Financial Assistance - Disclosure Statement For The 504 Loan Program         The 504 Loan Program offers eligible Small Business Concerns (SBC's) the means to finance expansion projects through a long-term, fixed asset financing program. It requires the participation of a lending institution and provides up to 90% of a project's total financing requirements. The EDC wishes to advise you of certain charges and procedures relating to the Program's application, approval and funding process. This Disclosure Statement highlights only certain routinely encountered issues and is intended for informational purposes only. It is not meant to be a complete loan summary of all 504 loan policies and requirements. Each loan applicant is solely responsible for determining, understanding and following all Loan Program guidelines. The following are some matters relating to procedures and fees of which you should know: 1. NO REPRESENTATIONS Funding of the 504 debenture and disbursement of loan proceeds is subject to your satisfactory compliance with the terms and conditions set forth in the 504 Authorization and Debenture Guaranty (SBA Form 1248). By signing this Disclosure Statement, you acknowledge that you have not relied upon any representation made by the EDC and have made no representations or promises to the applicant and its agents regarding formal EDC and SBA approval of your loan or of your qualifications receive a loan the 504 Loan Program. 2. INTEREST RATE ON DEBENTURE The EDC will issue debentures (bonds) for up to 40% of the total project. The participating lender provides financing for up to fifty percent 50%. The 504 debentures are pooled monthly and sold through a certificate mechanism to the public market (insurance companies, pension funds, private investors, etc.). At the time of sale, a fixed interest rate will be placed on the debenture, which rate takes into consideration the current average market yield on outstanding marketable U.S. obligations with comparable maturities. Neither the interest rate on the debenture nor on the promissory note shall be set until the time of the debenture sale. 504 funding does not occur until the project is completed. TOP 3. ELIGIBLE PROJECT COSTS •  Land and building acquisition •  Building improvements and construction •  Soft costs including appraisal environmental legal, etc... •  Construction financing interest and loan fees (1st mortgage lender's loan fees cannot be included) •  Equipment acquisition TOP 4. LEASING EXCESS SPACE POLICY For an existing building, the SBC must initially occupy at least 51% of the total building space and proceeds may not be utilized to renovate any portion of the building, which is not occupied by the business. For new construction, the Small Business Concern may sublease up to 40% of the square footage of rentable property for a short term, if reasonable growth projections show that additional space is needed within three years and that the company will use 80% of the space within ten years. TOP Subject to SBA approval, the SBC may lease up to twenty (20%) of the rentable property. 5. JOB CREATION/COMMUNITY/ECONOMIC OBJECTIVES One "job opportunity" must be projected (within two years after funding) for every $35,000 in 504 funds loaned unless the project can meet one of the community development goals or one of the public policy goals. If one of these goals are met the business may borrow up to $1,300,000 million in 504 funds. Community Development Goals include: business district revitalization; expansion of exports; expansion of minority, women owned business development; rural development; enhanced economic competition; restructuring because of Federally Mandated Policies and changes necessitated by Federal cutbacks. TOP 6. REAL ESTATE OWNERSHIP Eligible Passive Companies and certain trusts may hold title to the real estate, and lease the facility (20 year lease) to the eligible operating company. Subject to SBA approval, a 504 loan may finance a project, housing multiple unrelated businesses. TOP 7. SIZE ELIGIBILITY REQUIREMENTS A SBC together with its affiliates cannot have a tangible net worth in excess of $6 million, and cannot have an average net income after tax, in excess of $2 million. TOP 8. PERSONAL/CORPORATE GUARANTEES Personal guarantees are required of all principles owning 20% or more of the business, and in cases of individual ownership of the real estate, a corporate guarantee is also required of the small business concern. TOP 9. PREPAYMENT OF LOAN A SBC may pay off its 504 loan prior to scheduled maturity but will occur a prepayment premium over the first half of the term of the debenture. This premium is equivalent to one year's interest calculated on the remaining principal balance of the debenture and reduces by a factor of 10% annually. Additionally, the note may only be prepaid on the debenture's semi-annual payment date. Should the Small Business Concern wish to make accelerated payments, typically it reduces the first mortgage balance, if no such prepayment exist. TOP 10. ASSUMPTIONS The SBA 504 loan is assumable at EDC's and SBA's sole discretion. The EDC accesses 1% fee on the outstanding indebtedness for all assumption actions. TOP 11. PRIOR BANKRUPTCIES It is our policy to reserve the right to withhold approval of applications where the applicant, and or its principals have taken prior protection from creditors under bankruptcy law. Full disclosure of prior bankruptcies is required. TOP 12. FEES A Deposit Fee of $1,250 is required at the time the EDC accepts your application for processing. This deposit is held in an escrow account until closing of the approved 504 Loan and will be credited to the applicant following the funding of the 504 debenture. •  This deposit covers EDC's administrative and processing costs, should you decide to withdraw your loan application at any time before the SBA issues its approval in the Debenture Authorization. In the event you withdraw your application after the SBA has issued the authorization, the $1,250 is forfeited. •  If the EDC or the SBA declines your application, this deposit will be returned to the applicant. •  A loan documentation/Closing Fee of $1,750 is charged to the applicant for EDC's legal counsel's costs for the preparation and execution of required SBA loan documents. THIS IS NOT AN OUT-OF-POCKET EXPENSE TO THE BORROWER. •  Participating lending institution's Loan Origination Fees may not be included in the total SBA project financing. Included in Loan Proceeds •  A Loan Processing Fee of two and three quarter's percent of the 504 Loan is due upon funding of the SBA loan and is added to the loan amount. •  This fee covers a processing (1.5%); selling group (.5%); funding (.25%); and reserve deposit fee (.5%) to total the 2.75%. Included in SBA Interest Rate: A borrower's guarantee fee, participation fee and CDC fee will be included with the payment on the note made each month to Colson Services Corporation. TOP 13. FIRST MORTGAGE LENDER FEES AND CERTIFICATIONS A one-time Participation Fee of .5% of any mortgages that are senior to the SBA mortgage is due at closing. The lender must also certify that the desired credit is unavailable to the applicant on reasonable terms and conditions from non-Federal sources without SBA assistance. TOP 14. ENVIRONMENTAL REPORT Prior to disbursement the applicant must provide evidence satisfactory to the SBA, that the real property is free and clear of any environmental hazards. Unless otherwise stated, a Phase I environmental Risk Assessment satisfactory to EDC and SBA if required, evidencing any environmental concerns relating to the property. TOP 15. FLOOD/EARTHQUAKE HAZARDS A loan recipient must obtain flood insurance if any building, machinery, or equipment acquired, installed, improved, constructed, or renovated with the proceeds of SBA financial assistance is located in a special flood area. Construction of facilities financed with the proceeds of SBA financial assistance must conform with the "National Earthquake Hazards Reduction Program ("NEHRP"). TOP 16. START-UP BUSINESS If the small business concern has been in operation for a period of 2 years or less, it must provide at least 15% of the eligible project costs, thereby reducing the SBA loan participation to 35%. TOP 17. SINGLE PURPOSE BUILDING A limited market property has a unique physical design, special construction materials, or a layout that restricts its utility to use for which it is built. Examples include gas stations, motels, car washes, bowling alleys or any other facilities that would have limited markets or would require extraordinary costs to make them marketable. TOP 18. APPRAISALS If the loan is secured by commercial real property, an appraisal for that property by a state licensed or certified appraiser is required before funding when: 1.  The estimated value of the property is more than $250,000; or 2.  If the estimated value of the property is $250,000 or less AND such appraisal is necessary for appropriate evaluation of credit worthiness. TOP 19. PERSONAL GUARANTEES Any individual holding more than 20% or more ownership of a company, will be required to guarantee the total indebtedness of the loan request. TOP 20. APPROVAL PROCESS ALL 504 Loans are required to receive the EDC's approval prior to submission to the U.S. Small Business Administration. All applications must have a prior commitment of approval from a qualified lending institution providing the companion financing. Once all documents have been submitted to the EDC the overall approval process takes approximately 4-6 weeks. TOP 21. INTERIM AND CONSTRUCTION FINANCING Due to the nature of the funding of 504 debentures, interim and/or construction financing is required. EDC should be notified within six weeks of the completion of your construction process so that the EDC's attorney may review the closing documents on the 504 funds. TOP 22. TIMING ON FUNDING OF SBA DEBENTURE Once you have executed all 504 loan documents, there is a six to eight week time period until the 504 loan is funded. The 504 interest rate is established and your funds are wire transferred directly to your lending institution. TOP 23. METHOD OF DEBENTURE PAYMENTS Monthly payments on the 504 debenture will be made by an automatic electronic transfer from an account designated by the small business concern. The account may not be a savings account. TOP 24. INDEMNIFICATION The applicant will indemnify and hold Economic Development Center and/or its agents harmless from any and all loss or injury including reasonable attorney fees resulting or arising from failure by the applicant to receive such a loan, and/or any loss or liability to applicants or the business of the applicant. TOP 25. NO ADDITIONAL PROVISIONS All parties agree that there are no other promises, terms, or agreements (oral or written) between the EDC and the undersigned, and that the program's rules and fees are subject to change at any time. TOP Back to The 504 Loan Program Economic Development Center 5988 Mid Rivers Mall Dr. Suite 100, St. Charles, MO 63304 Phone: 636.441.6880, Toll Free: (877) 441-6880, Fax: 636.441.6881 E-mail: info@edcscc.com Advanced Technology Center 118 N. Second Street St. Charles, MO 63301 Phone: 636.410.0300, Fax: 636.940.0408 E-mail: info@edcscc.com Site Concept and Design ©2008 / Maintenance and Hosting provided by jWeb.