What are SBA 504 Loans?

The Small Business Administration 504 Loan Program is a long-term financing tool that promotes economic development within a community.  The 504 Program provides small businesses with long-term, fixed-rate financing to acquire major fixed assets such as real estate or machinery and equipment for expansion or renovation.  The small business is able to obtain up to 90% financing on these assets.  Typically, the financing structure is as follows:

Source % of Project Lien Position Interest Rate & Term Maximum Loan
Bank 50 1st Market No Maximum
PTS CDC
(SBA Debenture)
40 2nd 20 years fixed Real Estate or 10 years fixed Equipment $5,000,000

($5,500,000 per project for manufacturers and green projects)

Borrower 10

 

Use of Proceeds

Proceeds from 504 loans can be used for any of the following:

Eligibility

The borrower must operate for profit. The borrower must have a tangible net worth of $15 million or less, and it must have experienced an average profit of less than $5 million over the last two fiscal years. SBA 504 loan size is linked to job creation. A small business owner must create and/or retain jobs to qualify for an SBA 504 loan.

Advantage to the Borrower

Unlike conventional loans, SBA 504 loans are structured to help preserve working capital.

Advantage to the Lender

Other Important Facts About SBA 504 Loans

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