What is the SBA 504 Loan Program?
The SBA 504 Loan Program assists small business owners in the
purchase of commercial real estate or machinery/equipment. The SBA 504 Loan
Program is a partnership program between a Certified Development Company (CDC)
and a lender. Working in conjunction with qualified lenders, Capital CDC provides
up to 90% financing for commercial property purchases and new construction and,
usually, does not require additional collateral.
How is an SBA 504 Project Structured?
Capital CDC provides up to 40% of the total project cost with an affordable, fully amortized, fixed-rate loan. The participating lender, in most cases, finances 50% of the cost. You, the borrower, typically put down as little as 10% of the total project cost.
EXAMPLE PROJECT
SOURCE |
Percentage |
Project Amount |
Bank Loan |
50% |
$500,000 |
CDC/SBA |
40% |
$400,000 |
Business Owner |
10% * |
$100,000 |
|
100% |
$1,000,000 |
- The CDC/SBA portion of the loan amount (40%) is limited to a maximum of $1,500,000
- The 504 Loan amount can be increased, however, to $2,000,000 when supporting economic development “public policy” goals
- The 504 Loan amount can be further increased to $4,000,000 for “small manufacturers” as defined by the SBA
* Single purpose buildings and start-up businesses are subject to additional equity injection
Try our Loan Calculator
Why is the SBA 504 Loan Program Right for You?
An SBA 504 loan is a powerful tool to help your business grow. It offers:
- Low down payment – conserving valuable operating capital
- Competitive, Fixed-Interest Rate – no future interest rate fluctuations
- Long-Term – brings debt service in line with cash flow generated by the asset
- Conserve Working Capital – as low as 10% down
- Offset Interest Rate Risk (of portion of project tied to a fixed rate)
- 10-20 Year Terms - extended terms provide lower monthly payments
- Improve collateral position to increase borrowing capacity at lower rates
Assets which can be Financed
- Existing Buildings – business must occupy at least
51% of the project (may include remodeling or expansion)
- New Construction – business must occupy at least
60% of project upon occupancy (must occupy 80% within ten years and can lease
20% of project on a permanent basis)
- Machinery / Equipment – must have a useful life
of at least ten years
Eligible Companies
Existing Businesses that meet SBA’s definition of a small business are eligible to apply for 504 loans. Start-up ventures with financially strong and/or experienced owners are also eligible.
Contact an office near you to find out more about the SBA 504 Loan program or learn more at the following:
Back to Top |
