April 2019
Commercial Lending
No, We Didn’t Really Finance the State’s First Outdoor Snow Ski Resort … However

We had some good lighthearted fun in the name of April Fools’ Day 2019.  On Monday, April 1, we sent out an email blast highlighting our latest Small Business Administration (SBA) 504 loan project – the first outdoor snow ski resort in Florida!

Florida's First Outdoor Snow Ski ResortThe $18 million fictitious deal included 50 acres of land, construction of three ski slopes, ground-up construction of an Alpine style 120-room full-service lodge as well as the purchase of a high speed chair lift and revolutionary new patent pending snow making machine that produces melt less artificial snow regardless of air temperature (ha!).

Kidding aside, this pretend deal actually highlights the ability of the 504 Loan Program to finance many different property types for small- and medium-sized businesses, including special assets (otherwise known as special purpose properties).

In fact, this asset class may be difficult to finance without the support of an SBA loan. Specialty properties that may require additional collateral or an additional down payment with a conventional loan are likely to qualify for more reasonable financing with an SBA 504 loan.

The only caveat of financing a special purpose property with a 504 loan is the 504 loan structure starts at 50/35/15% (instead of the traditional 50/40/10%).  When financing a special purpose property, the 504 commercial lending partner’s 1st mortgage must be at least 50% of the project, the SBA 2nd mortgage is limited to no more than 35% of the project and the borrower must inject a minimum of 15% down (20% if the project is both a start-up and a special purpose property, which is the max down payment for a 504 loan).

Even with the increased borrower injection, SBA financing compares favorably to conventional terms, which often require down payments upward of 30% or more to secure this type of special asset.

The SBA 504 Loan Program provides up to 90% financing at below-Prime, fixed interest rates and long amortization terms up to 25 years for the purchase of major fixed assets, such as owner-occupied commercial real estate, energy efficient “green” initiatives and/or fixed heavy duty machinery and equipment.

504 loans 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.  Note: These are SBA 2nd mortgage loan portions only; there is no limit on overall project dollar size.

So what types of properties are considered “special purpose”?  Here is the SBA’s full list:

  Amusement parks;
  Bowling alleys;
  Car wash properties;
  Cemeteries;
  Cold storage facilities where more than 50% of total square footage is equipped for refrigeration;
  Dormitories;
  Farms and dairy facilities;
  Funeral homes with crematoriums;
  Gas stations;
  Golf courses;
  Hospitals, surgery centers, urgent care centers and other health or medical facilities;
  Hotels and motels and other lodging facilities;
  Marinas;
  Mines;
  Nursing homes, including assisted living facilities;
  Oil wells;
  Quarries, including gravel pits;
  Railroads;
  Sanitary landfills;
  Service centers (e.g., oil and lube, brake or transmission centers) with pits and in ground lifts;
  Sports arenas;
  Swimming pools;
  Tennis clubs;
  Theaters; and
  Wineries.

Lenders, if you have a special purpose project that’s outside your bank’s traditional comfort zone, consider partnering with us and taking the deal 504.  And as with all 504 loans, the program puts commercial lending partners in a 1st lien position with an attractive 50% LTV, thus minimizing their collateral risk.

For more information about SBA 504 loans in Alabama, Florida or South Georgia, contact a Florida First Capital Loan Officer or email us at info@FloridaFirst.com.  Phone: 850.681.3601 or toll-free at 800.504.LOAN.