• Lower down-payment requirements – only 10%
• Long repayment terms (25, 20 and 10 year options)
• Fixed rate for the term of the loan
• Projected income is considered, not just historical cash flows
• Collateral is typically the building being financed

Most 504-financed purchases are for office, retail or industrial buildings. SBA 504, fixed-rate loans finance 40 percent of the total purchase. A bank or other lender provides 50 percent and the business owner contributes a 10 percent down payment. For example, if the building purchase price is $500,000, the following would be the loan structure:

• Bank 1st mortgage – $250,000
• CDC 2nd trust deed – $200,000
• Borrower down payment – $50,000

Straight purchases usually require no more than 60 days to fund. If construction is involved, this can extend the process.

All the fees are financed into the loan; consisting of 2.625% of the loan amount plus legal fees of $2,500.

There is a declining prepayment penalty for the first ten years of the loan, based on the loan amount and funding rate.

Yes, “soft costs” (e.g. appraisals, environmental, construction interest, closing costs) can also be financed in the 504 loan, allowing the small business to preserve working capital.

SBA-504 loans can finance up to 40% of the total project cost, or $5 million. For manufacturing businesses, 504 loans can finance up to $5.5 million.

The business tangible net worth must be less than $15 million. After-tax net profit must be $5 million or less, on average, for the prior two years.

The business must occupy 51% of an existing building purchase or 60% if constructing a new facility.

Long-term machinery and equipment with a useful life greater than ten years (e.g., a printing press).