SBA 504 Loan Program for Development Companies
Improve local real estate and the community with long-term financing from a SBA 504 Loan
The SBA 504 Loan Program provides long-term financing for economic development within a community. The program is designed to help small businesses requiring “brick and mortar” or capital equipment & machinery financing. Money borrowed with a SBA 504 loan can be applied to land and building purchases, existing building and lot improvements, new construction, long-term equipment purchases and more.
Amounts
Total financing up to $12 million (Bank loans up to $6 million with CDC loaning of up to $5 million)
Average total project cost of $12 million
Purpose
SBA 504 Development Company Loan is designed for businesses looking to acquire, construct, or improve owner-occupied real estate that meets the following requirements:
51% occupancy for existing building
60% occupancy for new construction
Uses
Real estate (owner occupied)
Machinery and equipment
Fixed assets with a useful life of 10 or more years
Debt refinancing
Rates
May be fixed or variable based on 10- or 20-year term (depends on asset type financed)
Variable rates* (maximum with potential monthly changes)
One month Libor + 3.00%
Wall Street Journal Prime rate + 2.75% (for terms greater than 7 years)
* SBA 504 loans are for terms of either 10 or 20 years. The interest rate on the SBA 504 loan is set when the SBA sells the bond (debenture) to fund the loan, and the interest rate is then fixed for the duration of the term. The small business owner's monthly payment includes program fees and a loan loss subsidy fee, which are financed as part of the loan. SBA 504 debentures are fully amortized securities and have no balloon payments. To compare interest rates, see the U.S. Treasury bond rates.