From time to time, discussions with our SBA 504 staff counterparts provide helpful insight about emerging issues.  Recently, I worked with SBA District Counsel in California that asked me to submit copies of Subordination agreements recorded by the SBA 504 Priority or Permanent Lender.  This is not part of the normal submission package and therefore made me curious about the inquiry.
 
Here is what I was able to take away from this SBA 504 project.  The concern being discussed at SBA is whether or not a Subordination Agreement involving the Eligible Passive Company (“EPC”) and Operating Company (“OC”) could create any legal basis for the OC to affect the SBA’s ability to liquidate the subject property (SBA 504 Collateral)?  Of particular concern to the SBA is whether or not the Subordination Agreement contains any Nondisturbance and Attornment language?  SBA counsel is sensitive to the possibility that Nondisturbance and Attornment language might provide a basis for the OC to claim a right to remain in the property after the foreclosure, presumably with favorable rent and for a long term, therefore affecting the market value of the property and ultimately the ability of SBA to recover its principal investment. 
 
As part of the Bolt Law Group review process we review the documents of the Senior Lender and therefore had collected the Subordination Agreement requested by SBA District Counsel.  The Subordination Agreement involved in the SBA 504 project created none of the concern outlined above and therefore caused no delay in obtaining SBA 504 funding clearance.  At Bolt Law Group we work diligently to stay abreast of developments in the SBA 504 industry to ensure that our clients have the most effective and professional support possible.  Give us a call today 424-265-8529 to learn more about Bolt Law Group and our focused approach to supporting SBA 504 lenders.

​Are you prepared for to establish Use of Proceeds in your upcoming US Small Business Administration (“SBA”) audit?  Has your Closing Attorney discussed recently released SBA Guidance on Use of Proceeds?  Bolt Law Group works diligently to stay apprised of developments at the SBA and thereafter informs all of its Certified Development Company (“CDC”) clients about such developments.  Below is a quick discussion about the new standards by which your portfolio files will be judged in upcoming SBA 504 Audits.
 
Projects involving Construction, Leasehold Improvements and Installation of Equipment:

1. Signed Contract where total is equal to what is shown on the SBA 504 Loan Authorization (“Authorization”).  A Bid Proposal is no longer acceptable;
2. Evidence that construction was completed (Architect, Appraiser, or by some other means).  Example: If a pool was to be built do we have evidence one is now there?
3. Certificate of Occupancy;
4. Disbursement Schedule showing Payee, Date of Payment, and Amount of Payment, signed by Title, Escrow, or Third Party Lender;
5. Owner/Builders
   1. Documentation to support conclusion that Owner/Builder is experienced in the type of construction or machinery installation;
   2. 2 Bids from independent contractors that prove that the cost of the project is the same or less; and
   3. Owner/Builder cannot earn a profit.

 
Projects involving Installation of Equipment:

1. List of all equipment with serial numbers for all items worth more than $5,000;
2. Disbursement Schedule showing Payee, Date of Payment, and Amount of Payment, signed by Title, Escrow, or Third Party Lender;
3. Where Borrower receives any disbursement further evidence, e.g. Canceled Checks, are required to show what was paid for.

 
This article is meant only to quickly introduce the topic.  There are additional details to be considered for simple Real Estate transactions and where the CDC is the Interim Lender.  In any project success or failure can often hinge on the supporting cast with which you surround yourself.  At Bolt Law Group we pride ourselves on being the most informed and dedicated SBA 504 closing attorneys and would relish the opportunity to introduce ourselves to you.
 
Please reach out to us today, Curtis@boltlawgroup.com or 714-595-1696.
 
We are now proudly serving CDC clients throughout California and Texas.

In a rising rate environment, the fixed rate character of the SBA 504 loan is becoming a more popular option among borrowers.  That being said, the high cost of an SBA Closing Attorney can certainly be an impediment to funding smaller debentures (those less than $500,000). 
 
From an economic development standpoint the SBA 504 program provides Borrower’s with the opportunity to stabilize a large percentage of their operating expense.  However, in some jurisdictions high funding/closing costs cause some 504 professionals to actually recommend alternative loan programs.  In other words turn away interested Borrower’s.
 
We have been fortunate enough to work with a number of Certified Development Company’s (CDC’s) that fully understand the benefit of embracing small businesses that often become large businesses.  Below you will see that how combining a proper CDC philosophy and choosing the right Closing Attorney can make a huge difference.
 
Net Debenture: $100,000.00
 
Item                                                  Another Texas Attorney         Bolt Law Group
Funding Fee (.25%)                         $250.00                                         $250.00
CDC Processing Fee (1.5%)            $1,500.00                                     $1,500.00
CDC Closing Fee                              $2,500.00                                      $2,000.00
Other Out of Pocket                       $1,000.00                                      $0.00
Sub-Total                                          $5,250.00                                      $3,750.00
 
Underwriters Fee                            $424.00                                         $416.00
 
Gross Debenture                             $106,000.00                                 $105,00.00
 
Balance to Borrower                       $326.00                                         $834.00
 
Attorney Closing Fee                       $3,500.00                                      $1,750.00
 
Total Closing Costs                          $9,174.00                                      $5,916.00
 
Instead of turning away another Borrower, your CDC just earned $3,500.00 in fee income.  When choosing Bolt Law Group, the Borrower is saving  $3,766.00 or 3.77%, which does not include the beginning principal balance being $1,000.00 lower.  Of the Borrower savings, Bolt Law Group contributes $1,750.00.
 
Our CDC clients have been able to make this fee scenario work because of the extensive work included as part of the much lower Bolt Law Group Attorney Closing Flat Fee.  Stop turning away Borrowers; the professionals at Bolt Law Group can help you expand your client and revenue base.
 
Expect the best and find out what more than 130 SBA 504 borrowers, since January 2014, already know. Lower fees do not require fewer services.
 
Contact me today to better understand how Bolt Law Group can help you reach more clients (Curtis@boltlawgroup.com or 714-595-1696).