The 504 program allows small and medium-size businesses
to obtain long term, fixed-rate financing at below market rates for up to 20 years. The SBA-guaranteed
debentures are pooled monthly and sold to private investors.
Projects are financed per the following
A private lending institution
covers 50 percent of the project cost.
A Certified Development Company (CDC) finances 40% (not to exceed
$1,000,000) through SBA
The small business must invest at least 10% (15% for special purpose facility/20%
for special purpose and start-up businesses)
Types of Financing
20 Years Real Estate
10 Years Machinery and
Prime + .5% - 2.75% variable from primary lender (Varies by
CDC Rates typically fixed at less than Prime rates
Loan To Value:
50 - 90%
There is a ten year pre-pay penalty. 10%, 9%, 8%, 7%, 6%, 5%,
4%, 3%, 2%, 1%
None to minimal lender fees
Packaging fee/good faith deposit
Customary closing costs
Construction fee, if applicable, to offset monitoring costs
SBA charges a fee of
approximately 2% (depending on loan amount and percentage of guarantee)
Owner occupied small business
US Citizen or resident alien
Reasonable financial statement or credible
Business must meet SBA size standards
First lien on land, building, equipment and inventory.
Personal guaranties of the principal owners are also required.
Additional outside collateral is necessary if
lease-hold improvements are substantial.
Loan decision made within 4 weeks of receipt of completed
SBA 504 financing is a superior long term fixed rate financing option. 504
loans are normally done on larger projects. If you do not feel you would be owning the property for a longer
period of time, SBA's 7(a) loan program or perhaps conventional financing would be a better alternative
because of the 504's longer pre-pay penalty period. The longer pre-pay penalty is to offset the significantly
lower rates offered in a bond debenture done by the CDC. Refinances are
SBA 504 financing is a great financing option. The only disadvantages is that SBA
7(a) can finance some costs that a 504 can not. The pre-pay penalty is long, but it is for the bond
debenture portion and does not apply to the entire loan.
To prequalify for financing, download the following forms and
provide the following information and fax to (202)478-1811 or email