About SBA 504 Loans
Who Qualifies for an SBA 504 Loan?
The SBA 504 Loan Program is specifically designed for long term, fixed rate, fixed-asset financing, primarily owner-occupied commercial/industrial real estate and/or major machinery and equipment.
Proceeds an be used to finance these specific needs:
- Purchase of Land and Improvements, including existing buildings, modernizing, renovating, or converting existing facilities
- New Construction
- Purchase of New Long Term Machinery and Equipment
- All costs that are directly attributable to the purchase or construction project can be financed
- Proceeds CANNOT be used for working capital, inventory, or costs unrelated to the project
How can I get an SBA Loan for my business?
An SBA 504 loan is available to businesses that are:
- A for-profit business whose business net worth is less than $15 million and has income after taxes of $5 million or less, on average, for the previous two years.
What are the advantages of an SBA 504 Loan?
Advantages for the commercial lender:
- Reduced risk on projects resulting in 50% loan-to-value ration
- Fixed or variable rate option on the bank loan
- Meets economic development and community reinvestment goals
- Keeps the bank competitive by offering attractive financing for its clients
Advantages for the small business:
- Low down payment - helps conserve valuable operating capital
- Below market rate - avoids future rate fluctuation, keeping costs of loan low
- Long-erm - brings debt service in line with cash flow generated by business
What is the project size range?
The 504 loan size can be up to $5 million (up to $5.5 million for energy projects/manufacturers meeting SBA defined NAICS codes. Typically, 504 loans do not go below $100,000.
Typical 504 Financing Structure
SBA 504 / NGCDC, Inc.
Up to $5M ($5.5M for energy or manufacturing)
Term Real Estate
10 years or longer
7 years or longer