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ELIGIBILITY
• Must be a for-profit business. Non-profit groups such
as churches are not eligible.
• Must achieve an eligibility goal of SBA (usually easy
to do).
• Must be classified as small (net worth under $7 million
& net profits under $2.5 million).
• Owner must occupy 51% of an existing building or 80%
of the newly constructed space.
• Investment properties such as apartments and strip
shopping centers are not eligible.
• Speculative ventures (such as subdivision development)
are not eligible.
• Debt refinance is not allowed.
ALLOWABLE USES OF PROCEEDS
• Acquisition of vacant land for construction.
• Acquisition of existing land and building.
• Building construction and/or renovation.
• Machinery, equipment, furniture, fixtures located
in building being financed.
• Associated Soft costs such as architectural fees,
engineering, survey’s, appraisals, etc.
TYPICAL PROJECT
| Project Costs |
Project Sources |
| Land Purchase… |
$ 200,000 |
Bank – |
$ 500,000 |
| Building Construction… |
$ 700,000 |
SBA/CSRA 504 – |
$ 400,000 * |
| Machinery… |
$ 75,000 |
Borrower Equity (Down Payment)… |
$ 100,000 |
| Soft Costs… |
$ 25,000 |
TOTAL SOURCES |
$1,000,000 |
| TOTAL PROJECT |
$1,000,000 |
*MAXIMUM AMOUNT OF 504
2nd MORTGAGE LOAN $2,000,000
(Loan can be up to 4,000,000 if the loan is to a manfacturer.) |
RATES, TERMS, AND FEES
• Bank sets rate on their first mortgage loan. If SBA
term is 20 years, bank must be 10.
• Bank must pay a one-time fee of ½ of 1% fee
to SBA for participating in the program.
• All SBA 504 bond costs are financed into the loan.
• SBA 504 loans are assumable.
COLLATERAL
• Typically project collateral stands for the loan on
SBA-504 loans.
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