Small Business How Can FFCFC Help You Get A 504 Small Business Loan? As a business owner or potential business owner, it s not always easy to find reliable financing when you re starting your own business or planning for its growth. High down payments, uncertain interest rates and short repayment periods make conventional loans unappealing or unavailable even when you know company expansion makes sense for your business, your employees and your community. For almost three decades, Florida First Capital has helped thousands of clients throughout the state achieve their small business dreams through the Small Business Administration (SBA) 504 Loan Program. We are the experts to turn to in Florida for smarter small business We Make the Process Easy Florida First Capital is dedicated to making the loan process easy. Our loan officers are trained professionals who are eager to help you with your financing request. Our loan officers will help with the paperwork, answer your questions and work to make both the application and credit processes smooth, quick and easy ones for you. We Have the Resources We ll provide you with all the information you need about the 504 Loan Program. You can rest assured that we have more resources and ways to finance your small business needs than ever before. The Right People No other Certified Development Company in the state is as committed to the success of its customers than Florida First Capital. And no other Certified Development Company strives to make the entire loan process as helpful, quick and easy as us. You can count on our staff to deliver the best and most complete service the industry has to offer. Florida First Capital: The State s Most Complete Certified Development Company Founded by the State of Florida in 1983 as a statewide Certified Development Company, FFCFC was privatized in 1997 and operates as a federally regulated, nonprofit corporation. From Pensacola to Key West, FFCFC s mission is to foster economic development by working with the SBA and private sector lenders to provide financing to small businesses. FFCFC is a charter member of the Florida Finance Network, an alliance of State of Florida founded economic development agencies.

7 Florida s Most Complete CDC The FFCFC ADVANTAGE Having an advantage in business means everything. When it comes to small business financing of owner occupied commercial real estate and long life industrial machinery and equipment, FFCFC is your Advantage. FFCFC has a proven track record of experience, performance and service That s why we re the best and most complete 504 certified development company in Florida. Top Reasons for Choosing Florida First Capital: Quick Turnaround Time: Approval decisions are made by our loan committee on a daily basis. Lowest Effective Rates: Borrowers pay the lowest effective rates permitted by law on 504 Loans. Easy Closing Process: Simultaneous closings for turnkey projects. Experienced Attorneys: Access to a specialized statewide network of local FFCFC closing attorneys. Professional Staff: Our highly trained and vastly experienced staff of loan officers and underwriting, closing and servicing professionals ensure you the best and most complete service the industry has to offer. Full Service Offices: From Pensacola to Key West, we have Florida covered! 504 Highlights: Purchase, construction, expansion or renovation of owner-occupied commercial real estate and/or the acquisition and installation of long-life machinery and equipment Up to 90% commercial Below-market, true fixed interest rates no ARMs. Amortization terms up to 20 years. Fees and other up front costs and expenses may be financed in the loan. Projects from $125,000 and up. About FFCFC: FFCFC is a statewide, nonprofit, federally regulated certified development company which administers the 504 loan program on behalf of the Small Business Administration. FFCFC prepares the loan documents and handles all of the details of the 504 loan, including credit underwriting, approval, closing and servicing of the loan for its life.

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