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% – 1st Mortgage
SBA 504 – 40% – 2nd 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
Lending products available with approved credit.
