SBA 504 Loan Program
What is an SBA 504 Loan?
The SBA 504 Loan Program provides companies a 10-percent down, fixed-rate, long-term loan designed to expand capital access. This program is about helping these businesses purchase the assets needed to take it to the next level: acquire new facilities or purchase equipment.
Typical Project Structure
- 10% Company Cash Down
- 50% Bank Financing
- 40% CDC Debenture
Projects are secured by a 1st and 2nd Deed of Trust/Mortgage on General and Special Purpose commercial real estate, meeting SBA qualifications, having a maximum aggregate Loan to Value between of 90%, depending on program parameters.
In order to qualify for the program, the borrower must meet the SBA’s definition of small business and must plan to use over half (51%) of the property for its own operations within one year of ownership; if the building is to be newly constructed the borrower must use 60% at once and plan to occupy 80%. The borrower may form a real-estate holding company that lease 100% to the operating business, which then subleases surplus space (up to 49%). To qualify for this program, U.S. citizens or permanent residents must hold a majority of the ownership of the operating companies and the holding company.