If you have a business and have seen references to the SBA 504 Loan program but have questions, we
hope to provide you with some answers. CDC lending and the SBA 504 Loan program can give you a long-term financing option with a fixed rate and up to $5 million for major fixed assets that go toward job
creation and business growth. Here’s what you need to know.
What is an SBA 504 Loan?
A 504 loan is issued through CDCs or Certified Development Companies. It is typically referred to as a
‘504 loan’ or ‘CDC loan’. These are partners in the community that are authorized and regulated by
the U.S. Small Business Administration, or SBA. The loan is for for-profit businesses and may assist
businesses that struggle to get conventional financing. Once the loan is funded there is a monthly
payment with a fixed interest rate for the entire term of the loan. Often, 504 loans have lower equity
or down payment requirements that a conventional loan…most often, 10%.
Who is Eligible for a 504 Loan?
This 504-loan program is for businesses that are for-profit, meets the SBA size standards,
demonstrate an ability to repay the loan, and for a variety of reasons may not be able to obtain credit
from other non-government guaranteed sources. There are also stipulations that the business does
not have more than $15 million in tangible net worth but must have an average net worth of less than
$5 million for the two years before the business applies for the loan.
SBA 504 Lending Terms
Loan terms for an SBA 504 loan are 10, 20 or 25-years, interest rates that follow but are not tied to,
the 10-year U.S. Treasury index, a maximum loan amount of $5 million ($5.5 million for
manufacturing or energy efficient projects) with monthly payments, and a declining prepayment
penalty. To get started with the loan process you must work with a CDC to go through the application
process for the business.
If you are interested in possibly applying for an SBA 504 loan or want to talk more about them, give
our office a call. We’re here to help provide the needed expertise and experience on these types of
loan programs. Give our office a call anytime.