504 Loan Underwriting Considerations

These are the top five questions we ask when we are looking at financing a particular 504 loan request. If you have a client that fits the program but falls short in answering these questions give us a call and we will be glad to work through underwriting the loan on a case by case basis.

How well can the business cash flow debt?

• Cash flow coverage is the single most important criterion in getting a loan approved.
• Plus 1: 1 debt coverage in existing financials is a great way to start.
• We can underwrite on financial projections if they make sense and fit the business model.How strong is the company’s balance sheet?

How strong is the company’s balance sheet?

• We want to see business owners that are invested in their businesses.
• We want to see a post project pro forma debt/worth ration 6:1 or less is considered very good; we can go higher but we will need compensating factors.

What are the company’s operating trends?

• We like to see solid growth or the potential for growth.
• We do not like to see a company relying on just one or two business clients for revenue, the more the better.
• We are looking for a solid accounts receivable and accounts payable by the business indicating good strong business health.

How strong are the company’s owners?

• We like to see some net worth outside of the business.
• Solid credit is important and credit must be acceptable.
• Borrowers must show that they have their down payments seasoned and sourced.

How solid is the project collateral?

• We need to have an appraisal that equals project costs

If you have a question that you would like to ask concerning the SBA 504 loan program please use the form below

[faq ask SBA 504]