Frequently Asked Questions
- When should my business consider using an SBA 504 or 166 Regional loan?
- How much can I borrow?
- Is it true that these loans require a lot of paperwork and that it takes a long time to get approval?
- Why should my business go to the extra effort to get a 504 or 166 loan?
- Will using a 504 or 166 loan delay my project?
- Do you provide start-up financing?
- So you will finance start-ups?
- Is debt refinancing allowed?
- Are there fees associated with these programs?
- Can a 504 loan and a 166 loan be used with other public loan programs?
- What is the best way to find out if a 504 or 166 loan can work for my business?
Q: When should my business consider using an SBA 504 or 166 Regional loan?
A: When your business needs to make an investment in real estate or equipment. This can mean purchasing, constructing or renovating a building that your business will substantially occupy. An SBA 504 loan can also help purchase and install equipment that, on average, has at least a ten-year life. A 166 Regional loan can help purchase equipment and finance shorter-life equipment.
Q: How much can I borrow?
A: Both the 504 and 166 programs lend up to a maximum of 40% of a real estate or equipment project. The rest comes from another lender (usually a bank) and equity. The 504 loan can be at most $5 million depending on your particular situation. The 166 Regional loan maximum is $500,000.
Q: Is it true that these loans require a lot of paperwork and that it takes a long time to get approval?
A: OSDC tries very hard to minimize paperwork and provide a quick response to any loan request. Documentation for 504 and 166 loans closely follows your bank's application requirements, so OSDC usually just needs a copy of what you have given your banker. The OSDC staff's in-depth experience with these programs allows us to determine within several business days if a 504 or 166 loan is a good fit for your project. If yes, then loan approval usually occurs within 30 days.
Q: Why should my business go to the extra effort to get a 504 or 166 loan?
A: The benefits to a business include low down payment, longer term and overall more financing than what may be available through a conventional lender alone. In most cases, the borrower's down payment will be 10% of project costs. Also, the 166 loan offers an attractive low fixed rate between 2% and 8%. The 504 loan rates are generally below market and fixed for the term of the loan.
Q: Will using a 504 or 166 loan delay my project?
A: A project utilizing 504 financing can proceed according to the policies of the participating lender; however, the SBA is not 100% committed to make the loan until it is approved in writing by the SBA. A 166 Regional loan requires approval by the State Controlling Board before the project can move forward. In exceptional cases, with prior notification, the State will allow a project to go forward at its own risk.
Q: Do you provide start-up financing?
A: A 166 Regional loan could help a new business purchase equipment. An SBA 504 loan could be considered for a start-up business purchasing equipment that has a ten-year life. In most cases, a start-up business isn't ready to make an investment in real estate until after it has established a track record and proven itself. However, there are exceptions due to the special nature of a business, when an existing company is expanding to a second location or when an established company is branching out into a related field.
Q: So you will finance start-ups?
A: Only when it makes the most sense from an operations and financial perspective. Additional equity and very often additional collateral would be required in order to offset the risk which is inherently involved in any new business.
Q: Is debt refinancing allowed?
A: Yes. The 504 program can participate in projects that include existing debt.
Q: Are there fees associated with these programs?
A: Yes, there are fees as found on the loan program information page. The SBA 504 loan includes processing fees, closing costs, and the Third Party Lender fee. Most of these fees can be financed and added onto the loan amount. The 1.5% 166 Loan fee is usually paid out of pocket.
Q: Can a 504 loan and a 166 loan be used with other public loan programs?
A: YES! The SBA 504 loan program can be used in conjunction with many other financing options including the 166 Regional loan and local revolving loan funds. OSDC works to get the best financing package for your business.
Q: What is the best way to find out if a 504 or 166 loan can work for my business?
A: Talk to your banker about these programs and call OSDC at 614/481-3214 or email at firstname.lastname@example.org.