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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:

For most projects the maximum SBA debenture size is $5 million. Generally, a business must create or retain one job for every $75,000 provided by the SBA. For “Small Manufacturers” and “Energy Efficiency Projects” the debenture size increases to $5.5 million. Small manufacturers must create or retain one job for every $120,000 provided by the SBA.

Job creation goals are not required when a 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

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.

An “Energy Efficiency Project” must:

  • Reduce the borrower's energy consumption by at least 15%, generate renewable energy, or produce renewable fuels such as biodiesel and ethanol.

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
  • Refinancing under certain circumstances. Contact us for further information.

Terms and Interest Rates:

Interest rates on 504 loans are set to an increment above the current market rate for five-year and 10-year U.S. Treasury issues. Maturities of 10, 20 and 25 years are available. See Current Interest Rates for SBA 504 Loans

If you’re a veteran, ask us about our VetLoan Advantage program.

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