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

Source

Lender Loan

SBA 504 / NGCDC, Inc.

Borrower

Project Costs

50%

40%

10%

Lien

1st

2nd

n/a

Funding Limits

No Limit

Up to $5M ($5.5M for energy or manufacturing)

n/a

Rate

Market

Fixed

n/a

Term Real Estate

10 years or longer

20 years

n/a

Term
Machinery &
Equipment

7 years or longer

10 years

n/a