SBA-504 Loan Made Easy

Here is an example breakdown of a SBA-504 loan showing the bank’s 1st mortgage (Lender Loan) at 50% of the total project, the SBA-504 loan (2nd mortgage) at 40% and the small business owner injection of 10%. The rates used are examples only.

To provide a more thorough and valuable service to your clients, CDC offers a Customized Lease vs. Buy Comparison. We have Loan Experts in your area who can develop a custom analysis for you and then help close your deal.

Lenders often consider the SBA-7a loan along with the 504 program. This side-by-side comparison illustrates the differences:

SBA 504 LOAN

(Commercial Real Estate & Equipment)
90% Fixed-Rate

SBA 7(a) LOAN

(General Purpose)

ELIGIBLE BUSINESS SIZE• Business net worth not to exceed $15 million
• Average net profit after taxes for 2 consecutive years not to exceed $5 million
• Determined by industry type
• Annual sales not to exceed range of $750,000 to $33.5 million for retail, service and agriculture
• Number of employees not to exceed range of 100 to 1,000 for wholesale and manufacturing
LOAN STRUCTURE• 50% bank loan
• 40% CDC loan
• 10% borrower down payment
• Loan structure negotiable; dependent on risk
• 10% down payment (minimum)
PROCEEDS USE• Purchase existing building
• Land acquisition and ground-up construction (can include soft cost development fees)
• Expansion of existing building
• Finance building improvements
• Purchase equipment
• Expand, acquire or start a business
• Purchase or construct real estate
• Refinance existing business debt
• Buy equipment
• Provide working capital
• Construct leasehold improvements
• Purchase inventory
PROGRAM REQUIREMENTS• 51% owner occupancy for existing building
• 60% owner occupancy for new construction
• Equipment must have minimum 10-year economic life
• 51% owner occupancy for existing building
• 60% owner occupancy for new construction
• All assets financed must be used to the direct benefit of the business
COLLATERAL• Generally, project assets being financed are used as collateral
• Personal guaranties of the principal owners of 20% or more ownership are required
• Subject assets acquired by loan proceeds
• Pledge of personal residence unless bank can justify why unnecessary
• Personal guaranties of the principal owners of 20% or more ownership are required
FEES• Fees are financed in the 504 loan
• Fees are negotiated for the 50% bank loan
• Servicing fee (lowest allowed by SBA) for CDC plus a legal review fee
• Fees can be financed in the 7a loan
• Fees vary with the size of loan paired with 504 loan
• Additional .25% charged on any loan portion above $1 million