for other expenses of the project including expenditures
the borrower (with
its own funds or from a loan);
To acquire land
used in the project prior to applying for the
SBA 504 loan;
Pay for other
expense of a project paid within nine months prior to
receipt by the
SBA of a complete loan application (unless the time limit
is extended or
waived by the SBA for good cause);
Pay for overruns
not to exceed 10 percent of construction cost;
Pay for professional
fees directly attributable and essential to the
as title insurance, architecture, engineering, accounting,
studies and legal fees (other than legal fees associated
with the closing);
financing, including points, fees and interest.
up to one third of your loan funds can be used to refinance existing
debt if that debt was originally related to fixed asset
of a SBA 504 Loan
A complete SBA 504 financing package consists of two financing sources, the SBA
and a private sector lender. The
SBA can loan up to 40% of the eligible costs to any approved project with a maximum
of $5 million to any non manufacturing, and $5.5 million to any manufacturing
business receiving the financial assistance is required to inject at least 10%
of the total funds for any project. Certain types of projects may require additional
injection of funds by the business. Third party lenders, usually a bank or
savings and loan institution, must provide the remaining percentage
of the financing.
loan terms are: 10 years for loans on machinery and equipment;
20 years for loans on real estate, including buildings. Interest
rates are "fixed" for the full term of the loan and
as of April 2013, are as low as 4.16% for 20 year loans.
Loans under the SBA 504 program must be secured
to ensure repayment. Collateral may include: a mortgage on the
land and building being financed; liens on machinery, equipment
lease assignments; and personal guarantees from individuals with
20 percent or more ownership in the company.
a completed project can assure the small business of the operating
capacity needed to make payments to the SBA, so interim financing
will be needed
for all projects. The interim financing (frequently provided by
the third party lender) provides the needed capital at project
and is repaid from SBA loan proceeds.
has the security of a first mortgage on the land and building or
equipment being financed, as well as any other collateral involved.
The SBA is secured by a second mortgage.
A Small Business Must Meet the Following Criteria to Qualify
for SBA 504 Loan Assistance
Its net worth
must not exceed $15 million and its average net income after taxes
for the preceding two years
must not exceed
It must be a for-profit
corporation, partnership, or proprietorship.
Its project must
demonstrate a significant economic impact on the community in which
it is located, primarily
through job creation
among others, investment companies, gambling facilities, lending
institutions, such as banks
or financing companies,
churches, and other not for profit companies.