March 2019
Commercial Lending
504 Bridge Loan Program Delivers Viable Interim Financing Option for SBA Lending Partners

Loans under the Small Business Administration (SBA) 504 Program provide permanent or takeout financing for first mortgage lending partners.  In many cases, the lending partner in a 504 deal provides provisional financing to cover the interim phase of a project between the lending partner’s closing and the SBA takeout of the second mortgage, during which time the lending partner is at risk on the second mortgage.

SBA Lending Partners Benefit from 504 Bridge Loan Program ParticipationIt’s not uncommon, however, for a first mortgage 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.

That’s where the 504 Bridge Loan Program comes in.  The program, which is available for any Florida SBA 504 loan, mitigates exposure risk for 504 lending partners by providing bridge loan funds to cover the second mortgage during the interim period of the project until the permanent SBA takeout occurs.

To date, the 504 Bridge Loan Program has committed and/or deployed more than $94 million in interim financing.

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 of the bridge loan is 6 months.  If the 504 loan has not funded by expiration of the initial 6-month term, the second mortgage bridge loan will be automatically extended at 6-month increments with pricing adjustments applicable once the loan matures past 1 year.

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

The 504 Bridge Loan is non-recourse to the lending partner.  Bridge loan funds are repaid through takeout via the SBA 504 loan.

Click Here for Frequently Asked Bridge Loan Questions

504 Bridge loans are administered by the Florida Department of Economic Opportunity and processed by Florida First Capital.  Florida First Capital underwrites, prepares loan documentation, coordinates closings and provides bridge loan servicing.

Interested 504 lending partners should contact a Florida First Capital loan officer for an application and other required documents.  Click here to locate one of our loan officers in your local area.  Phone: 850.681.3601 or toll-free at 800.504.LOAN.