SBA CDC / 504 Loan Program
SBA 504 Program Overview:
The SBA 504 loan program provides small businesses long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization. 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.
Typical Project Structure:
- 50% LTV Conventional 1st DOT/Mortgage
- 40% LTV SBA/CDC 2nd DOT/Mortgage
- 10% Equity Injection
SBA 504 Program Eligibility:
- The Small Business Concern must be operated for profit and fall within the size standards set by the SBA (Tangible Net Worth LESS THAN $7.5 million and Average Net Income DOES NOT exceed $2.5 million after taxes for the preceding two years). Loans cannot be made to businesses engaged in speculation or investment in rental real estate.
Use of Proceeds:
- Purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping.
- Construction of new facilities or modernizing, renovating or converting existing facilities.
- Purchasing long-term machinery and equipment.
NOTE: The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.
- $1,500,000 when meeting the job creation criteria or a community development goal.
- $2,000,000 when meeting a public policy goal.
- $4,000,000 for small manufacturers.
- Interest rates on 504 loans are pegged to an increment above the current market rate for five-year and 10-year U.S. Treasury issues. Maturities of 10 and 20 years are available. Fees total approximately 3 percent of the debenture and may be financed with the loan.
Eligible Property Types:
- Office: Professional, Condominium, Medical, Dental and Veterinarian.
- Industrial: Heavy and Light Manufacturing, Warehouse and R&D Flex.
- Retail: General.
- Special Purpose: Assisted Living Facilities / Adult Care, Day Care Facilities, Restaurants, Funeral Homes and Hotels/Motels.
Maximum Loan Amount:
- 1st DOT/Mortgage – $4,000,000
**Up to $6,000,000 of the Aggregate Financing Request. See SBA 504/CDC Interim Financing Program below.
- Adjustable, Three (3) and Five (5) Year Fixed Loan Terms Available.
Maturity and Amortization:
- 50% LTV based upon the Lower of Cost or Appraised Value.
Minimum Debt Coverage Ratio:
- 1.25x Minimum Debt Coverage Ratio (“DCR”) for the most recent FYE and Interim period. The DCR will be based on the underwritten EBITDA of the Small Business Concern.
- 51% or greater must be occupied by the Small Business Concern.
Borrower /Guarantor Characteristics:
- Prior Ownership and Management Experience.
- Minimum FICO 680.
- All loans are Full Recourse and require the personal guarantee of any and all individuals or entities holding 20% ownership interest or more.
- Up to $2,000,000.
- 120 Day Term.
- Variable Interest Rate based upon the published Wall Street Journal (WSJ) Prime Index + 2.75%, Interest Only, to adjust QUARTERLY.
**Funding of interim loan may be required by Lender.
- Available for Multi Purpose Projects. Please call for Program Information.