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SBA – 504 Loans - Real Estate & Equipment Loans

The SBA CDC/504 Loan Program provides financing for major fixed assets such as Real Estate or Equipment. Real Estate must be 51% owner occupied.

Key Features:
  • Ninety – Percent (90%) Loan to Cost Financing
  • Long Term Fixed Interest Rates that are BELOW MARKET
  • Longer Term Amortizations – Lower Payments
  • Fully Assumable Loan
A typical 504 loan structure might look like this, according to the SBA:
A 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped.
Basically this means that a bank will lend 50% of the purchase price, the SBA/CDC will lend 40% of the purchase price and the borrower comes in with a 10% down payment.

Loan Amount
Up to $5million, or up to $5.5 million for manufacturing companies. The minimum debenture amount is $50,000. There are no restrictions on the total project size.

The term for real estate financing is 20 years and the term for machinery and equipment financing is 10 years. A minimum term of 10 years is required from the first trust lender on real estate financing and 7 years for machinery and equipment.

One-time fees on the SBA 504 loan total approximately 2.75% of the amount of the 504 financing. These fees are included in the loan, so that the out of pocket cash disbursements for the borrower are minimized.

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