Frequently Asked Questions
What is the SBA 504 Program?
What are the Advantages of the 504 Loan?
- Commercial loans for healthy expanding businesses.
- Fixed rate below market financing.
- Financing for fixed assets: real estate, machinery and equipment.
- Term of 20 years for real estate, 10 years for machinery and equipment.
Who are Eligible Borrowers?
- Long term below market fixed rate financing.
- Equity requirement of 10% or more for customer.
- Lender can provide 90% financing for customer.
- Lender can participate in larger transactions.
- Lender enjoys first lien, lending 50% of value at market rate and fees.
What is Eligible Use of Funds?
- For profit businesses.
- Tangible net worth not to exceed $15 million.
- Net profit after taxes not to exceed $5 million during previous 2 years.
Who are Ineligible Borrowers?
- Purchase land, purchase or construct building.
- Modernize, renovate or improve building.
- Purchase machinery and equipment with 10 year useful life.
- Soft costs.
- Total project size $125,000 minimum.
- No maximum total project size.
- Refinancing of debt - Program ends Sept. 27, 2012
What is Ineligible Use of Funds?
- Speculative development.
- Lending institutions, insurance companies.
- Gambling concerns and private clubs.
What is the SBA 504 Loan Product?
- Working capital.
- Rolling stock.
Rate: Based on pricing published by NADCO.
Structure: Healthy Expanding Business
50% Lender in 1st Lien
40% 504 in 2nd Lien
What is the Private Lender Participation?
- Start-up or Special Purpose Building will require 15% equity.
- Start-up and Special Purpose Building will require 20% equity.
What are the Fees for the Small Business Owner?
- Minimum 10 year term on real estate, minimum 7 year term on machinery and equipment.
- Market rate and fees.
- Covenants established by lender.
- One time 1/2% fee to SBA on Lender's participation.
Are there Other Requirements?
- Debenture Fees: 2.17% of 504 loan.
- All of the fees can be financed.
- Personal guarantee by 20% or greater owner.