Here are some frequently asked questions.
If you find you still have questions one of our loan specialist staff members will be happy to help you. Call 610-898-6045 or email.
Check out our resources page for forms, helpful links and other valuable resources.
What is a CDC?
CDC stands for Certified Development Company. Most CDC’s are non-profit corporations that are authorized by the Small Business Administration to package, process, close and service 504 loans. The 504 loans are issued through a partnership between the CDC’s and private sector third party lenders.
What is PCDfc’s mission?
The Pennsylvania Community Development and Finance Corporation (PCDfc) is a Certified Development Company (CDC) licensed by The US Small Business Administration(SBA) to administer the SBA 504 Loan Program. PCDfc was established to provide financial support to small and growing businesses in the Commonwealth of Pennsylvania, with a special emphasis on creating jobs and building the economic base in Berks County, PA. PCDfc’s membership has strong business and community involvement which we believe will ultimately benefit efforts to enhance the economy throughout the Commonwealth. This is due to the guiding role of its past Chairman, Albert Boscov, who through his nonprofit organizations and department store chain has created thousands of new jobs through retail, office, industrial and cultural development.
To learn more about PCDfc, please visit our About Us page.
What type of projects are available for financing?
For-profit, owner-occupied small businesses are eligible. Entrepreneurs can purchase real estate, fund expansion projects, finance equipment, tenant improvements and finance related soft costs up. One hundred percent debt re-financing is also available for small businesses looking to replace expensive short term debt with long term fixed rate financing. Because this is an economic development tool offered by the federal government, the small business must meet various objectives, such as creating jobs or enhancing market competition. Explore our BUSINESS OWNERS page for more details outlining the SBA 504 Loan Program.
Why is the 504 loan program beneficial for lenders?
The 504 loan program lowers the third party lenders loan to value, and reduces a lenders credit risk through partnership funding.
Why is a loan through PCDfc beneficial to my business?
Businesses attain many benefits through our different loan programs. These include reduced equity injection, low fixed rates, longer term financing, increased loan sizes, with no balloon provisions and the multiple uses of funds in one loan.
What are the main advantages of an SBA 504 loan?
The biggest advantage of a 504 loan are reduced equity injection (10%-20% of project cost) and capital preservation. This means, you can reserve your cash for working capital needs.
How is a 504 loan deal structured?
Most loans structures are a 50/40/10 split. Ninety percent (90%) of the financing comes from the bank and PCDfc, while 10% is the equity injected by the borrower. Equity injection (Borrower’s contribution) can vary from 10% to 20%, depending on the project and the borrower. For example if you wish to borrow $1,000,000, on a 50/40/10 split you will be required to inject $100,000 (10%); you will request a loan of $900,000 ($500,000 from the bank and $400,000 from PCDfc). See 504 loan structure chart/graph.
What are the requirements for equity injection?
In general, most hard asset acquisitions of companies that have 2 years of prior tax returns are required a 10% equity injection.
Special purchase financing requires an extra 5% equity injection (i.e.: golf courses, bowling alleys, car washes, hotels)
All start-ups or companies with less than two years of filed Tax Returns require an extra 5% equity injection.
What kind of equipment am I eligible to finance with the 504 loan program?
Heavy duty machinery and equipment is eligible and must have a minimum useful life of 10 years.
Are soft costs eligible Use of Proceeds in an SBA 504 loan?
In most projects, soft costs are able to be added back into the loan amount to help the small business owner preserve working capital.
What is the size standard for small businesses?
The business net worth must be less than $15 million. After-tax net profit must be $5 million or less, on average, for the prior two years.
What are the Benefits of the SBA 504 loan?
- Low down payment (as little as 10%). For start-up businesses or special-purpose building, an additional 5% down payment is required. If the business is BOTH a start-up and is to be situated in a special purpose building, then an additional 10% is required.
- Low, fixed interest rates.
- 20-year fully amortized loans for real estate, 10-year loans for equipment.
What can my business finance with the 504 loan?
- Site or building acquisition
- New building construction
- Renovation of an existing facility
- Equipment or machinery purchases
- Soft costs such as appraisals, architectural or engineering fees, environmental studies, construction period interest, closing costs, etc.
- Construction contingency costs
- Minor equipment, furniture or fixtures can be included in a real estate purchase
- NEW! 100% Debt Re-finance
Is there a minimum or maximum project amount?
There is no maximum project size! 504 projects typically range in size from $250,000 to $13,000,000. For the 504 portion of the project (typically 40%), loan sizes range from $100,000 to $5,000,000. If your business meets specific goals or is a manufacturer, then the 504 portion of the loan can be as high as $5,500,000.
Is it easy to apply?
Absolutely! It is easy to apply. As with any financing application, the small business will need to complete an application and provide financial information about its company and its owners. The team at PCDfc will make this process as easy as possible for you. Call us at 610-898-6045 or email us or go to our 504 Application page.
How does this program compare to conventional financing?
The SBA 504 loan has many advantages over conventional financing.
- Lower down payment. Many banks require a 20% or more down payment.
- The interest rate is fixed for the life of the loan.
- The interest rate is set by the public capital market, not by a local lender.
- The interest rate is generally lower than what your bank would offer over the life of the loan.
- The loan is generally for a longer term, up to 20 years, than what a bank may be willing to offer to you.
- Almost all project costs can be financed into the loan. Many banks do not allow soft costs to be financed.
- The 504 loan is assumable. If you sell your business, it is possible for the new owner to assume the 504 loan.
What are the fees associated with the 504 loan?
Depending on the type of loan, fees are approximately 2.15% plus $2500 flat attorney closing cost of the 504 portion of the total project. These costs are financed as part of the total loan.
How do I apply?
Call 610-898-6045 or go to the 504 Application.
I have some problems on my credit report from the past; how does my credit score impact my application?
We want to see that you are presently current on all your debt and that any derogatory marks on your credit report have a reasonable explanation as to what happened. See more on credit scores on our Resources page.
Do I need a business plan?
If you are a start-up business, you will need a 2 – 3 year detailed business plan with assumptions and monthly cash flow analysis. If you are expanding your existing business a business plan and monthly cash flow analysis will be required to explain how the expansion will positively affect revenues. Visit our Resources page, for additional resources if you require assistance with your business planning.