In order to cope with the large volume of commercial loans maturing in the coming year, the banks are remaining very conservative in financing hotels. In this market, conventional loans are available but for hotel transactions with strong sponsors, stable historical cashflow, and strong market penetration reflected by the STAR report. In this project, a sudden and temporary drop in demand in the local market resulted in a drop of the 2023 revenue making the hotel less desirable for conventional loans. Scientific Capital then resorted to SBA 504 for the financing of this hotel acquisition and PIP (Property Improvement Plan required by the franchise) for a loan of $7.5 million with desirable terms such as interest rate of Treasury + 3% fixed for 5, amortization of 25, and prepayment penalty of 3 2 1. 

 A recent challenge experienced by some borrowers applying for a new SBA loan is the error code 4363. If SBA notices discrepancies with an EIDL loan documents, it will put an error code 4363 against the borrower’s social security number in which case, when a lender (in case of SBA 7a loans) or an SBA CDC (in case of 504 loans) tries to enter the social security of the partners into the SBA system called ETran, it receives the error code 4363. The SBA loan cannot be approved unless the error code 4363 is cleared. Generally within 24 to 48 hours after the ETran entry that resulted in the error code 4363, the borrower receives an email from 4363resolution@sba.gov requesting full 2019 tax returns and the 2019 tax transcripts of the small businesses causing the 4363 error code. The borrower obtains the transcripts from the IRS by either calling in or faxing the 4506-T forms to the IRS. Assuming the tax return, the income reported when EIDL was obtained, and the IRS transcript are a match, the error code 4363 should be cleared shortly after the submission. In this project we were able to get clearance in under 30 days considering that it takes about 7 to 10 days to receive the IRS transcripts.