Loan Information
As your local U.S. Small Business Administration (SBA) Certified Development Company, Dakota BUSINESS Finance works with local lenders to provide loans to small businesses to construct, purchase, or renovate a building, install leasehold improvements or long-term machinery and equipment. Typically, the lender will provide 50 percent of the financing; SBA/Dakota BUSINESS Finance will provide 40 percent of the financing; and the small business owner will contribute the remaining 10 percent.
SBA/Dakota BUSINESS Finance's portion of the project is a direct loan from SBA, which sells the loans as bonds (or debentures) to investors on a monthly basis. Loan participants must be for-profit businesses and meet standards set by SBA.
Structure:
- Lender takes a 1st lien on the project property
- SBA takes a 2nd subordinate lien on the project property
- For expansion projects, a borrower may be able to pledge existing equity in land/building as the down payment
- Minimum of 10% down payment required
- Start-up businesses require an additional 5% equity injection
- "Single-purpose" buildings require an additional 5% equity injection
Example Project Structure
| Bank Loan (50%) | $500,000 |
| SBA Loan (40%) | $400,000 |
| Borrower Cash or Equity (10%) | $100,000 |
| Total | $1,000,000 |
Eligible Uses of Funds
