Servicing Your Loan
BEFCOR is responsible for administering the 504 account consistent with the expectations of SBA. If you have any questions or concerns about your 504 loan, contact the BEFCOR servicing manager. Here are the kinds of information which will most frequently be requested of the customer to assure the terms of the Loan Authorization are met:
- Financial statements (annually)The year-end financial statements of the operating business will be required within 90 days of fiscal year end. A complete copy of the operating business’ Federal Tax Return can be provided instead as an alternative to satisfy this requirement.
- Proof of hazard insurance on the project collateral (annually)A copy of the insurance binder showing continued coverage specifying BEFCOR and/or SBA as the mortgagee/loss payee will be needed.
- Status of the loan with the senior lender (annually)Information showing the loan balance and current condition of the loan. If this information is unknown to you we will provide a form to be signed authorizing your bank to disclose the information to BEFCOR.
- Job count (annually)BEFCOR compiles this information from all 504 loans and provides the information to SBA. That agency uses the data to show Congress the effectiveness of the 504 program and its impact for economic development and job creation.
- Copy of paid Property Tax receipt (annually)This will be requested only when the information is not otherwise available on-line.
- 504 Project field visit (annually)
BEFCOR will contact you to arrange a field visit of the project facility by our staff. This is an excellent opportunity to discuss additional expansion funding needs of the business or its affiliates.
Modifying Your Loan
BEFCOR also acts as the conduit to SBA to process loan servicing modifications. Here are some examples:
- Subordinate to allow another bank to replace the existing senior lender.
- Subordination of SBA collateral to permit refinancing for business growth and expansion.
- Substitute equal or greater equity in collateral.
- Release of collateral.
- Recognize changes in the organizational form of the borrower such as conversion to a LLC, LLP, Subchapter S Corporation, or C Corporation
- Release or substitution of obligors resulting from retirement, sale of the operating business or 504 loan assumption.
- Loan assumptions where the business relocates or is sold. Qualified buyers can assume the loan, often with the release of original obligors. There is a required 1% assumption fee plus reimbursement for legal fees and other out-of-pocket fees.
- Deferment of monthly 504 loan payment.
- Changes to the account used for the automatic draft of the 504 monthly payment.
504 Loan Prepayments
Prepayment of 504 accounts are different than other financing due to the use of a debenture to originally fund the loan. The following is an overview of the prepayment process:
- The prepayment semi-annual dates are scheduled twice yearly for each 504 loan and are based on the date of the original loan funding.
- Prepayment calculations will include all payments up to and including the one due for the semi-annual date. All deferred catch-up plan payments, overdue payments, late fees and any other costs or fees incurred will be included.
- Prepayments can only be scheduled for the third Thursday of each month. 15 days advance notice must be provided so that the prepayment date can be scheduled.
- Prepayment premiums will be incurred on all 504 loans prepaid prior to the half-life of the loan (10 years on loan having a 20 year maturity and 5 years on a 10 year maturity 504 debenture).
- A prepayment estimate will be provided to you soon after the prepayment date has been established.
- A non-refundable Good Faith Deposit of $1,000 must be wired.
- The Good Faith Deposit must be wired not less than 10 days prior to the scheduled prepayment date.
- Colson Services Corp., the Central Servicing Agent, will then provide the actual prepayment amount, usually about six (6) days prior to the scheduled prepayment date.
- The actual prepayment amount must be wired not later than noon on the scheduled prepayment date.