9 Steps of 504
There is an initial assessment conducted with the borrower and lender to discuss the project and the SBA loan parameters. The borrower shall complete and provide all documentation needed by NEDCO.
2. NEDCO Loan Committee Approval
The NEDCO staff performs loan underwriting for the project and receives loan approval from the NEDCO Loan Committee. This process takes approximately two weeks.
3. SBA Loan Approval
NEDCO submits the loan application packet to the SBA Loan Processing Center in Sacramento, California, for final approval. Approval is usually received within one week.
4. SBA Written Commitment
The SBA issues a commitment entitled, “Authorization for Debenture Guarantee.” This document outlines the terms and conditions which must be met in order to close the SBA loan. NEDCO and the borrower review the Authorization for Debenture Guarantee and sign the document.
5. Bank Closing
A copy of the Authorization for Debenture Guarantee is given to the lender. The lender provides the interim financing for the project. The lender must advance funds for both the first and second liens until the SBA loan can be closed and funded.
6. NEDCO Closing
NEDCO will close the SBA loan once all construction and/or renovations have been completed. For projects that involve the purchase of an existing building, the closing will take place as soon as all of the Authorization for Debenture Guarantee requirements have been met. The borrower is responsible for all closing costs incurred by NEDCO. This includes, but is not limited to, title insurance premiums, recording fees, legal fees, flood determination fees and courier services.
7. SBA Funding
There is approximately a 45-60 day waiting period from the time the SBA loan closes until the SBA loan funds. The borrower is responsible to pay interim interest to the lender until the funding occurs. On the funding date, the lender receives a wire transfer to reduce the interim note to the approved permanent note balance. Any excess funds must be paid by the borrower and not added into the first lien note. The interest rate for the SBA loan is determined when the SBA loan funds.
8. SBA Loan Payments
Beginning on the first of the month following the funding date, the borrower will begin to make payments on the SBA loan. The borrower will have a separate payment to the lender and to the SBA. The SBA payment is collected by Colson Services, the SBA servicing agent.
9. SBA Loan Servicing
NEDCO requires that borrowers submit annual financial statements prepared by an independent accountant within 90 days of the business’s fiscal year-end. NEDCO also requires that all insurance remains current and the real estate taxes remain paid on all properties.