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 $5 million when meeting certain job creation criteria or community development goals. Generally, a business must create or retain one job for every $65,000 provided by the SBA except for "Small Manufacturers" which have a $100,000 job creation or retention goal.


The maximum SBA debenture is $5 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
• Increased 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

The maximum debenture for "Small Manufacturers" is $5.5 million. 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.

The maximum debenture for "Energy Efficiency Projects" is $5.5 million. The project must:

• Reduce the borrower's energy consumption by at least 10%; or
  
• Generates renewable energy or renewable fuels, such as biodiesel or ethanol production

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.