Tag Archives: SBA eligibility

City business district

Explaining the SBA 504 Debenture Process

What Does it Mean and How does it Work?

A debenture is really a fancy word for a special kind of bond. It is an “instrument” created by a lender to raise capital. Lenders create a debenture and are in first position to be repaid. This debenture is bought and sold on financial markets.

Debentures are an integral part of the Small Business Administration (SBA) 504 loan program.

Here’s how the SBA 504 program with Debenture works:

  • There are three entities that fund the loan: a senior lender, a Certified Development Company (CDC) and the borrowers themselves.
  • The Senior lender provides typically 50% of the funding through the first mortgage. Their loan is in the form of a bridge loan, because it bridges the gap while the full funding is underway.
  • The CDC provides a second mortgage loan for a large chunk of the loan (around 40%). This portion of the loan is guaranteed by the SBA.
  • CDC’s are not traditional lenders. They do not have depositors or customers in the same way. So, they raise funds through creating the debenture and selling it to investors. This debenture is 100% guaranteed by the SBA, and is considered a very safe investment.
  • The borrower provides a modest equity contribution (typically 10-20% of the loan)

Advantages of an SBA 504 program with a Debenture Component

  • Lower down payment/equity injection
  • Competitive fixed-rate financing for the life of the loan
  • Long repayment periods (up to 25 years)
  • Affordable payments as a result of the loan repayment periods, which impacts cash flow immediately

Timeline of an SBA 504 loan from start to Finish:

  • First, you have to select both a senior lender and a CDC. This is where GRP Capital’s expertise is the most critical. We have the experience and the vast lender network to help find both a lender who is willing to be in the senior position as well as an appropriate CDC.
  • The senior lender and CDC coordinate so they agree on the loan structure and details.
  • Once the senior lender and the CDC indicate their willingness to find your project, then dual underwriting commences. Borrowers work closely with our processing team to provide information and documents to both the lender and the CDC simultaneously.
  • Both the senior lender and CDC officially approve the loan through their loan committee sturctures.
  • The senior lender sets a closing date! The senior lender takes lead in creating documents, and agrees to a a place and time for closing. A title company, escrow and attorneys are also working on your behalf.
  • The first loan closes: borrowers take possession of their new property, and funding for other costs begins (like construction and renovation).
  • The borrowers begin making payments on the first loan.
  • Now the creation of the debenture occurs. The debenture sale occurs around 30-60 days after the first closing. That’s why a bridge loan is necessary.
  • After the CDC receives their funds from the sale of the debenture, they pay off the bridge loan in full. They then create their own closing documents and a second closing takes place.
  • The permanent 504 loan is fully financed.
  • The borrowers now make payments on the final permanent loan.

Why Should I Consider an SBA 504 loan?

  • Your project is more attractive with an SBA guarantee, especially for senior lenders.
  • The long terms and low rates are important to your business plans and projections.
  • You are purchasing a building or a business OR
  • You are refinancing and/or consolidating qualified debt OR
  • You are renovating or involved in construction OR
  • You are purchasing long-term machinery and equipment with a useful remaining life of a minimum of 10 years.
  • You do not need financing for working capital, as that is not an eligible 504 component.

Whether you’re purchasing, refinancing, or building from the ground up, our extensive network of lenders ensures you’ll find funding that aligns with your goals and cash flow needs.

Here’s what sets GRP Capital apart:

  • We save you time by researching and identifying the best funding options for your project.
  • Our expertise spans various loan products—including non-recourse loans, SBA loans, bridge loans, and conventional financing—so you can navigate even the most complex transactions confidently.
  • Beyond lending, we provide strategic guidance on operational decisions that drive long-term business success.
Loan calculation

Check Your EIDL Status: Your Future Loans May Depend on It!

What is your EIDL Status?

During the onset of the COVID pandemic, many business owners took advantage of low cost loans offered by the Small Business Administration (SBA), called Economic Injury Disaster Loans or EIDL. These were long term loans at a very low interest rate, intended to keep businesses operating.

If you have an EIDL on the books, it is critical that you are making the regular monthly payments. Even more critical is that every person who is even a partial owner in a business with an EIDL must confirm that their loan is current. You can use this link to confirm your EIDL status: Check here

GRP President Rick Patel and Managing Director Krishan Patel both have worked closely with clients whose EIDL status was not current.

Rick mentions, “There is almost nothing that is more detrimental to future loan eligibility than having an EIDL that is not current.”

Krishan states that responsible business people “must be proactive and check on any EIDL that has their name attached” before seeking out future financing.

What to Know and Do about your EIDL Status

  • Make sure you keep a current list of every business that you own (fully or partially) in which you received an EIDL.
  • The SBA portal can be utilized to check on the status of each EIDL loan. However, if there have been multiple partners or owners of a business that sought out a loan, you need to determine who set up the portal and the login information (user ID and password).
  • Within the SBA portal, you can see if the loan is current or not.
  • If your EIDL status is not current and shows either a default or even worse a charged off status, you must address this right away.
  • You cannot obtain future SBA loans (including 7(a) and 504) if your EIDL status is anything but current.
  • Please allow sufficient time to repair your EIDL status. First, find out the amount needed to get your loan current. Then continually communicate with the SBA to ensure that the portal status changes.
  • The SBA portal allows you to download EIDL documents, which might be requested by lenders, particularly the loan agreement.

Best business practice tip: Maintain Business Debt Schedules

  • Maintain a business debt schedule for every business you own (even if you are even a partial owner).
  • Each business debt schedule should list every loan for this business, the monthly payment, the date of the loan and when it will mature, the interest rate, the original loan amount and the current balance.
  • For real estate mortgages, also include the original cost to purchase the property and the current market value (your best estimate).

Whether you’re purchasing, refinancing, or building from the ground up, our extensive network of lenders ensures you’ll find funding that aligns with your goals and cash flow needs.

Here’s what sets us apart:

  • We save you time by researching and identifying the best funding options for your project.
  • Our expertise spans various loan products—including non-recourse loans, SBA loans, bridge loans, and conventional financing—so you can navigate even the most complex transactions confidently.
  • Beyond lending, we provide strategic guidance on operational decisions that drive long-term business success.
New Mexico Native American art

New Mexico Hotel Refi Offers Low Rates

GRP Capital New Mexico hotel owners secured financing that offered market-best low rates.

Ryan Dumas and the GRP Capital team worked very diligently with this client group. The partners really had one overarching goal: securing lower rates. Their current note had a high interest rate. Therefore, their new loan needed to show significant savings. An SBA 504 loan was the best choice for them. It offered stable, low rates. More importantly, the SBA guarantee made the loan more attractive to lenders.

Senior Associate Ryan Dumas reflected on the path to get the loan closed. “Our clients are experienced in this marketplace. However, New Mexico is a smaller market. We needed the SBA to help support this loan in order to entice a lender. I was thrilled that this new loan is a full 3 points lower than the clients’ previous mortgage. They will be saving serious money, which they can use personally or professionally. They will continue to be a significant employer and business in their small town.”

Using an SBA 504 to Access Low Rates

  • GRP Capital has connections with multiple CDC’s across the nation and the lenders who are interested in 504 loans.
  • The 504 program requires utilizing a Certified Development Company (CDC). The CDC is SBA’s community-based nonprofit partners who promote economic development within their communities. CDCs are certified and regulated by SBA.
  • The SBA 504 structure guarantees loans, so that lenders face lower risks.
  • We are very careful to ensure sufficient SBA eligibility prior to choosing a loan vehicle. If you have any questions about what this means, please contact us.
  • In many marketplaces, the SBA guaranteed loans are competitive with conventional loans.
  • SBA loans may often be the best bet for achieving lower interest rates.

Contact Ryan if you are considering SBA funding, 504 Loans, Green Loans or any other loan products.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance, purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Third Beach Hotel Buy

Ryan Dumas and the GRP Capital team are very happy to have closed another Carolina beach hotel loan. Our clients decided to embark on an SBA 504 loan, utilizing the Green program. They will be adding solar panels to their hotel, reducing electric consumption and bills.

Senior Associate Ryan Dumas and our entire team collaborated with our very motivated clients to get this somewhat complex loan closed.

Ryan, who has now closed three loans with this client, stated:

I really value this client group and was so happy that they came to me for a third time to find financing. The lead borrower has a lot of knowledge about this resort community. Of course, he is an excellent hotelier. It was critical to place this loan with the SBA 504 Green Program. When you use the Green program, it preserves eligibility. Since the partners have other SBA loans, they didn’t max out with this loan. And now they are installing solar panels, which are ideal for sunny climates. Even more importantly, this kept the loan affordable, as the partners have other future business deals in mind.

Advantages of the Green Program for a Beach Hotel

  • There are certain limits to an SBA 504 loan. However, utilizing a Green Loan does not “count against” your eligibility.
  • Green Loans can be used to reduce energy costs and to utilize renewable energy. A sunny and/or windy location near a beach is perfectly situated.
  • We are very careful to ensure sufficient SBA eligibility prior to choosing a loan vehicle. If you have any questions about what this means, please contact us.
  • The 504 program requires utilizing a Certified Development Company (CDC). The CDC is SBA’s community-based nonprofit partners who promote economic development within their communities. CDCs are certified and regulated by SBA.
  • GRP Capital has connections with multiple CDC’s across the nation and the lenders who are interested in 504 loans.

Contact our team if you are considering SBA funding, 504 Loans, Green Loans or any other loan products. We can help you determine the right mix of loan types for all of your business financing needs.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance, purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Partner Group Buys New York Hotel

The New York hotel marketplace can be complex. Real estate taxes and procedures can be complicated with commercial real estate deals. But our clients were ready to purchase a New York hotel. They perceived that the state has largely bounced back from COVID, especially upstate.

Working closely with our entire team, they purchased the hotel and are ready to take advantage of summer high season. Our clients selected SBA financing for their loan. As a result, our team needed to be nimble, especially with changes in the SBA administration. Everybody was particularly mindful of the rules for SBA eligibility.

Senior Associate Ryan Dumas was excited to close this loan. He remarked:

My clients were ready to purchase this upstate New York hotel and have a good handle on this specific market. An SBA loan was the best loan vehicle for them. However, we were all aware of changes in the SBA. We had to make changes to the loan details a couple of times, but I was thrilled to get this across the finish line. I know my clients will own and manage this property in ways that maximize revenue, while keeping an eye on expenses.

Is an SBA Loan in Your Future?

  • The Small Business Association (SBA) has multiple loan programs and guarantees. They each have their own eligibility standards.
  • SBA loans may be the best choice for certain markets and for certain types of hospitality properties, especially hotels with external corridors.
  • Because of changes to SBA staffing and increased scrutiny of non citizen partners, borrowers should be aware that the SBA approval can take three to four weeks, in addition to lender underwriting and approval. (These can happen simultaneously.)
  • SBA also limits the amount of SBA debt each guarantor can have. This debt load does not include prior EIDL’s (Economic Injury Disaster Loans).

Contact our team if you are considering SBA funding or any other loan products. We can help you determine the right mix of loan types for all of your business financing needs.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance, purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.

Georgia hotel courtyard in Marietta

Georgia Hotel Owners Secure Triple Success!

Our clients, Georgia hotel owners of three independent properties, achieved an impressive trifecta by closing three loans all within 36 days of each other. Working closely with our entire team, they refinanced two loans and closed a new one, freeing up SBA eligibility, and unlocking new opportunities.

The outcome was impressive: two refinanced conventional loans and the successful purchase of a new Georgia hotel. Additionally, they were able to restructure their ownership simultaneously.

Senior Associate Ryan Dumas expressed his enthusiasm for the project, stating:

My clients possess a deep knowledge of the Georgia hotel market. I’m thrilled that we matched them with a lender who shares their vision for independent hotels. The lender’s flexibility in incorporating all three properties into the deal was key. Because of this, the clients’ loans have extremely favorable rates and the most stable financing available.

What is SBA Eligibility and How Did it Affect These Georgia Hotels?

  • The Small Business Association (SBA) has multiple loan programs and guarantees. They each have their own eligibility standards.
  • This Georgia hotel took advantage of the SBA 7(a) program. There are also 504 loans and subsets of those which include Green loans.
  • SBA 7(a) loans have an upper limit, typically $5,000,000.
  • SBA also limits the amount of SBA debt each guarantor can have. In this instance, moving other loans out of the SBA program freed up eligibility. This debt load does not include prior EIDL’s (Economic Injury Disaster Loans).

Is your project a good fit for an SBA loan or combining an SBA loan with other loan types?

  • What is the size of the loan or loans you are needing?
  • Who will be guaranteeing your loans?
  • Do the guarantors have other SBA debt? If so, how much?
  • What interest rates and terms do you have on loans you are wanting to finance?
  • What interest rates and terms match your budgeting needs and your business plans?

Contact our team if you are considering SBA funding or questioning your eligibility. We can help you figure out the right mix of loan types for all of your business financing needs.

Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance, purchase or engage in construction, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.