504LoanProgram

Specialized Lending:

SBA Guaranteed Loans

504 Loan Program

The 504 Loan program is done in partnership with a Certified Development Company (CDC), which are non-profit entities that are sponsored by private-sector organizations or by state and local governments to contribute to economic development. Loans are used solely for the purchase of equipment or for the expansion or purchase of a building*, and generally requires only 10% equity (may require 15% to 20% in certain cases). The SBA portion is up to 40% to a maximum of $5,000,000, which can equate to a total project of $12,500,000.

The 50% financing is completed via a conventional, non-SBA guaranteed loan from the Bank. Rates for the SBA portion are fixed for the term, and substantial pre-payment penalties apply. Rates for the 50% non-SBA piece are negotiated with the Bank, and may be fixed, but for a lesser term than the SBA portion.

Specific uses and terms are:

Equipment – 10 years
Real Estate* - 20 years

The 504 Loan program can be combined with other State and/or Local loan programs. Eligible project costs may also include acquisition legal expenses, professional fees, and other related soft costs. The 504 program also requires the creation or retention of one job for every $65,000 of the 40% SBA loan proceeds.

*Owner must occupy 51% or more of the building’s total square footage.

We welcome your call or visit to any Branch Office
or contact our Information Center at 1.800.822.3321, 7 days a week!

Eligibility for SBA Loans

A business must be deemed eligible by the SBA in order to qualify for financing. To be eligible, the business must be operated for profit.

Further eligibility requirements include nature of the business, size of the business, and use of proceeds. A business’ NAICS (North American Industry Classification System) Code is used to determine both the type and the size of a business. Size standards for the most part are either average annual receipts or the number of employees. Some examples of ineligible businesses are those engaged in speculative real estate investment, gambling, pyramid schemes, or illegal activities.

The use of proceeds must be for sound business purposes, and for example, cannot be used to refinance personal debt (unless it is specifically documented to have been used strictly for the business), or repay an owner or investor’s equity injection into a business. Other factors are also considered when determining eligibility, such as personal liquidity, prior loss to the government, or businesses with an associate of poor character.

Your Relationship Manager and SBA Specialist are able to discuss this in complete detail with you.