The Small Business Administration's 504 Loan Program provides small companies in development areas with guarantees for loans for major fixed assets such as land and buildings for economic development. The purpose of 504 loans is to improve the economy of a locality or to assist businesses owned by women, minorities, veterans, rural businesses, and other designated types of businesses. The 504 loans are set up to work with Certified Development Companies - nonprofit corporations set up for community development. Generally the project assets are used as collateral.
A typical 504 loan structure might look like this, according to the SBA:
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped.
Are you considering commercial property? Consider a 504 Loan.
The Small business administration has a program (504 loans) that can allow business owners to borrow up to 90% of the cost of commercial real estate. This can include the cost of renovations as well. A small business owner can partner with other businesses or purchase the property on their own. It is necessary to use at least 50% of the property for your business, but it is possible to lease the remaining portion to other businesses.
You will want to check into the details. It is possible to borrow several million dollars if necessary or much less depending on your needs and qualifications. Your business must be for profit, cannot have tangible assets greater than $8.5 million, cannot have net profits for the last two years exceeding $3 million. The business will also be required to either create jobs or meet a social policy requirement.
The SBA 504 loan can also be used for equipment purchases.
The SBA 504 Loan Program: Helping Small Businesses Think Big
A long-term, fixed-rate solution
The U.S. Small Business Administration established the 504 loan to help businesses purchase equipment and commercial real estate while retaining working capital.
The SBA 504 loan puts financing within reach for small businesses through low down payments and long-term, low, fixed interest rates. And it reduces the risk to lenders through a shared financing structure.
Eligible 504 loan uses
Land and building purchases
New construction or renovation
Heavy machinery or equipment purchases
Soft costs (e.g., appraisals, title searches, attorney's fees, etc.)
The SBA 504 loan boosts business expansion and supports economic development in communities nationwide.
Most Recent SBA 504 Rates
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4.86%
October 2009
504 20-Year Term
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4.26%
September 2009
504 10-Year Term
Eligibility
SBA 504 LOAN ELIGIBILITY
The 504 loan serves numerous expanding small to mid-sized businesses. It is available to individual business owners or multiple owners partnering on a project.
Eligible borrowers
For-profit businesses
Tangible net worth no greater than $8.5 million
Net profit after taxes no greater than $3 million during previous two years
Multiple businesses partnering to occupy the same building
Must meet at least one goal around job creation, public policy or community development through their expansion project
Kinds of businesses served
Auto and motorcycle dealerships
Auto repair shops
Car washes
Childcare centers
Dental offices
Distribution centers
Hair salons
Heating and mechanical contractors
Hotels and motels
Internet companies
Law offices
Manufacturers
Medical offices
Restaurants and food service companies
Retail and wholesale companies
Veterinary offices
Warehouses
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