Green Commercial Capital / MyMortgageBanker.com
SBA Commercial Financing FAQ's
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sba 504


Frequently Asked Questions

Commercial Loans

Do you offer commercial loans? Yes, we offer commercial loans nationwide.

What is a CDC? A CDC is a Certified Development Company. CDC's are non-profit organizations that have been certified by the SBA to provide loans to small businesses and they are instrumental in providing and the approving the debenture piece of SBA 504 loans.

What is a Debenture? The debenture is the second mortgage piece of the 504 loan and it is the piece that is underwritten by the CDC and guaranteed by the SBA.

What is the maximum Debenture? The maximum debenture is $4 million and there is no restriction on the amount of the lender funded first mortgage.

How does the SBA define a "small manufacturer?"

A Small Manufacturer is defined as a small business concern that has:
Its primary business classified in sector 31, 32, or 33 of the North American Industrial Classification System (NAICS); and All of its production facilities located in the United States.

What are the Public Policy Goals of the SBA 504? Public policy goals have always been a requirement of the 504 program, but there have been some changes with the recent passage of the Energy Independence and Security Act of 2007 and the American Recovery and Reinvestment Act (of 2009) that specifically relate to energy efficiency and green building.

Essentially, any business eligible for a 504 loan that can reduce it's energy consumption by 10% or produce some of it's own energy may now qualify for maximum financing.

Here are all the public policy goals - a business needs to meet just one to qualify for the 504 program:

  • 10% reduction in energy consumption
  • Renewable energy production/generation
  • Incorporation of Sustainable Design or LEED construction
  • Business district revitalization.
  • Expansion of exports.
  • Expansion of minority business development.
  • Rural development.
  • Increasing productivity and competitiveness.
  • Restructuring because of federally mandated standards or policies.
  • Changes necessitated by federal budget cutbacks.
  • Expansion of Veteran owned small businesses - especially service-disabled veterans
  • Expansion of small business concerns owned and controlled by women.

 

What is EBITDA?

"EBITDA" is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization and it is a way to measure a company's cash flow and it's ability to service debt. Computing EBITDA requires adding back interest, depreciation and amortization expenses to pretax income.

 

Residential Loans

We are not offering residential loans at this time.

Underwriting

What is “Payment Shock?”  Payment shock is a term used by mortgage underwriters to refer to how much your new payment is going up from what you are currently paying for your housing expense.  It is typically a very important factor in an underwriter’s decision regarding a loan.

What is a “debt to income ratio” or DTI?  This is the ratio of your monthly payments to your GROSS monthly income.  In other words, if the total of your monthly payments including your mortgage is $2000 and your gross monthly income is $6000 then your debt to income ratio is 33%.  Only debts listed on the credit report and any child support, alimony or child care are typically counted in the ratio.

Credit and Credit Scores

What is a FICO score?  FICO scores were developed by Fair Issac Corporation as a tool to help lenders evaluate the creditworthiness of consumers.  Essentially, they represent the quality of your credit in a number.  The higher the number the better your credit and they are an absolutely crucial element of any mortgage file – especially a stated income or no income loan.

What is a middle credit score?  Mortgage lenders use the middle of the 3 FICO scores that we get from each of the credit bureaus – not the average of the three – so if you have a 679 from Equifax, a 680 from Experian and 681 from Trans Union we will use 680 as our representative score.

How come the credit reports I get online don’t give me the same credit scores that lenders use?  Good question.  Mortgage lenders use FICO scores and it is a mystery to those of us in the lending community as to why the credit bureaus give out anything but FICO scores since it does nothing but create confusion for all involved.

Piggyback second mortgages and PMI

Is Private Mortgage Insurance (PMI) tax deductible?  Yes, if it is paid in connection with the purchase/acquisition of a property, but there are limitations so please refer to either IRS publication 936 or check with your trusted tax advisor.

What is a “piggyback” second mortgage?  A piggyback second mortgage (or equity line) is a way around a 20% down payment and PMI.  In the days before private mortgage insurance you had to have at least 20% down to buy a house.  PMI made 100% financing possible with the creation of an insurance policy paid by the borrower to protect the lender in the event of default.  PMI has limitations, so many banks created “purchase money” second mortgages to enable those who either did not want PMI (prior to 2007 it was not tax deductible) to be able to buy a home with a smaller down payment.  It is also used to avoid paying a premium for a jumbo mortgage by combining it with a first mortgage at the “conforming limit” enabling borrowers to

What is the definition of “loan to value”?  Loan to value is the relationship (expressed as a percentage) of your loan vs. the value of your property.  If you owe $95,000 on a home valued at $100,000 then you have a 95% “loan to value.”  The lower the loan to value the less risk there is for the lender.

What is the definition of “combined loan to value”?  Combined loan to value is a term used to when you have more than 1 mortgage on the property.  For example, if your home is valued at $100,000 and you have a first mortgage of $80,000 and a second mortgage of $15,000 then you have a combined loan to value of 95% (80 + 15 = 95).

 

Closing Costs

What is a discount point?  A discount point is 1% of a loan amount.

What is an Origination Fee?  An origination fee is a fee charged by some mortgage lenders and brokers as compensation for processing and closing your loan.

Are mortgage “discount points” tax deductible?  In most cases, yes, but please refer to IRS publication 936 for details.  It should be pointed out that points for a refinance can usually only be deducted over the life of the line.

How much can the builder or seller pay towards my closing costs and points?
Yes, but how much depends on how much you are putting down.  For the purchase of a primary residence with 5% down the seller can typically pay 3% of the loan amount(s) towards your closing costs/discount points and they can typically pay up to 6% with a 10% down payment.

Commercial Hard Money Loans

Do you offer commercial hard money loans? No, but we have relationships with commercial hard money lenders and a relationship with a nationwide direct private money lender if you need a hard money loan.



* There are a few counties and some states where cannot offer a few of our mortgage programs.

contact us to find out more!