Frequently Asked Questions
Q. Who is Dakota CDC?
A. Dakota Certified Development Corporation is a 501 c(3), private, not-for-profit certified development company. With more than 30 years of operation behind us, we are the first, the largest, and the most experienced SBA 504 lender in North Dakota. We have financed over 1,100 small businesses well in excess of $400 million.
We have evolved and grown through our own experiences and in those we have met along the way. Dakota CDC is all about cultivating the success of businesses in North Dakota and western Minnesota. Our vision will not be measured by the number of loans we make or the dollars we lend, but rather by the differences we make along the way.
Q. Is Dakota CDC a government entity? What is your source of funding?
A. Dakota CDC is a private, not-for-profit 501 c(3) organization. We are not associated with, or part of, any governmental organization, nor do we depend on any governmental support to operate.
Since we are a private not-for-profit we invest our profits in other business development and economic development efforts across the state and region we serve. For example, we have supported the North Dakota Small Business Development Centers, the Impact Foundation Procurement Center and others. While we do not receive any direct government support we do have some loans that we use for relending to small business from both the US Small Business Administration and Rural Development. We operate much like any small business and our revenue is generated from the processing and servicing fees from the small business loans we make.
Q. Do Dakota CDC loan programs qualify for the purchase of farm real estate? Will SBA guarantee loans to farmers?
A. There are situations where the SBA 504 loan program can be used to purchase farm real estate, usually in conjunction with some other small business purpose. For example, a farmer may want to put up a small hog operation so he or she purchases 40 acres, builds a building and acquires some equipment. This purchase of the 40 acres could be included in with the total project as long as it was in keeping with the small business operations. SBA does guarantee loans to farmers on a case-by-case basis.
Q. How much equity is required by the business owner for Dakota CDC loan programs?
A. A down payment of at least 10% (higher for certain programs) is required for Dakota CDC loan programs (SBA 504, 7a, IRP, ILP and Main Street).
Q. What fees are associated with Dakota CDC loan programs?
SBA 504: The 504 program requires payment of a fee of 2.15 percent of the SBA portion of the loan package, plus a closing fee for closing, recording and legal fees of approximately $2500 (financed). The participating bank pays an up-front fee of 0.5 percent of its loan to Dakota CDC, which transfers the payment to the SBA.
SBA 7a – The SBA 7(a) has a sliding scale of fees as follows:
- Loans of $150,000 or less – 2% of the guaranteed portion
- Loans $150,001 to $700,000 – 3% of the guaranteed portion
- Loans $700,001 to $5,000,000 – 3.5% of the guaranteed portion up to $1,000,000 plus 3.75% of the guaranteed portion over $1,000,000
IRP – The IRP has a 1% origination fee plus all hard costs associated with the loan.
ILP – The ILP has a 1% origination fee plus all hard costs associated with the loan.
Main Street – The Main Street has a 2% origination fee (minimum $100) plus all hard costs associated with the loan.
Q. How is an SBA 504 loan structured?
A. A complete 504 financing package is a combination of at least three sources: SBA-funded loan up to 40% of total project cost through Dakota CDC, borrower equity of at least 10%, and the balance (50%) through a local bank, savings and loan or credit union.
Q. Is there a prepayment penalty for SBA 504 loans?
A. A prepayment penalty applies during the first half of the loan term and declines to zero at the mid-life of the loan.
Q. Are SBA 504 loans assumable?
A. Yes, 504 loans are fully assumable with SBA approval.
Q. What sources underwrite DCDC’s IRP lending?
A. Dakota CDC is an intermediary lender of IRP, a USDA program administered through Rural Development. The funds are being leveraged for maximum effectiveness, whenever possible, through local bank participation in projects in their area.