February 2018
Borrower Profile
SBA 504 Debt Refinance Loan Helps Boat Manufacturer Remain a Contender

Contender Fishing Boats have been fished in South Florida for over 30 years.  With thousands of boats floating along coasts around the country, the product is the best testament of the dedication to their unwavering “Performance through Innovation” motto.  As company owner Joe Neber likes to say, “Despite your fishing level, you’re starting with the unfair advantage of a Contender Fishing Boat.”

Contender Fishing Boats Homestead FloridaNeber founded Contender in 1984 at just 27 years of age.  Today, the company manufactures sport fishing boats, tournament boats and bay boats ranging from 22′ to 39′ in length with pricing from $55,000 to over $1,000,000.

Central to the success of Contender is a fully integrated manufacturing facility with an aluminum shop for towers and tops and an upholstery shop for cushions and bolsters strategically located at their headquarters in Homestead, between Miami and the Florida Keys.

After Hurricane Andrew in 1992, the Beacon Council and City of Homestead approached Neber to move the operation to Homestead and to bring manufacturing jobs with him, which led to the construction of the manufacturing facility on land that was leased from the city.  In 2004, a loan was extended in order for the company to buy the real estate from the city and construct a second facility onsite.

Fast forward to today and after careful consideration of the current financial markets, Neber sought the expertise of Florida First Capital and the Small Business Administration (SBA) 504 Loan Program in order to refinance the $4.5 million note.

“This is a great example of the SBA 504 Loan Program’s ability to refinance existing debt in order to help fortify small businesses in today’s changing and often challenging financial environments,” said Alejandro Buitrago, Florida First Capital Vice President and Business Development Officer for the Miami-Dade area.  “The savvy entrepreneurs that are today’s small business owners know they have to take the opportunities that flexible financing offers and there is no better product available today in terms of flexibility than the SBA 504 Loan.”

Under the SBA 504 Loan Program, borrowers have two options for debt refinancing — with and without expansion.

Under debt refinancing without expansion, small business owners can lighten their monthly debt payments and access equity trapped in commercial real estate holdings by refinancing conventional real estate loans.  Borrowers may also refinance eligible business operating expenses (cash-out option).

For borrowers that refinance only long-term fixed asset debt (no cash out), the maximum LTV is 90% of the fair market value of the eligible fixed asset(s).  Eligible fixed assets include land, buildings, machinery and equipment that were acquired, constructed or improved by a small business for use in its business operations.

Borrowers can also refinance eligible business operating expenses (cash-out option), however a maximum 85% LTV applies and the business operating expenses portion of the project may not exceed 20% of the value of the eligible fixed asset(s) securing the qualified debt.  Eligible business operating expenses includes salaries, rent, utilities, inventory or other obligations of the business that were incurred but not paid prior to the date of the refinance application or that will become due for payment within 18 months after the date of application.

Debt refinancing with expansion is a strong option for small business owners looking to grow and expand their operations and reduce some debt at the same time.  Under this option, if an SBA 504 loan project involves expansion, then existing debt that does not exceed 50% of the cost of the expansion may be refinanced.

“Expansion” includes any project that involves the acquisition, construction or improvement of land, building or equipment for use by the small business.  The debt being refinanced will be added to the expansion cost to establish the total project costs.

Substantially all (85% or more) of the indebtedness should have been used to acquire land, land and building, construction of a building or to purchase equipment.  The assets acquired should have been eligible for financing under the 504 loan program.

The existing debt should be collateralized by fixed assets. The 504 eligible fixed assets collateralizing any debt to be refinanced, or relating to the portion of debt being refinanced in the case of a partial refinance, should also collateralize the 504 Loan.  The financing must provide better terms or rate of interest than the existing indebtedness on the date of refinancing and at least a 10% reduction in the debt service on the existing loan.

The SBA 504 Loan Program provides up to 90% financing at below-market, fixed interest rates and long amortization terms for the purchase of major fixed assets, such as owner-occupied commercial real estate and/or heavy duty machinery and equipment.

504 loans are paired with private-sector commercial loans and provide up to $5 million of aggregate SBA eligibility on standard 504 projects; up to $5.5 million per 504 energy efficient green project not exceed $16.5 million in the aggregate; and up to $5.5 million per eligible small manufacturing project with no limit on total SBA dollars available.  These are SBA 2nd mortgage loan portions only; there is no limit on overall project dollar size.

For more information about SBA 504 debt refinancing 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.