SBA 504 Loan Program

If you are looking for long term, fixed-rate financing to buy or build your own facility, the SBA 504 loan program provides this. 20-year fixed rate for real estate and 10-year fixed rate for equipment. Other advantages are low down payment and below market rate interest rate. The SBA 504 requires a minimum of 10% down payment where a conventional bank loan requires 20% (an additional 5% equity is required for a start-up business, 5% equity is also required on special purpose facilities).

The term of the loan depends upon the nature of the proceeds:

* Land and Building – 20 years

* Machinery and Equipment – 10 years

Typical Structure of a Loan:

Bank – 50% – 1^st Mortgage

SBA 504 – 40% – 2^nd Mortgage

Borrower’s Equity – 10% *

* This is a minimum requirement – An additional 5% equity is required for a start-up business, 5% equity is also required on special purpose facilities (hotel/motels, gas stations, car washes, funeral homes, theaters, etc.) Therefore, if you have a start-up special purpose project, the borrower will need to contribute 20% equity into the project.

Start Up & Special Purpose Facility Structure:

Bank – 50% – 1st Mortgage

SBA 504 – 30% – 2nd Mortgage

Borrower’s Equity – 20%

Ineligible Purposes:

* Working Capital

* Franchise Fees

* Inventory

* Rolling Stock

Ineligible Businesses:

* Nonprofit Organizations

* Financial Institutions

* Gambling Facilities

* Real Estate Development Companies