SBA reviews four areas before a 504 loan is considered completely approved. It is highly recommended the participating lender wait before disbursing their loan proceeds until FDDC and SBA have reviewed and approved all four items listed below.
- Membership / Franchise Agreement Approval
If the SBA 504 loan applicant has signed a franchise, license, cooperative membership or dealer agreement, the agreement must be reviewed by FDDC and SBA prior to consideration of any credit application. (This includes dealer licenses, management agreements, fuel supplier agreements, etc.) SBA maintains a franchise directory listing all agreements reviewed and approved. Loan applications which involve a previously reviewed agreement enjoy faster processing time by SBA. If the agreement is not on the registry, it will need to be reviewed by FDDC and SBA individually.
2. Credit Approval
After all application documents are received, FDDC packages the 504 credit application. FDDC’s Board of Directors reviews and approves each loan request before forwarding to SBA for approval. FDDC schedules Board meetings as needed to ensure timely processing of applications. SBA issues a loan commitment and final loan authorization once approved.
3. Appraisal Approval
SBA requires an appraisal on real estate if the estimated value of the project property is greater than $500,000. The appraisal must be dated within one year of the SBA application date and in addition to addressing the third party lender, must be addressed to FDDC and SBA. Appraisals are also required on used equipment if it is part of the project. In most cases, appraisals can be sent to SBA with the application or after credit approval.
4. Environmental Approval
If the 504 project involves real estate, SBA will require an environmental investigation to be completed. The level of investigation will be determined by the current and past uses of the property and the 504 loan amount. Contact FDDC to make this determination. The environmental report must be dated within one year of the SBA application date and be addressed to FDDC and SBA.
As always, FDDC is happy to walk you through the process. Email or call as 504 questions arise.