What is needed to close an SBA 504 loan?
We review the SBA loan authorization to determine what is needed to close each loan. A letter summarizing the items needed will be sent to you and your banker in anticipation of the closing. The SBA authorization also outlines the requirements to close and fund the loan. If you need your SBA loan authorization, please request it from your loan officer or the loan closing team.
What is the insurance requirement for closing an SBA 504 Loan?
The SBA loan authorization outlines the specific requirements for your loan in Section E.1 Insurance Requirements. Typical insurance requirements:
Real Estate Hazard Insurance coverage on all real estate that is collateral for the loan in the amount of full replacement cost. If full replacement cost insurance is not available, coverage must be for maximum insurable value. Insurance coverage must contain the Mortgagee Clause in favor of Amplio and the SBA.
Personal Property Hazard Insurance coverage on all equipment, fixtures or inventory that is collateral for the Loan, in the amount of full replacement cost. If full replacement cost insurance is not available, coverage must be for the maximum insurable value. Insurance coverage must contain a Lender’s Loss Payable Clause in favor of Amplio and the SBA.
Liability Insurance for both the Borrower, Co-borrower, and Corporate Guarantor.
Workers Comp Insurance in an amount meeting requirements in state law.
Life Insurance collateral assignment of each policy with Amplio and the SBA as assignees. Amplio must also obtain acknowledgment of the assignment by the Home Office of the Insurer.
Flood Insurance if any part of the building(s) is in a flood zone. If the loan includes equipment, and this equipment is also in the flood zone, additional insurance for the equipment is also required.
What are the requirements for the lease between the Eligible Passive Company (Borrower) and Operating Company (Business)?
The lease requirements are found in the SBA loan authorization in the Collateral Conditions Section D.2 and summarized below:
Term of the lease, with options to renew exercisable solely by the Operating Company, must be for at least the term of the SBA loan.
Subordinate to Amplio’s Security Interest and/or Mortgage
Lease Payments must be no more than is necessary to amortize debt plus pay expenses related to holding the property.
What are the requirements and process for construction projects?
Inform us when the project is complete and the bank loans have been fully advanced. Provide us with the sworn construction statement, all draws, invoices and final lien waivers. SBA authorization requirements:
- Certificate of Occupancy needs to be obtained and provided to us, if required by the city.
- Evidence of borrower injection of equity into the project
- Appraisal Recertification Letter if the construction cost is 1/3 of the purchase price or greater
- Updated financials that are not older than 120 days from the debenture funding date
- Mechanics lien coverage provided to Amplio from the title company
Closing documents are prepared by the Amplio closing team and sent to an attorney for review. Once reviewed and approved a closing will be scheduled.
The loan documents are signed and then sent to the SBA District Office for final approval to fund.
The SBA loan funding occurs approximately four to six weeks after loan signing.