RBAC Answers your business loan faqs

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What can the SBA 504 loan program be used for?
  • Purchase land and building
  • Land acquisition, along with building construction
  • Building expansion
  • Equipment acquisition (with life expectancy of 10 years or more).
  • Equipment
What are the minimum and maximum project costs?
  • Minimum of $150,000
  • Maximum depending on overall loan structure
What is the maximum SBA loan amount?

The 40% debenture had the following amount limits:
$1,500,000 or $2,000,000 if the borrower meets a SBA Public Policy Goal or $4,000,000 for manufacturing companies and Energy efficient projects. 40% of the project cost for a multi-purpose facility; or up to 35% of the project cost for a special purpose facility (restaurant, gas station, etc.); or up to 35% of the project cost for a startup business (business owned less than 2 years); or up to 30% of the project cost for a startup business in a special purpose facility.

There is no maximum loan amount for the Bank financing, but the bank must finance a minimum of 50% of the project cost for a start-up business and/or a special purpose facility.

How can the Bank loan be structured?
  • Amortization: 10 to 30 years for real estate; 7 to 10 years for equipment.
  • Term: Minimum of 10 years for real estate; minimum of 7 years for equipment.

Interest rate will be at a market rate (fixed or variable at banks discretion).

How is the SBA loan structured?

The SBA loan will be fully amortized for 20 years for real estate; 10 or 20 years for equipment.

What Bank Fees are eligible for financing within the program?

Normal bank costs such as:

  • Interim Points/Loan fee
  • Documentation fee
  • Processing fee
  • Appraisal
  • Environmental report
  • Title fees
What are the SBA closing costs?

Approximately 2.16% of the SBA loan, plus legal costs ranging from $1,000 to $2,500 all of which will be financed by SBA.

What is the occupancy requirement to qualify for an SBA 504 loan?

51% if acquiring an existing facility (49% can be permanently leased out). 60% for a new construction project with the potential that the business will occupy some additional space within three years, and a total of 80% within ten years. The balance of the building (20%) can be permanently leased out.

Can the subject property be owned personally and leased to the business?

Yes. In addition, the ownership in the real estate does not have to be the same as the ownership of the business, but a guarantee by the business and the property owners will be required. In addition, the buyer/borrower does not have to have any ownership in the business, but the business and any 20% owner of the business must be a guarantor on the SBA loan.

What about an Environmental Report?

An environmental questionnaire is required on all properties. A TSA is required on all properties, except bare land that has never been farmed. A phase I environmental report may be required if additional investigation is needed.

What about an Appraisal Report?

The appraiser must be qualified to prepare a commercial real estate appraisal report. Submissions to SBA can be subject to receipt of an appraisal report. Complete appraisals are generally required. Bank staff appraisers must be pre-approved by SBA.

What are the eligibility issues of the SBA 504 program?

The business, plus affiliate companies, must have a net worth of less than $8.5 million. The average net profit of the business and affiliates cannot be more than $3.0 million after taxes in the last two years. The business must create and/or retain jobs and/or meet one of the following
Public Policy goals:

  • Expansion of an Export business (at least 10% of last year sales must be from export sales)
  • Expansion of a Minority owned business (at least 51%)
  • Woman Owned (at least 51%)
  • Veteran Owned (at least 51%)
  • Subject property is located in one of the following areas:
    • Rural community; or
    • Enterprise Zone (federal or state designated); or
    • Redevelopment Area (low/moderate income area with slum and blight); or
    • Hardship community due to federal budget cutbacks (i.e. base closures)

For additional questions and/or clarification regarding the SBA 504 program, please contact us directly.

Who can apply?
Anyone who owns or is starting a business in the State of New Jersey is eligible for RBAC financing.
What is the application process?
  • Submit a completed application (PDF) and all supporting documentation.
  • The loan officer will review your application and call to discuss your financial needs.
  • The loan officer will determine if your loan request should be presented to the loan committee for approval.
  • The loan package is submitted to the loan review committee, which meets on the third Thursday of each month.
  • Notice of your loan's approval, or declination, is usually available the day after the loan committee meets.
  • If approved, an appointment will be made for the disbursement of funds.
  • Once the funds have been dispersed, the client will meet regularly with the business mentor for at least the next six months to discuss issues and concerns pertinent to your business.
What documents will I need to provide?
  • Completed and signed application
  • Two years of personal tax returns
  • Two years of business tax returns (for existing businesses)
  • Business plan for all start-ups
  • Financial projections
  • Copy of draft lease (if applicable)
  • Evidence of owner(s) contribution to the project
  • Copy of operating agreement for all corporations, LLCs & LLPs
  • Evidence that the business is current on all state and payroll taxes
What is required to secure a loan?
  • A completed and accurate application form (PDF) (DOC)
  • Submit a detailed, written business plan
  • Start-up entrepreneurs must have experience in the proposed business
  • The business owners must have a reasonable credit rating
  • The business must generate sufficient income to repay the loan
  • Owners must contribute at least 10% of the project financing
Which loan is right for me?

SBA 504: to purchase Commercial Real Estate and Equipment, 51% owner occupied up to 90% financing, below

Microloans: Up to $35,000 financed over 5 years, or less. 10.5% interest rate. Microloans are available to most small businesses throughout the State of New Jersey.

Mercer County Loan Fund: Loans up to $125,000 financed over five years, or less, for Mercer County residents only.

How long does it take to get approved?

This is not a quick process, but we will try to make a determination on your loan request as soon as possible. All RBAC loans must be approved by our loan committee, which meets the third Wednesday of every month. You can help speed up the process by making sure your application is accurate, complete and signed - and accompanied by all the required supporting documentation.

Once received, your application and business plan will be reviewed and all facts must be verified. A credit report will be pulled for all principals and guarantors listed on the application. Please keep in mind that these things take time and that your application will need to be submitted at least several weeks before the loan committee meets.

Do I need perfect credit?

Of course, good credit is better than bad credit. But keep in mind that almost everyone has some sort of blemish on their credit report. What's important to RBAC is that you are taking measures to clear up any negative comments or erroneous information. If your report shows a pattern of chronic late pays, charge offs, defaults or bankruptcies, be prepared to provide a detailed explanation of the facts in each case. Your character, in regards to how you handle your personal finances, will be an integral factor in determining whether or not RBAC can provide a loan for your small business.

You can request a copy of your own credit report by visiting:

Experian (www.experian.com) (888) 397-3742
TransUnion (www.tuc.com) (800) 888-4213
Equifax (www.equifax.com) (800) 685-1111
Consumer Credit Counseling Service (www.cccsnj.org) (888) 726-3260 provides resources and advice on improving credit.

What types of businesses do we fund?

RBAC does not have a typical client. We have financed conventional businesses (hair stylists opening their own salons, truck drivers and restaurant owners), high-tech entities ("dot-com's," website developers, e-commerce ventures) and niche products or services (custom-made pool tables, ethnic food purveyors and manufacturers).

How does a business qualify for a loan?

Three factors are considered before a full analysis is undertaken:

1. Is the business owner investing his/her own cash and assets into the business?
You are the one who will earn the profit and you should be willing to risk some of your own capital.

2. Does the business owner have experience in the business s/he is proposing to start?
Gaining direct experience in the proposed business greatly increases your chances for success and reduces the likelihood of learning things the hard way.

3. Does the business owner have unresolved personal credit issues?
You must have resolved or be in the process of resolving any and all personal credit problems.

We can help you get erroneous derogatory information off your credit report or direct you to a credit counselor that may be able to help you work out a payment plan with creditors.

What are eligible uses of funds?

RBAC most often finances equipment and inventory purchases and working capital, which can include advertising and marketing expenses, start-up bookkeeping, down payments, payroll services and other miscellaneous business expenses. With some of our more specialized loan programs, eligible only in Mercer County and focused on redevelopment in Trenton, RBAC can finance real estate acquisition and renovation. Most of RBAC's real estate loans are part of a larger financing package, usually in partnership with a bank and/or the New Jersey Economic Development Authority.

Does RBAC take collateral?

RBAC takes business and personal collateral when it is available. RBAC loans are always secured by a Uniform Commercial Code (UCC) lien on the business assets. This lien entitles RBAC to sell the business assets to recoup the loan proceeds if the business owner does not repay the loan. RBAC will also look for personal collateral and/or guarantors to help mitigate the high risks of the loans. RBAC holds second mortgages on personal residences of about half of our clients and has taken liens on some unusual personal property.

Can a business owner apply for a loan if s/he has poor personal credit?

Once a loan application is received at RBAC, we request a copy of the credit report(s) for all business owner(s) and guarantors. All derogatory situations on a credit report must be adequately explained and all judgments, charge-offs, and collection accounts must be either satisfied or in a satisfactory workout situation.

Is a business plan necessary to apply for a loan?

RBAC requires a business plan for all start-up ventures. You need a roadmap as much as we need to see how you plan to operate the business and earn sufficient profit to repay the RBAC loan. RBAC is not looking for a lengthy or complex document, but we are looking for the basic operating assumptions of your business and how those assumptions are translated into projections of sales, expenses and profits. Businesses that have been operating at least 12 months need to provide two years of sales projections and expenses.