Your SBA 504 Loan Guide
The U.S. Small Business Administration (SBA) created the 504 loan program in 1980 to provide accessible financing for growing businesses seeking owner-occupied commercial real estate.
As little as 10% down payment to preserve working capital
No additional collateral required
Decreased risk for lenders
No limit on total project costs
Below-market FIXED rates, 20 year and 10 year terms
Maximums on SBA Loan Portions
- $5.0 million for most projects
- $5.5 million for manufacturing projects
- $5.5 million when "Go Green" initiatives are met
- No maximum limit placed on total project cost or lender's first mortgage
How Funds May Be Used
- Acquisition of an existing building (51% occupancy)
- Building expansion or renovations
- Fixed assets from business acquisition
- Land and new construction
- As little as 10% down payment for most loans
- 15% for start-up businesses (within two years) or special-use properties
- 20% if project is a start-up and a special-use property
- Job creation
- Expansion of lending to women, minorities and veterans
- Assisting U.S. manufacturing
- Rural and under-served area development
- Expansion of lending to businesses that "Go Green"
Go Green Qualifications
- LEED certified buildings
- Projects that reduce energy consumption by at least 10%
- Projects that generate renewable energy
- Qualify for purchase of multiple properties (no cap)
- Unlimited total project cost (SBA portion capped at $5.5 million)
ARE YOU QUALIFIED?
- Private, for-profit businesses in the U.S.
- Seeking financing for equipment or an owner-occupied building (minimum 51%)
How is an SBA 504 loan structured?
Using the example of a $4 million purchase with improvements of an additional $1 million, the financing for a project totalling $5 million would look like this:
Did You Know?
- Most privately held companies are eligible for SBA financing.
- SBA 504 Program provides up to 90% financing that helps owners preserve working capital.
- SBA 504 provides special savings for U.S. Veteran-owned businesses.
- An unlimited number of SBA 504 loans are available, even if 504 or 7A borrowing limits were already met (when businesses "go green").
Why choose an SBA 504 over a 7A or Conventional loan?
Included in SBA Loan Amount at approximately 2.65%
SBA 2nd Loan at Below-Market, Fixed-Rates for 20 Years
No Additional Collateral Required
Yes - 10 years, declining each year
Maximum Loan Amount $5MM
10 - 15% Minimum
Paid out of pocket at 2% to 3.75% of the Loan Amount
Typically Variable Rate Tied to Prime
Additional Collateral Typically Required for 90% Financing
Yes - Typically 3 years
25 - 40%
Paid out of pocket at approximatly 1%
Varies by Lender
Typically No Additional Collateral
Varies by Lender