Can I act as my own general contractor on an SBA loan?
Short answer
Possibly. SBA calls do-it-yourself construction generally unsatisfactory. It is allowed if the lender documents you are experienced and licensed, the cost matches or beats outside bids, and you earn no profit. Source: SOP 50 10 8.1, Sec. B, Ch. 6, Para. A.4.
Possibly, with documentation. SOP 50 10 8.1, Section B, Ch. 6, Para. A.4, says do-it-yourself construction and borrowers acting as their own contractor have proven generally unsatisfactory. They can cause problems with lien waivers and mechanics' liens.
What the lender must justify in the file
- You are experienced in the type of construction and hold all appropriate licenses.
- The cost is the same as or less than what an unaffiliated contractor would charge.
- You will not earn a profit on the construction.
The cost test uses 2 bids, or a single estimate from a third-party construction manager or the lender's internal construction department.
The same rule covers renovations and the installation of machinery and equipment.
504 loans
Section C, Ch. 1, Para. C.9, uses the same three tests. The Certified Development Company (CDC) justifies and documents them. The single estimate can come from a third-party firm or the Third Party Lender's internal department.
What stays required
On a new building or an addition, the lender must obtain evidence of seismic code compliance. That applies with or without a contractor (Para. A.4; 13 CFR § 120.174).
What the SOP does not say
It sets no minimum years of construction experience. Each lender decides whether to allow it.
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