- Insurance: Insurance coverage on the assets financed with 504 has been required by SBA for years. However, the new SOP adds a layer: if the state requirements are more than SBA requirements, or the state requires a business to carry specific insurance, then that business must prove it has the state required insurance.
- Guarantors: The 20% or more rule still applies. However, the 504 must have at least one guarantor, even if there are no 20% or more owners.
- Religion: Businesses promoting religion are ineligible, but there are some businesses that may now be eligible. SBA has developed a checklist to help determine if the project that involves religion would be eligible. (Form 1971)
- Businesses Engaged in Lending: Businesses with the primary purpose of lending are not eligible for 504. However, SBA has added the following exception to this rule: Financial Advisors. To be eligible, the Financial Advisors' services must be fee-based and funds cannot be invested in their own portfolio of investments.
- Multiple 504's: The 504 portion of most projects cannot exceed $5 million, but there are certain circumstances where this can be exceeded (mostly manufacturing). Should a business meet the eligibility requirements for multiple 504s in excess of $5 million, SBA will determine if multiple loans in excess of $5 million to a borrower meets their prudent lending standards.
Remember, should you have any questions or need personalized lender training, contact us. We are happy to come on-site and respond to your questions or conduct a training seminar with your commercial lending team. http://www.growthcorp.com/ContactUs.aspx
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