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SBA 504 Loan

The 504 Loan 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 womenIncreased 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
  • 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. See Current Interest Rates for SBA 504 Loans