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The Typical Deal
After you determine the total project cost, a private lender finances 50% of the cost and takes a first mortgage position on the assets being financed.
Tri State CDC, through the SBA 504, finances 40% of the project cost up to a cap of $1,500,000 ($2,000,000 if certain requirements are met) and the CDC takes a second mortgage position. You, the small business in California, infuse only 10% of project costs.
An Example:
 |
Building |
$1,000,000 |
|
Machinery |
$300,000 |
|
Renovations
|
$100,000 |
|
Soft Costs |
$50,000
|
|
Total Costs
|
$1,450,000 |
Financing:
|
Private Lender |
$725,000 |
|
SBA 504 (Second Mortgage) |
$580,000 |
|
Equity
|
$145,000 |
|
Total Costs
|
$1,450,000 |
Interest rate below market in California
Terms - 20 years
Collateral:
The CDC takes a security interest in the assets financed and a second mortgage to secure its 40% portion of the financing. Other assets of the California small business or principals are generally not required unless the asset being financed does not appraise high enough or the asset is considered a single purpose asset.
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