SBA 504 Standard Loan Requirements

Occupancy Requirements
New Construction:
(a) Operating Company must have a master lease on the entire premises;
(b) Operating Company must initially occupy at least 60 percent of the entire rentable space, but may sublease up to 40 percent to one or more tenants;
(c) Operating Company must begin to occupy a portion of the subleased space after three years and must occupy a minimum of 80 percent of the entire rentable space after ten years;
(d) Operating Company may sublease to one or more tenants up to 20 percent of the entire rentable space indefinitely;
(e) Borrower must not use Loan proceeds to improve any portion of the property to be subleased.

Existing Buildings:
(a) Operating Company must have a master lease on the entire premises;
(b) Operating Company may sublease to one or more tenants up to 49 percent of the entire rentable space indefinitely;
(c) Borrower must not use Loan proceeds to improve any of the property to be subleased.

Collateral Assignment of Life Insurance
Borrower(s) shall provide to TCM/SBA a collateral assignment of life insurance equivalent to the SBA Loan amount. TCM and SBA are named as collateral assignees, not as beneficiaries.

Guarantees
Personal Guarantees:
All 20 percent owners of the Borrowing Entity and/or the Operating Company must provide a personal guarantee for the Loan. Individual owners with less than 20 percent ownership may also be required to provide a personal guarantee for the Loan on a case by case basis.

Corporate Guarantees:
A Corporate Guarantee is required from the Operating Company when the Borrower is an Eligible Passive Concern.

Change of Ownership or Control
Throughout the term of the Debenture and Note, most ownership changes in the Borrower or Operating Company require SBA's prior written consent. Ownership changes with a cumulative change of less than five percent do not require prior written consent of SBA. In addition, the SBA Loan is assumable in many cases, with the prior written consent of SBA.

Appraisal
Prior to closing, a certified appraisal of the project property shall be furnished to SBA. Total financing must not exceed 90 percent Loan to Value, based on the lesser of appraised value or total project cost. If the appraised value is less than the total project cost, the Borrower has the following options: 1) provide additional investment; 2) provide additional collateral; and/or 3) reduce the size of the project, as appropriate. TCM and SBA must be named as a party to the appraisal report; reliance letters issued after the original report are not accepted by SBA. For new construction or substantial renovation projects, SBA requires that after the improvements are completed, the appraiser will provide a post-construction statement including an “as-completed” value and certification that all construction was performed according to plans and specifications.

Environmental
Prior to closing, TCM must obtain the reports or findings from any environmental inspection performed on the property. SBA and TCM must be satisfied that all real estate to be taken as collateral is reasonably free from recognized environmental conditions. For reports other than the SBA environmental questionnaire, SBA requires the environmental professional to sign the SBA Reliance Letter for each environmental report completed for the project.

Other Conditions
Borrower must comply with any other conditions, not inconsistent with the provisions of the Authorization For Debenture Guarantee, as reasonably may be imposed by TCM. This list of standard SBA 504 requirements is a partial overview of the loan requirements and therefore does not cover all requirements that may be contained in an actual SBA Authorization For Debenture Guarantee.