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SBA 504 Loans |
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The 504 Loan Program
offers several benefits to the Business
- Low down payment
- Below market, fixed interest
rates
- Long-term financing
- Loan fees may be financed
- Loan is assumable
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Downloads:
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Qualifications:
- To qualify for an
SBA 504 loan, the business must be for-profit with a
net worth of less than $7 million, and have a
two-year average net profit after taxes of less than
$2.5 million.
- The business
applicant must be the primary user of the facility
(minimum 51% for existing facilities and 60% for new
construction)
- Furthermore, the
504 loan requires that one new job be
created/retained for every $50,000 provided by the
lender, unless the business meets other public
policy goals.
- Passive investment
companies, most non-profit businesses, lending
institutions, real estate development companies, and
some other enterprises are not eligible for 504
loans.
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Loan Purpose: Real
estate and fixed asset purchase including – business
acquisition, business expansion, construction, partner
buyout, start-ups, turn-arounds, and machinery and
equipment. Program is available nationwide to a variety of
industries.
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Property Types:All
property types.
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Loan Amount: Lender
Loan – up to $3,000,000 – First mortgage loan, or
approximately 50% of project cost. CDC Loan – up to
$2,000,000 – Second mortgage loan, or approximately 40% of
project cost. Loan may be higher under specific
circumstances.
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Interest Rate: Variable
and fixed interest rate.
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Loan Term: Lender Loan
– Up to 25 years, fully amortizing. CDC Loan – Up to 20
years, fully amortizing
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Prepayment Penalty:
Declining scale
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Personal Guarantee:
Full guarantee of all principals who own 20% or more of the
project.
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Loan to Value (LTV): Up
to 90%
To download a complete application packet
in .pdf form, click here |
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A loan made under the SBA 504 Loan
Program contains the following three parts:
- A First Mortgage Loan
provided by the borrower’s financial lending institution, up
to 50% of project cost. The private lender’s note is
separate and carries its own rate, terms and conditions. The
private lender charges a market rate for his loan with a
minimum term of 10 years.
- A Second Mortgage Loan
from our lending partner, up to 40% of project cost or a
maximum of $1,300,000 (under special circumstances, up to
$1,500,000 is available). The term of the 504 loan can be as
long as 20 years for real estate and 10 years for equipment.
The interest rate is fixed for the maturity period. The
interest rate is below market, fixed and determined at the
time of SBA funding.
- A down payment from the
borrower, typically 10% of total project cost. If the
business is a new business or the facility is for special
usage, the required down payment may be as much as 20% of
total project cost. The down payment can be cash, equity in
land or building, existing equipment or any other fixed
assets that are part of the project.
The 504 loan amount and the
required equity contribution will depend on many credit and
eligibility factors.
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