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Did You Know? 504 Bridge Loan Program Mitigates Risk on 2nd Mortgage Interim Financing for Lending Partners

Nov 2014

Under the Small Business Administration (SBA) 504 Loan Program, commercial lenders partner with a Certified Development Company like Florida First Capital to provide small business owners with up to 90% financing for the purchase of owner-occupied commercial real estate and/or heavy duty fixed machinery and equipment.

Typically, anSBA 504 loan is structured whereby a commercial lender finances 50% of the project and holds the first mortgage. Florida First Capital/SBA finances 40% of the deal and holds the second mortgage. The borrower provides a 10% down payment.

For a commercial lending partner in an SBA 504 loan, one of the most critical stages is the interim phase of a project between their closing and the SBA takeout of the second mortgage, during which time the commercial lending partneris at risk on the second mortgage.

The 504 Bridge Loan Program addresses this exposure and timing difference by providing 504 commercial lending partnerswith 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.

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). There is no limit on total project size. The initial term is six (6) months with automatic extensions with pricing adjustments. Commercial lending partners may also earn servicing fees on the bridge loan during the initial six (6) month term (straight acquisition projects and projects with renovations only; servicing fees are not applicable for ground-up construction projects).

504 bridge loans are processed by Florida First Capital, the state-appointed administrator of the program. Florida First Capital underwrites, prepares loan documentation, coordinates closings and provides bridge loan servicing. Florida First Capital also has the most experience of any Certified Development Company in the state in generating 504 bridge loans.

To participate in the Bridge Loan Program, 504 commercial lending partners enter into a Participation Agreement with Enterprise Florida Inc., the participating lender. Contact Florida First Capital for more information.

Click Here for Terms, Rates and Fees and FAQs

504 bridge loan proceeds are provided as part of a $97.6 million allocation from the U.S. Department of Treasury for the state of Florida's participation in the State Small Business Credit Initiative (SSBCI). The SSBCI is a federal initiative that encourages states to establish or strengthen state programs that support lending to small businesses.

Interested 504 commercial 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. Email: info@ffcfc.com. Phone: 850.681.3601 or toll-free 888.320.5504.