The 504 Loan program is done in partnership with a Certified Development Company (CDC), which are non-profit entities that are sponsored by private-sector organizations or by state and local governments to contribute to economic development. Loans are used solely for the purchase of equipment or for the expansion or purchase of a building*, and generally requires only 10% equity (may require 15% to 20% in certain cases). The SBA portion is up to 40% to a maximum of $5,000,000, which can equate to a total project of $12,500,000.
The 50% financing is completed via a conventional, non-SBA guaranteed loan from the Bank. Rates for the SBA portion are fixed for the term, and substantial pre-payment penalties apply. Rates for the 50% non-SBA piece are negotiated with the Bank, and may be fixed, but for a lesser term than the SBA portion.
Specific uses and terms are:
- Equipment – 10 years
- Real Estate* - 20 years
The 504 Loan program can be combined with other State and/or Local loan programs. Eligible project costs may also include acquisition legal expenses, professional fees, and other related soft costs. The 504 program also requires the creation or retention of one job for every $65,000 of the 40% SBA loan proceeds.
*Owner must occupy 51% or more of the building’s total square footage.