SBA 504 Loan Program
The SBA 504 offers your growing business stability by providing long-term, fixed-rate financing. Low down payments and below-market rates allow your business to reserve more money for working capital. To learn more about the advantages of the 504 loan, just click on the questions below:
Does my business qualify for a 504 loan?
Businesses in a variety of industries are eligible, including manufacturing, distribution, health care, agri-business, retail and service. Eligible businesses must be for-profit and the primary occupant of the financed property. Contact us to assure your business is eligible. (back to top)
What can my business finance with a 504 loan?
Proceeds from a 504 loan can be used for major fixed-asset projects such as the purchase of land, buildings or equipment. Funds can also be put toward construction, remodeling and infrastructure improvements. (back to top)
My project is already under construction. Can I still qualify for an SBA 504 loan?
Yes. While the project is in interim financing, it is still eligible for the SBA 504 program. In fact, the SBA 504 can participate in a project that has been completed for less than 6 months. (back to top)
Are there any other requirements for obtaining a 504 loan?
Generally, the applicant business must commit to creating or retaining one job for every $50,000 borrowed. Manufacturers must create or retain one job for every $100,000 borrowed. The applicant business has two years from the project’s completion to meet the job goal. Personal guarantees will be required from all individuals with 20% or greater ownership. Borrowers may also be required to provide an assignment of a life insurance policy to cover the outstanding balance of the loan. (back to top)
How much can my business borrow?
Typically, The SBA will finance up to 40% of a project’s cost. Eligible businesses can take out multiple SBA 504 loans totaling up to $2 million; however, manufacturers can have a maximum exposure with the SBA of $4 million. The minimum SBA 504 loan amount is $50,000. (back to top)
What is the typical down payment on an SBA 504?
The SBA 504 loan allows borrowers to come in with as little as 10% equity. The SBA takes a subordinate lien position, financing up to 40%, with up to 50% provided by a private lender. Additional equity may be required for businesses that have been in operation for less than 2 years or when financing single purpose property. (back to top)
What are the terms and rates for a 504 loan?
The SBA offers 20-year fixed terms on real estate and 10-year fixed terms on machinery and equipment purchases. Historically, interest rates on 504 loans have been below prime. Interest rates are determined when the debenture sells and are fixed for the life of your loan. You can contact us for information on historical rate trends or check out the 504 rate-tracker on our homepage. (back to top)
What are the fees associated with the 504 loan?
The fees are approximately 3.5% of the 504 loan amount, and most of the fees are financed into the 504 loan. The 504 rate-tracker shows an APR for the 504 loan program; therefore, these fees are already factored into this interest rate. (back to top)
Is there a pre-payment penalty?
There may be a pre-payment penalty for the SBA 504 depending on how many years remain on the loan term. If you are interested in pre-paying your SBA 504 loan, contact us to find out if you will be subject to a penalty. (back to top)
Is there a pre-approval process?
Yes. In order to assure that your business is eligible for SBA financing, we will provide you with a pre-approval within 2 business days of receiving your complete financial package. (back to top)
Is it difficult to apply?
No. To initiate your application, just provide us with the same information given to financial institutions for traditional financing. Our experienced staff will then prepare the SBA application on your behalf. (back to top)
How long is the approval process?
Upon completion of your application, it usually takes no more than two weeks for the loan committee to review your request. Once approved, we forward your application to the SBA, which will review it within 5 to 7 business days. (back to top)
What happens after approval?
After approval, the bank funds the project in the interim until it is completed. (back to top)
When can my 504 loan close?
The following conditions must be met prior to closing:
ü Construction/renovation is completed
ü Certificate of occupancy has been issued
ü All equipment is in place and operational
ü All bank loan proceeds have been spent
ü You have made your equity contribution
Contact us if you are ready to close your loan. (back to top)
When will the debenture sell?
A debenture sale occurs once a month. Typically, your 504 loan will fund approximately 45 days after closing. At the time the debenture is sold, your interest rate and payment amount will be set. (back to top)
How do I apply?
It’s simple. Just call us at 419-222-0130 or contact us by email and we’ll be happy to get your application started. (back to top)