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The 504 Loan Program is an extremely attractive financing tool. The 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
The maximum SBA debenture is $1,500,000 when meeting certain job creation criteria or community development goals. Generally, a business must create or retain one job for every $50,000 provided by the SBA except for "Small Manufacturers" which have a $100,000 job creation or retention goal.

The maximum SBA debenture is $2.0 million when the 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 women

The maximum debenture for "Small Manufacturers" is $4.0 million. A Small Manufacturer is defined as a small business concern that has:
  1. Its primary business classified in sector 31, 32, or 33 of the North American Industrial Classification System (NAICS); and
  2. All of its production facilities located in the United States.

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 or purchasing long-term machinery and equipment.


The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or for refinancing.

TERMS, INTEREST RATES:

Interest rates on 504 loans are pegged to an increment above the current market rate for five-year and 10-year U.S. Treasury issues. Maturities of 10 and 20 years are available.






Central Minnesota Development Company [CMDC]
1885 Station Parkway NW, Andover, MN 55304
(763) 784-3337 | Fax (763) 784-3338