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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 allowed in some instances. Click here for a guide to the SBA 504 program.
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 (borrower selected) |
$ 500,000 |
| Building Construction |
$ 700,000 |
|
SBA/CSRA 504 Loan |
$ 400,000* |
| Machinery |
$ 75,000 |
|
Borrower Equity (Down Payment) |
$ 100,000 |
| Soft Costs… |
$ 25,000 |
|
|
|
| TOTAL PROJECT |
$ 1,000,000 |
|
TOTAL SOURCES |
$ 1,000,000 |
Note: (Loan can be up to $5,500,000 if the loan is to a manfacturer.)
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*Maximum amount of 504 2nd mortgage loan can be $5,000,000 |
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.
SBA 504 REFINANCE PROGRAM
• Click here for information about the SBA 504 Refinance Program..
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