Scientific Capita Group, Inc.- A National Hotel Finance Company

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Hotel SBA 504 Loans

SBA 504

USDA B&I

Loan Structure: The loan is structured as a first trust deed of 50% of the project cost (or value whichever is less) and a second trust deed of 35% by the SBA (called debenture). However, for a start up business, the maximum SBA debenture will be 30%

Maximum Loan Amount: 1.5 million for the second trust deed unless the business contributes to public policies in which case the maximum loan amount is 2 million. Examples of such contribution are a business owned 51% by females or minorities. There is no limit on the first loan as it is left to the discretion of the lender, however, lenders normally would prefer to remain at 50% of the appraised value or the cost whichever is less

Interest Rates: First trust Deed rates range widely based on the lender and depending on the property and the borrower profile. Second trust deeds rates are fixed for 20 years. The current national rate is on the home page of this web site under current

SBA Direct Costs: The cost breakdown adds up to about 2.36% which is added to the second trust deed. This means that the total loan to be paid back will be the net loan paid towards the purchase plus the 2.36% loan fees. As an example if the net loan is $1000,000 the total loan to be paid by the borrower will be $1,023,596

Personal Guarantee: Any partner or member of the buying entity having interest of 20% or more has to provide personal guarantee

Maturity: The maturity of the first trust deed cannot be less than 10 years, but the maturity of the second trust deed is 20 years

Amortization: Any loan in conjunction of the SBA 504 loan should at the minimum have the 20 year amortization. This will include any carry backs in the third position

Eligible Businesses: To be eligible, a business must be operated for profit and not have tangible net worth in excess of $7 million and not have an average net income in excess of $2.5 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate

Prepayment Penalty: The prepayment of the first trust deed is negotiable with the lender. However, the prepay of the second trust deed is a 10 year prepay starting with 10% of the note rate declining every year by 1%. As an example if the note rate of the loan (interest rate) is fixed for 10 years at 6%, then the prepayment of the first year is 10% of 6% or 6% for the first year, 9% of 6% for the second year or 5.4%, 8% of the 6% for the third year or 4.8%, etc.

Major Features:

Requires low injection of 15% to 20%
Offers low rates for long-term fixed periods at least on the SBA portion
Supports first time buyers
Accommodates long-term investments (i.e. Long-term prepayment penalty and long-term fixed rates)
Supports non-flag independent hotels/motels
Covers all markets and geographic areas