504 Loan Program In-Depth

The SBA 504 Loan Program makes business growth and expansion easy. Use the links below to learn more information about the 504 Loan.

What can be financed?
How much will it cost?
How much can I finance?

What can be financed?

Eligible Uses of Funds

Purchase of land and existing buildings
Construction of new facilities, including infrastructure costs, utilities, parking lots landscaping and professional fees
Modernization, renovation or conversion of existing facilities
Expansion of existing facilities
Purchase of machinery and equipment with a useful life of 10 years of more

Ineligible uses of Funds

Working capital
Inventory
Consolidating or repaying debt
Purchase of goodwill
Refinancing current debt
Franchise fees
Vehicles or airplanes

How much will it cost?

Interest rate

The interest rate will be fixed for the entire term of the loan
Interest rates are priced at a margin above the current market rate for five-year and 10-year U.S. Treasury issues

Terms

Maturities of 10 and 20 years are available
Loan is fully amortized over the chosen 10 or 20 year term
Lines of credit are not eligible

Fees

Fees total approximately three (3) percent of the debenture and will be financed into the SBA loan

How much can I finance?

Minimum Debenture

The minimum debenture for the SBA portion of the loan is $60,000. This equates into a total project amount of about $150,000

Maximum Debenture

$1,500,000 when meeting the Job Creation Criteria or a Community Development Goal
$2.0 million when meeting a Public Policy Goal
$4.0 million for small manufacturers. Certain guidelines must be met to qualify for this higher debenture amount

Borrower Injection
The borrower may provide the 10-20% injection in the following ways:

Personal or business cash
Equity in real estate (special conditions apply)
Personal or business loan

Amount Financed
Typically, the Partner Bank finances 50% of the total project amount, the SBA finances 40% and the small business injects 10% cash/equity. If the building is deemed Special Purpose, the borrower would be required to inject an additional 5% cash/equity, for a total injection of 15%. If the business is considered a New Business, the borrower would be required to inject an additional 5% cash or equity, for a total injection of 15% If the business is a new business and the building is special purpose, the borrower would be required to inject an additional 10% cash or equity, for a total injection of 20%.