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.
- 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|
Eligible Uses of Funds