SBA 504 Packaging Issues and Tips Lerch Early at America East

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SBA loans: How to issue your 504 loan commitment for permanent and interim financing, collection of due diligence and the loan closing process.

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SBA 504 Packaging Issues and Tips Lerch Early at America East

  1. 1. 504 Packaging Tips- Closing Your Loan to Ensure Perfect Packaging Alison W. Rind Lerch, Early & Brewer, Chtd.www.lerchearly.com August 2, 2012
  2. 2. Overview Issuing Your Loan Commitment For Permanent and Interim Financing Collection of Due Diligence Closing Process  Simultaneous Closing  Closing After Disbursement2 Completion © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  3. 3. Loan Commitment Make sure Permanent and Interim Loans Match SBA/CDC Approval  Request Copy of Authorization Loan Fees  InterimLoan Fee – Eligible Project Cost  Third Party Lender Fee Borrower and Guarantor3 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  4. 4. Commitment Letter (continued) Collateral  Preference Issues  Interim Loan Security4 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  5. 5. Loan Commitment (continued) Make sure interim loan term is sufficient for debenture funding  If simultaneous closing, allow at least 3 months  If disbursements are anticipated for 6 months, then term should be at least 9 months  Interim term is defined as the sooner of5 term in months or funding of debenture © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  6. 6. Checklist Include Documentation Required for Permanent/Interim Loan Closing and CDC Closing  Organizational Documents  TitleWork  Appraisal  Environmental  Sales Contract6 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  7. 7. Checklist (continued) Lien Searches Insurance SBA Approvals Leases Loan Documents Financial Statements7 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  8. 8. Checklist (continued) Copy CDC/CDC Counsel on All Due Diligence Items Received Request Property Insurance and Title Insurance for permanent loan, interim loan and CDC loan simultaneously8 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  9. 9. Parties Lender Lender’s Counsel Borrower Borrower’s Counsel Title Company CDC CDC Counsel9 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  10. 10. Simultaneous Closing Real Property Purchase (no construction) Refinance Equipment Purchase10 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  11. 11. Simultaneous Closing Provide draft loan documents to CDC counsel Execute Third Party Lender Agreement and Interim Lender Certificate Pay Third Party Lender Fee Provide Wiring Information to CDC for wire of debenture11 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  12. 12. Construction Contracts Disbursement Requests Lien Waivers Final Certificate of Occupancy Updated Appraisal12 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  13. 13. Modifications Remember, both the permanent and interim loan amounts must be modified. Borrower will also be required to inject more equity to maintain the 50-40-10 balance. Submit to the CDC documentation to justify the increase of Project Costs and obtain a revised appraisal, if needed, to support the increased costs. Extension of Interim term may be required13 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  14. 14. Speakers  Alison W. Rind is an attorney at Lerch, Early & Brewer who(301) 657-0750 represents commercial lenders inawrind@lerchearly.com loan transactions and other commercial matters. These include participants in SBA and other government-guaranteed lending( programs. 14 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
  15. 15. For more information Lerch, Early & Brewer, Chtd. 3 Bethesda Metro Center, Suite 460 Bethesda, MD 20814 (301) 986-1300 www.lerchearly.com Thank you for your participation15 © Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com

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