The SBA 504 Program
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 with qualified lenders, Capital CDC provides up to 90% financing for commercial property purchases and new construction and, usually, does not require additional collateral.
Why is the SBA 504 Loan Right for You?
An SBA 504 Loan is a powerful tool to help your business grow. It offers:
- Low Down Payment - Conserve working capital
- Competitive, Fixed-Interest Rate - No future interest rate fluctuations
- Long-Term (10, 20, or 25-year terms)- Brings debt service in line with cash flow generated by the asset
- Improve Collateral Position - To increase borrowing capacity at lower rates
- Refinancing - In certain circumstances, refinancing of existing debt related to fixed assets
Assets Which Can Be Financed
- Existing Buildings - Business must occupy at least 51% of the project
- New Construction - Business must occupy at least 60% of project upon occupancy
- Machinery / Equipment - Must have a useful life of at least ten years
How is an SBA 504 Project Structured?
The typical SBA 504 Loan structure is as follows: 50% lenders note, 40% SBA 504 note and 10% borrower injection.
If a project is a special purpose facility or start-up business, the SBA 504 portion drops to 35% and the borrower is expected to contribute 15%.
If a project is a special purpose facility and a start-up business, the SBA 504 portion drops to 30% and the borrower’s injection is 20%.