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504 Collateral Requirements

  • The 504 loan is typically secured with a subordinate lien on all project assets. 
  • The SBA 504 loan must have a security interest in all project assets. Existing prior liens can be recognized in the case of building expansions and renovations. 
  • Personal guarantees are required from all principals owning 20% or more of the operating company and borrowing entity . 
  • If the business is a start-up or the asset being financed is considered single purpose or the credit is unusually risky, additional collateral may be required. 
  • "Key Man" life insurance is typically required unless there is strong management succession.

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