504 LOANS FINANCE
THE 504 CLOSING PROCESS
I’m Approved For a 504 Loan…Now What?
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1. Read through the entire Loan Authorization document, as it sets forth the terms and conditions under which SBA provides the guaranty on your loan. It also outlines the servicing actions and loan compliance requirements for the term of your loan.
2. Review your Commitment Fee Invoice and remit payment as soon as possible. Quite a few people get confused about this. The commitment fee is essentially a deposit. As stated in Section III of your application agreement, “the commitment fee, together with the application deposit, will be used to pay for the closing costs, including, but not limited to, credit reports, title insurance, recording and search fees, Growth Corp legal fees, and all other out-of-pocket costs. Growth Corp will send a statement detailing the costs paid from these funds together with a refund of the balance, if any, after the loan is funded. (Please note: the loan cannot proceed with closing until these fees are paid in full.)
3. Expect a call from the Closing Officer assigned to your project. They’ll go over timelines and checklists, plus they’ll explain the closing process in detail.
Growth Corp’s Closing Team works diligently to ensure approved projects are funded in a timely manner. As soon as a 504 loan is approved, the Closing Specialist assigned to your project will provide you with a project-specific checklist and prepare the paperwork necessary for the 504 loan closing. You will continue to work with your interim lender throughout two closings: 1) the bank funding of its loan and the 504 interim loan, and 2) the funding of the 504 loan. In the interim, Growth Corp will work with you and your bank to collect items necessary for the 2nd closing. Typically, these items are:
• Title Work
• The Bank’s Note and Mortgage
• Organizational Docs
• Life Insurance Policies…these can be time consuming, so please plan ahead
Other required documents, specific to your project, will be outlined by your Closing Specialist.
When Do I Lock In My Interest Rate?
The interest rate on 504 loans is determined at the time the 504 debenture pool is sold to the private market and is based on current market conditions, which fluctuate. This typically happens approximately six weeks after your project is fully complete. All SBA 504 loans are funded using the same market sale process, so interest rates in an given month are the same nationwide…regardless of CDC.
Hurdles That Often Delay Closing…
Typically, there are two aspects of closing that can be time-consuming: obtaining life insurance, if required, and appraisals/environmentals. Please address these as early in the process as possible.