How is collateral assigned?
• CDC takes a subordinate (second mortgage) to secure its 40% portion of the financing • CDC takes a security interest in assets financed. • Key-an life insurance is generally not required unless there is no succession of management • Personal guarantees of any owner of 20% or more are required. • Other assets of the business or principals are generally not required (unless the company is a startup or the credit is unusually risky or the asset being financed is considered a single purpose asset or does not appraise high enough). What are the various fees added to the 504 loan amount? All of the fees on the SBA 504 loan are added to the loan amount so that you can amortize their cost over the loan term. You will sign a note for the 40% of project cost plus the fees. Ongoing fees decrease every 5 years. Fees are based on the 40% of project cost: • 1.5% of the 40% goes to CDC as its processing fee • 0.5% of the 40% is a reserve deposit • 1/4 of 1% of the 40% is a funding fee • loan loss c
