SBA 504 Loans Programs

The SBA-Muskegon Commerce Bank relationship

Muskegon Commerce Bank offers loans to help established businesses grow and expand. Because the Small Business Administration (SBA) provides government guarantees, it's easier for Muskegon Commerce Bank, to offer financing to rapidly growing businesses.

Can you use an SBA loan?

If you have a growing business, SBA financing can help you to:

• Purchase or renovate real estate. Purchase or upgrade real estate to operate your business, construct a business facility or make improvements to an owner-occupied property.
• Purchase fixed assets. Includes assets such as heavy machinery or specialized equipment.

Borrow working capital. Manage day-to-day cash flow and purchases

Features and benefits
SBA loans often offer important advantages over traditional business loans:

• Lower down payment requirements. Higher loan-to-value ratios allowed by SBA loans make qualifying easier. You can borrow up to 90% of your business financing needs, preserving working capital.
• Longer repayment terms. SBA repayment periods are longer than those of conventional bank loans. This makes your monthly loan payment more affordable, helping to improve your cash flow. Terms for:
  
  • Working capital: 5-7 years
  • Equipment: up to 10 years
  • Commercial real estate: up to 25 years
• Projected income consideration. For SBA loan qualification, projected income of a business (not just historical cash flows) is considered. This may be particularly advantageous if your business is growing.
• No balloon payment. SBA Express loans are fully amortized, with no balloon payments at the end of the loan. This eliminates the need to apply for a new loan and incur new fees at the end of the loan term.
• Fixed or variable rates.

SBA loan options

• SBA Express loan
  
  • Offers term loans and lines of credit up to $150,000.
  • No loan proposal required for most businesses.
  • Quick process.
• SBA 504 Loan Program
  
  • Provides long-term, fixed-rated financing for major assets such as owner-occupied land, buildings, machinery or capital equipment. Offers financing on total projects up to $5 million (combination of bank, SBA and borrower funds).
  • Low fixed-rate loans with terms up to 20 years.

Qualifying for an SBA loan

To qualify for an SBA loan, your business must be:

• Owner operated
• For profit
• Organized as a sole-proprietorship, corporation or professional partnership
• Conform to SBA guidelines for small business size

And

• Unable to secure conventional credit under reasonable terms

Note: Ineligible businesses include, but may not be limited to, those that engage in speculation, investment or lending, illegal activities, gambling, or multi-sales distribution.

Even though the SBA-qualifying standards are more flexible than other types of loans, you must still meet some criteria and demonstrate ability to repay the loan on time. The following criteria is what Muskegon Commerce Bank looks for in a potential SBA borrower:

• Demonstrated management ability/experience
• Creditworthiness as evidenced by an acceptable business and personal credit history
• Adequate investment.
• Ability to repay based on projected cash flows and profits
• Adequate collateral, which can consist of:
  
  • Real estate and improvements up to 90% of the appraised value.
  • Machinery and equipment up to 80% of cost (or of appraised value and economic life for used equipment).
  • Accounts receivable and inventory depending on the marketability of inventory and prior collection history of receivables.
  • Personal guarantees. Parties with a 20% or more ownership are required to guarantee the loan.

Preparing a loan proposal
Once you've decided which SBA program is right for you, you may need to prepare a loan proposal. SBA Express loans do not generally require a written loan proposal. A complete, well-organized presentation will expedite your loan approval process. Your lender will need the following documentation to evaluate your loan request:

• Business profile. A document describing type of business, annual sales, number of employees, length of time in business and ownership.
• Loan request. A description of how loan funds will be used. Should include purpose, amount and type of loan.
• Collateral. Description of collateral offered to secure the loan, including equity in the business, borrowed funds and available cash.
• Business financial statements. Complete financial statements for the past three years and current interim financial statements.
• Personal financial statements. Statements of owners, partners, officers and stockholders owning 20% or more of the business.

The strength and accuracy of your financial statements will be the primary basis for the lending decision, so be sure that yours are carefully prepared and up-to-date. The most important documents in your financial statements are:

• Balance sheets from the last three fiscal year-ends.
• Income statements revealing your business profits or losses for the last three years.
• Cash flow projections indicating how much cash you expect to generate to repay the loan.
• Accounts receivable and payable agings, breaking your receivables and payables in to 30-, 60-, 90- and past 90-day old categories.
• Personal financial statements from you and your business partners listing all personal assets, liabilities and monthly payments, as well as your personal tax returns for the past three years.

What you need to apply.

Gather your reference material.

You will be asked to provide information about yourself, other owners/guarantors, and your company. To speed up the application process, please have the following information on hand as you apply:

Information about your business:

• Business tax ID
• Date the business was established
• Date of current ownership
• Business location address and date moved to current address
• Gross annual sales for the last fiscal year
• Net profit for the last fiscal year
• Number of employees
• List of outstanding obligations, if any (Lender, Current Loan Balance/Credit Limit, Monthly Payment)

Information about each business owner/guarantor:

• Social security numbers
• Household location address
• Home phone number
• Personal gross annual income
• Date of birth
• Residence status (rent or own) and monthly housing payment

Information about property:

• Property address (including country)
• Current property owner
• Purchase price
• Date purchased
• Estimated current value
• Current mortgage holder
• Current mortgage balance

Questions about your application?
If you have a question about the application process, you can call us at 231.737.4431.