How RCA Capital Packages Complex Deals for Approval
The SBA has a reputation for “red tape,” but most of this friction comes from poorly structured applications. As your consultant, we focus on the EPC/OC (Eligible Passive Company / Operating Company) structure—the legal “gold standard” for SBA real estate deals.
Drill-Down: The EPC/OC Structure
For asset protection and tax planning, most investors do not want their active business (the Operating Company) to own the real estate directly. Instead, they create a separate LLC (the Eligible Passive Company) to hold the title.
-
- The Problem: The SBA generally doesn’t lend to “passive” real estate companies.
- The Solution: Structuring a “lease” between your EPC and your OC. The SBA then looks through the structure to the cash flow of your business to guarantee the loan. This allows you to keep your real estate and your business operations legally separate, affording you the protection you need while still benefiting from 90% SBA financing.
Understanding the “Personal Guarantee” and Liens
A common point of confusion is the SBA’s requirement for collateral.
-
- The 20% Rule: In general, anyone owning 20% or more of the business must provide a full, unconditional personal guarantee.
- The “All Available Collateral” Rule: If the business property doesn’t have enough equity to fully secure the loan, the SBA may require a lien on your personal residence or other real estate you own. RCA Capital’s expertise lies in negotiating and structuring these “collateral shortfalls” to minimize the impact on your personal estate.
Why Use a Consultant Like RCA Capital?
SBA lending is “formulaic.” If a file is presented incorrectly to a lender’s credit committee, a “no” is often permanent for that institution. We perform a pre-underwriting audit of your:
-
- Debt Coverage Ratio: Ensuring your business meets an acceptable debt service.
- Size Standards: Confirming your net worth is under the $15M threshold.
- Character Requirements: Reviewing any past credit or legal issues that need to be “explained away” to the SBA via a statement of personal history.
The RCA Value-Add: We don’t just find a lender; we manage the CDC, the third-party bank, the appraisers, and the SBA’s legal counsel to ensure your 10% down payment deal actually crosses the finish line.
