April 2017
Commercial Lending
504 Bridge Loan Program Helps Two Little Fishies Thrive

If you’ve ever seen an episode of ‘Tanked’ on the Animal Planet network, you can’t help but admire the creations featured on the show.  Anyone that has enjoyed these colorful works of art that are home aquariums understands that these are complex ecosystems that require constant care and attention.

Florida's 504 Bridge Loan ProgramTwo Little Fishies, Inc., in Miami Gardens was founded in 1991 to promote the reef aquarium hobby with its introductory video and books about reef aquariums by renowned aquarium expert Julian Sprung.  Since its small beginning, Two Little Fishies has grown to become a manufacturer and importer of the highest quality products for aquariums and water gardens, with international distribution in the pet, aquaculture and water garden industries.

With this substantial growth, it became evident that the company needed larger facilities.  To this end, the company eyed the purchase of a 6,952 square-foot warehouse/condominium space adjacent to their existing location.

Having used the Small Business Administration (SBA) 504 Loan Program previously for the purchase of the company’s existing facilities, Sprung worked with Florida First Capital and utilized the program once again to finance the expansion project.

However, this time around the first mortgage commercial lending partner in the deal took advantage of the 504 Bridge Loan Program, which helps mitigate an inherent challenge common in 504 transactions.

The SBA 504 Loan Program is a great fixed asset financing tool for commercial lenders because typically they are only at risk on the 50% first mortgage.  However, during the interim phase of a 504 project between the commercial lending partner’s closing and the SBA takeout of the second mortgage, the commercial lending partner is at risk on the second mortgage as well.

It’s also not uncommon for a commercial lending partner to initiate an SBA 504 loan, but decide not to fund the interim second mortgage due to external, internal and/or project based reasons, such as legal lending limits, internal policy guidelines or because of the property type.

The 504 Bridge Loan Program available through Florida First Capital provides 504 commercial lending partners with bridge loan funds to cover all or part of the second mortgage during the interim period of the project until the permanent SBA second mortgage takeout occurs.

With a total project cost of a little over $1 million, the first mortgage lender in the Two Little Fishies deal was able to use the 504 Bridge Loan Program to secure the $440,000 second mortgage amount during the interim period, thus alleviating risk.

“The 504 Bridge Loan Program was a great incentive for the first mortgage lender to participate in the transaction, while guaranteeing that the take-out funding was securely in place,” said Alejandro Buitrago, Florida First Capital Vice President and Business Development Officer for the Miami-Dade area.

Bridge loan funds may be used for interim project financing of the second mortgage of authorized SBA 504 loan projects, including straight acquisitions, renovations or build-out projects, ground-up construction and/or fixed heavy duty machinery and equipment purchases.

504 bridge loan sizes range from $250,000 (recommended minimum) to $5 million (legal maximum). Generally, the total project limit is $20 million. The initial term is six (6) months with automatic extensions with pricing adjustments after 1 year.

Commercial lending partners may also earn servicing fees on the bridge loan during the initial six (6) month term (Note: straight acquisition projects and projects with renovations only; servicing fees are not applicable for ground-up construction projects).

For more information about the 504 Bridge Loan Program or SBA 504 loans in Florida, South Alabama or South Georgia, contact a Florida First Capital Loan Officer or email us at info@ffcfc.com.  Phone: 850.681.3601 or toll-free at 888.320.5504.