An SBA504 Loan is a two part loan from a Bank Lender and a local development center. All the components are generally arranged by a commercial mortgage loan broker such as Venture Funding Group of Delaware ( www.TheSBALoan.com , 1-800-578-4884)
A typical SBA-504 loan is structured like this:
- Bank --- 50%
- SBA/CDC --- 40%
- Borrower --- 10%. The borrower's percentage will be adjusted for a special purpose facility or a start up business
The SBA 504-Loan program provides long term, fixed rate, subordinate mortgage financing and acquisition and/or renovation of capital assets including land, buildings and equipment.
Virtually all types of for-profit small businesses are eligible for the SBA504 program. The main benefit to an SBA 504 loan is a fixed interest rate that is competitive and usually below market.
Under an SBA504 Loan project, many costs can be financed, including acquisition (land and building, land and construction of building, renovations, machinery and equipment) and soft costs such as title insurance, legal appraisal, environmental, bridge loan fees, and construction interest. Closing costs may be financed.
Partnering with a Local Development Center
A portion of your commercial real estate SBA504 Loan will be funded by a Regional Certified Development Company (C.D.C.) chartered by the U. S. Small Business Administration (SBA). Each CDC is generally a non-profit corporation. Your mortgage loan broker will arrange the appropriate submission for the CDC.
The CDC will finance your small business enterprise with the SBA 504-Loan, in order to provide business owners in your region a capital resource to finance real estate and fixed assets for growth and expansion, and job creation. Overall the CDC pools traditional lending with SBA funding to create many opportunities for business customers.
SBA504 Loan Eligibility:
The business, plus all affiliate companies, must have a tangible net worth less than $7,500,000.00
The average net profit of the business can not be more than $2.5 million dollars after taxes in the last two years
Job creation or retention is at a rate of 1 job for every $50,000.00 of the SBA's part of the loan. Exceptions my apply.
Must be owner occupied
Ability to repay the loan from projected cash flow and profits
Management ability and experience to run the business
What Business is a SBA504 Loan Designed For?
Someone wanting:
- To preserve your capital, in most cases only 10% down will be needed
- A fixed interest rate, for the entire term of the SBA 504 Loan
- A long term of 10 or 20 years on real estate and 10 years on equipment
- A low interest rate as the SBA loan (debenture) is sold on the bond market and is guaranteed by the Federal government
