• Bridge Financing and the 504 Loan Program

    Bringing the right people together is important to the success of any project and Community Business Finance will help. As a dynamic resource for the business community, we believe in working with your lender to offer the best loan terms for your business.

    As experts in SBA Loans, we will lay the foundation for a successful loan process. Through our 504 Loan Program, we provide businesses with financing for major fixed assets such as office buildings, retail buildings, warehouse facilities, heavy equipment, and commercial vessels.

    Projects are typically financed with two loans: a first lien loan through a commercial lender for 50% of the project cost and a second lien loan for 30% - 40% of the project cost, financed by Community Business Finance. The borrower provides a 10% - 20% down payment.

    Community Business Finance offers an up-front commitment to finance a project, and the participating commercial lender provides interim financing, advancing up to 90% of the total project funds during the construction/acquisition period. However, some lenders cannot provide interim financing because the amount will exceed their legal lending limits.

    Lending limits are the maximum dollar amount that a single bank can lend to a given borrower. To avoid exceeding a bank's limit, another lender can provide a bridge loan for an additional fee. The bridge loan "bridges" the gap between initial closing and project completion, when the CDC funds the take-out portion of the total project cost. By using an alternative lender to provide the bridge financing, the original lender can still participate in the 504 Loan Program.

    Additionally, some banks are not comfortable with 90% loan to value during this interim period. While it is true that the risk goes up during this time, for projects with no construction phase, the bridge period is usually 45-60 days. This is a small window of increased risk. Obviously with new construction or renovations, this period is much longer and ends when the project is completed. By using a bridge loan, the first lien holder keeps their loan to value ratio at 50% and avoids any increased risk.

    Community Business Finance values its relationship with lenders, and we can build the right partnerships to avoid any obstacles in the 504 loan process.

    For more information on bridge loans or SBA loans contact our offices:

    In Texas call Bill Ebersole at 713-457-1650, ext. 201, or email him at bill@communitybusinessfinance.com.

    In Louisiana, call Jeanne Bergeron at 1-800-462-1017 or email her at jeanne@communitybusinessfinance.com.

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