SBA 504 Loan

The 504 Loan Program provides growing businesses with long-term, fixed-rate financing for major fixed assets such as land, buildings, machinery and equipment. A typical 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 CMDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and an equity injection of at least 10 percent from the small business.

Maximum Debenture:

For most projects the maximum SBA debenture size is $5 million. Generally, a business must create or retain one job for every $75,000 provided by the SBA. For “Small Manufacturers” and “Energy Efficiency Projects” the debenture size increases to $5.5 million. Small manufacturers must create or retain one job for every $120,000 provided by the SBA.

Job creation goals are not required when a project meets a public policy goal. The public policy goals include:

Business district revitalization
Expansion of exports
Expansion of minority business development
Rural development
Increasing productivity and competitiveness
Restructuring because of federally mandated standards or policies
Changes necessitated by federal budget cutbacks
Expansion of small business concerns owned and controlled by veterans (especially service-disabled veterans)
Expansion of small business concerns owned and controlled by womenIncreased use of sustainable design, including designs that reduce the use of greenhouse gas emitting fossil fuels, or low-impact design to produce buildings that reduce the use of non-renewable resources and minimize environmental impact

A “Small Manufacturer” is defined as a small business concern that has:

Its primary business classified in sector 31, 32, or 33 of the North American Industrial Classification System (NAICS); and All of its production facilities located in the United States.

An “Energy Efficiency Project” must:

Reduce the borrower's energy consumption by at least 15%, generate renewable energy, or produce renewable fuels such as biodiesel and ethanol.

What Funds May Be Used For:

Proceeds from 504 loans must be used for fixed asset projects such as:

Purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping
Construction of new facilities, or modernizing, renovating or converting existing facilities
Purchasing long-term machinery and equipment
Refinancing under certain circumstances. Contact us for further information.

Terms and Interest Rates:

Interest rates on 504 loans are set to an increment above the current market rate for five-year and 10-year U.S. Treasury issues. Maturities of 10, 20 and 25 years are available. See Current Interest Rates for SBA 504 Loans