SBA 504 BASICS

LOAN SIZE

  • $200,000 to $15,000,000+

BORROWER CONTRIBUTION / EQUITY INJECTION

  • A minimum of 10% unless …
  • The operating company has been in business less than 2 years, then 15% or
  • If the project involves a limited or single purpose building, then 15%
  • At least 20% if both a new business and special purpose property

Source of Funds

Existing Business AND Multi-Purpose Facility

Start-up Business OR Single-Purpose Facility

Start up Business AND Single Purpose Facility

Bank Loan
50% of Project Cost
50% of Project Cost
50% of Project Cost
NTCDC / SBA 504 Loan
Up to 40% of Project Cost
Up to 35% of Project Cost
Up to 30% of Project Cost
Borrower’s Equity
At least 10% of Project Cost
At least 15% of Project Cost
At least 20% of Project Cost

SBA PORTION OF PROJECT COST

  • $5 million maximum, or …
  • $5.5 million for small manufacturers, or …
  • $5.5 million for small businesses that reduce their energy consumption by 10% or generate renewable energy
  • The 504 loan may not exceed 40% of the Total Project Cost
  • No more than 50% of the financing can come from Federal sources

LOAN TERMS

  • 20 years for real estate / Bank’s portion must be at least 10 years
  • 10 years for equipment loans / Bank’s portion must be at least 7 years

JOB CREATION

  • 1 new job must be created or retained for each $65,000 debenture or $100,000 for manufacturing, unless the project meets one of the Public Policy goals

PUBLIC POLICY GOALS

  • Business district revitalization or enhanced economic competition
  • Expansion of exports
  • Expansion of minority, woman, or veteran-owned enterprise (51% or more ownership)
  • Rural development

BUSINESS SIZE STANDARDS (including affiliates)

  • Tangible net worth less than $15.0 million
  • Average net profit less than $5.0 million for the past 2 years

LEASING / OCCUPANCY REQUIREMENTS

  • If the project involves the purchase of an existing building, the borrower must occupy at least 51% of the facility. The remaining 49% may be leased permanently.
  • For new construction borrower must occupy 60% immediately, and an additional 20% within 3 years. The remaining 20% may be leased out permanently.
  • None of the “504” loan proceeds may be used to make tenant improvements to the portion of the building to be leased.

ELIGIBLE BUSINESSES

  • For-profit corporations, partnerships, and proprietorships
  • Owners must be U.S. citizens or legal permanent residents

INELIGIBLE BUSINESSES

  • Certain Passive income businesses (e.g. – apartments)
  • Financial institutions
  • Non-profit businesses

ELIGIBLE USES OF LOAN PROCEEDS

  • Purchase of land, building, machinery, or long-term capital equipment
  • Purchase land and construct new building & improvements
  • Purchase and Renovation of an existing building
  • Improvements or addition to existing building
  • Limited refinancing available. (see additional information)
  • Specialized equipment, such as commercial fishing vessels and heavy-duty earth moving equipment may be eligible

INELIGIBLE USES OF LOAN PROCEEDS

  • Working capital
  • Goodwill purchase
  • Inventory
  • Rolling stock such as cars, trucks, buses, or airplanes