1. Small Business Administration 504 Loan Program
West Central Texas Council of Governments
Council Finance, Inc.

2. Made up of cities, counties, and special governmental districts
Addresses issues regional planning, economic development, emergency planning, aging, youth, pollution control, 911 services, law enforcement, transportation

3. WCTCOG Economic Development
West Central Texas Housing Finance Corporation
West Central Texas Economic Development District
Council Finance, Inc.
Revolving Loan Fund

7. Council finance, Inc.-Certified Development Company
What are CDCs?
Certified Development Companies (CDC) are organizations certified by the SBA to provide funding for small businesses under the SBA 504 program
Approximately 260 CDCs nationwide
Operates under the leadership of a board of directors
Must provide at least four 504 loan approvals during two consecutive fiscal year

8. What is the SBA 504 Loan Program?
Provides financing and/or refinancing for major fixed assets
Real Estate
Equipment
Construction
Renovation or expansion of an existing facility
Debt Refinance
Professional Fees

9. What is the SBA 504 Loan Program?
Intended to create jobs
Funded from local bank, and a CDC
Bank- 50%
CDC/SBA %
Borrower- minimum equity injection of 10%

10. Example Project 1 Project Uses Dollars Acquisition of building 800,000
Renovations
100,000
Machinery
50,000
Soft Costs
Total
1,000,000
Financing Sources
Dollars
Bank-first lien
500,000
CDC/SBA- second lien
400,000
Borrower’s equity injection
100,000
Total
1,000,000

11. What Are the Loan Maximums?
For a generic SBA 504 loan or if the business meets a public policy goal the maximum loan is $5,000,000
If the borrower is involved in manufacturing, the loan my be as much as $5,500,000

12. What Are the Minimums?
The minimum project size is $125,000

13. Items of Interest Term Fixed interest rate Fees typically 2.5%
10 or 20 years
Fixed interest rate
March 20 year-4.799%
March 10 year-4.401%
Fees typically 2.5%

14. Quirks
Prepayment Penalty
Interest Rate

15. What Are the Qualifications?
Tangible net worth not to exceed $15 million
Average net income for the preceding two years is not to exceed $5 million
Must be owner occupied
Job Creation
1 job for every $65,000 borrowed
1 job for every $100,000 borrowed (for manufacturers)

16. Why Are 504 Loans of Interest to Banks?
Provides risk and liquidity management
Banks portion secured by the first lien position
Provide fee and interest income
Interim interest, origination fees, selling their first-lien loan in the secondary market
Help banks fulfill their mission of local economic development

17. Why Are 504 Loans of Interest to the Small Business?
Low Equity Injection
Preservation of working capital
Fixed-rate of interest
Fully amortizing, long term loan
10 or 20 years

18. Debt Refinance
Permanent Debt Refinance
Must involved expansion

19. Permanent Debt Refinance
Must have expansion of small business
Federal debt and federally guaranteed debt is eligible
Equity from equipment is NOT eligible
Debt to be refinanced may not exceed 50% of expansion cost
Project cost is the cost of expansion + refinanced debt + soft costs

20. Permanent Debt Refinance
Bank must finance 50% of project cost
SBA will finance up to 40% of the project cost
Borrower does NOT have to inject 100% of available equity but must inject at least 10-20% based on current SBA requirements

21. Example Project 2 Project Uses Dollars Equity In Land 150,000
Addition to Current Facility
800,000
Machinery
200,000
Debt Refinance
350,000
Total
1,500,000
Financing Sources
Dollars
Bank-first lien
750,000
CDC/SBA- second lien
600,000
Borrower’s equity injection
150,000
Total
1,500,000

22. Application Projections Schedule of Debt Personal History Statement
Personal Financial Statement and 2 years of tax returns
Current Financial Statements
Two years past tax returns and financial statements
Appraisal
Projections
Schedule of Debt
Schedule of Previous Gov’t financing
Tax returns of affiliates
Franchise Information
Credit history release
Project Cost Documentation
Environmental

23. How Does the Application Process Work?
Underwriting and Processing
Performed by both the bank and the CDC
Processing for the CDC takes 2 weeks
Loan Committee reviews loans
Wait for approval from SBA
SBA may “screen out” our loan
Appraisal and Environmental
Can be ordered after application is approved
Typically take between 2-3 days to get approved

24. How Does the Application Process Work?
Underwriting and Processing
Performed by both the bank and the CDC
Processing for the CDC takes 2 weeks
Loan Committee reviews loans
Wait for approval from SBA
SBA may “screen out” our loan
Appraisal and Environmental
Can be ordered after application is approved
Typically take between 2-3 days to get approved

25. U.S. Small Business Administration
7(a) Lending
Bank holds the note
Guarantee from the Gov’t
Program exceptions
Nothing
504 Program
Dual Mortgages
2nd Mortgage is guaranteed
Program Exceptions
Franchise Fees
Working Capital
Inventory
Rolling Equipment
Goodwill

26. WCTCOG Revolving Loan Fund
Loan Size-$2,000-$20,000
Term & Amortization up to 7 years
Qualifications:
Less than 50 employees
Gross Revenue less than $1MM
Must be located in the WCTCOG 19 county region
Must be in an area defined as rural

27. RLF Use of Funds: Real Estate Machinery Equipment Furniture
Working Capital
Inventory

28. Stovall realtors-Abilene

29. Value place-Abilene

30. Al’s mesquite grill-Abilene

31. Prime time-Abilene

32. Brownwood Fitness Center

33. The Country Store-Brownwood

34. Chicken express-early

35. A2z Self storage-abilene

36. La quinta Inn & Suites-Fairfield

37. Texas Sport & Spine-abilene

38. Western Inn-hamilton

39. Golden chick Brady

40. Daniel Hutson
Council Finance, Inc.