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Update: State of Florida Lowers Cost of 504 Bridge Loan Funds

Feb 2022

One of the most precarious junctures for a commercial lending partner in a Small Business Administration (SBA) 504 loan project is the interim phase between the commercial lending partner’s closing and the permanent takeout of the second mortgage by the SBA, during which time the commercial lending partner is at risk on the second mortgage.

The 504 Bridge Loan Program, which is available for any Florida SBA 504 loan, addresses this exposure and timing difference by providing commercial lending partners with bridge loan funds to cover the second mortgage until the permanent SBA second mortgage takeout occurs. In fact, to date the 504 Bridge Loan Program has committed and/or deployed more than $190 million in interim financing.

In an effort to further encourage growth and usage of the 504 Bridge Loan Program, the Florida Department of Economic Opportunity and Enterprise Florida, which provide 504 bridge loans, has waived the 2% interest rate escalation.

Previously, if the term of the second mortgage bridge loan was extended beyond one year, the extension was automatically granted in consideration of a one-time increase of 2% in the rate of interest payable on the second mortgage note, and a payment of 0.25% of the principal sum of the bridge loan at the beginning of each six (6) month extension.

Going forward, the only pricing change that will be effective once the loan matures past one year (and for every 6-month period of extension thereafter), will be the 0.25% extension fee.

The effective date of this change is for all loans approved on or after Jan. 27, 2022. Any requests for relief on existing bridge loans will be considered on a case-by-case basis.

About the 504 Bridge Loan Program

Loans amounts are generally capped at $5 million. Certain eligible energy-efficient or manufacturing projects may qualify for up to $5.5 million, in line with SBA standards. Generally, the total project limit is $20 million. (This restriction applies to the principal amount of the loan directly supported by the 504 bridge loan, plus all other loans for the same loan purpose that close on or about the same date.)

The initial term is six (6) months with automatic extensions at six (6) month increments.

Bridge loan funds may be used for straight acquisitions, renovations or build-out projects, ground-up construction and/or fixed heavy duty machinery and equipment purchases.

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.

Frequently Asked Bridge Loan Questions

504 Bridge loans are provided by the Florida Department of Economic Opportunity and Enterprise Florida and processed by Florida First Capital.

Note: The 504 Bridge Loan Program is available in Florida only.

Interested 504 first mortgage lending partners should contact a Florida First Capital Loan Officer for a bridge loan application and other required documents. Phone: 850.681.3601 or toll-free at 800.504.LOAN