Owner User Financing

Vesa Commercial works in conjunction with CDC Small Business Finance, the nation’s leading provider of SBA-504 loans, designed to help small businesses buy, construct or improve commercial and industrial buildings as well as buy and install heavy machinery and equipment.

Key Advantages of SBA-504 loans over traditional business loans

    • Lower down payment – the business owner pays only 10% down, borrowing up to 90% of the total financing needs, thus preserving cash for the business.
    • Longer repayment terms – SBA repayment periods are longer than conventional bank loans – 20 years fully amortized for real estate loans and 10 years fully amortized for equipment loans. The borrower’s monthly loan payment is more affordable, improving cash flow.
    • Below-market, fixed interest rate.
    • Projected income consideration – SBA lenders consider projected income of a business in addition to historical cash flows. This is particularly advantageous for growing businesses.
    • Secondary source of payment less critical – With the SBA-504 loan guarantee, collateral may be less critical in qualifying a borrower for a loan.

Typical Structure

A SBA-504 loan has three participants:

    • Bank – provides a first trust deed loan for at least 50% of the total project cost.
    • CDC – provides SBA-guaranteed 504 loan for up to 40% of the total project cost, or a maximum of $5 million ($5.5 million for manufacturing businesses).
    • Small Business Owner – contributes a down payment of at least 10%.

Qualifying Requirements

To qualify for a SBA-504 loan, a business must:

    • Be a for-profit business owner
    • Be organized as a sole proprietorship, corporation, partnership or limited-liability corporation (LLC)
    • Have net worth no greater than $15 million and net profit after taxes below $5 million in the last two operating years

Loan Program Requirements

    • 51% owner occupancy for purchase of an existing building
    • 60% owner occupancy for new construction
    • Equipment must have a minimum 10-year economic life

Terms, Rates and Fees

The bank portion of the loan package is typically amortized with a minimum term of 10 years and up to a maximum of 25 years. Rate, term and fees will be negotiated on behalf of the borrower by Vesa Commercial with the bank.

The CDC portion can be offered with term options of 10 or 20 years fully amortized. The interest rate on a 504 loan is set at an increment above the current market rate for five-year and ten-year U.S. Treasury issues. Fees are approximately 2.125% of the loan amount, plus a fixed fee for a legal review. All fees are financed into the 504 loan.

How to Apply

As with any loan, a standard application and specific documentation are required. Our experienced loan officers can provide a loan pre-qualification letter to you in just 24 hours. The complete process, from application submission, to disbursement of funds takes approximately 45 to 60 days, depending on the complexity of the loan. Vesa Commercial provides a checklist to keep the process simple for the small business owner. We will work with your accountant, banker, lawyer or other key confidant and do all of the analysis, packaging and SBA interfacing for you.