Frequently Asked Questions

What is the SBA 504 Program?
  • 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.
What are the Advantages of the 504 Loan?
  • 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.
Who are Eligible Borrowers?
  • For profit businesses.
  • Tangible net worth not to exceed $15 million.
  • Net profit after taxes not to exceed $5 million during previous 2 years.
What is Eligible Use of Funds?
  • 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
Who are Ineligible Borrowers?
  • Non-profits.
  • Speculative development.
  • Lending institutions, insurance companies.
  • Gambling concerns and private clubs.
What is Ineligible Use of Funds?
  • Working capital.
  • Inventory.
  • Rolling stock.
What is the SBA 504 Loan Product?
Rate: Based on pricing published by NADCO.
Structure: Healthy Expanding Business
50% Lender in 1st Lien
40% 504 in 2nd Lien
10% Equity
  • Start-up or Special Purpose Building will require 15% equity.
  • Start-up and Special Purpose Building will require 20% equity.
What is the Private Lender Participation?
  • 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.
What are the Fees for the Small Business Owner?
  • Debenture Fees: 2.17% of 504 loan.
  • All of the fees can be financed.
Are there Other Requirements?
  • Personal guarantee by 20% or greater owner.

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