SBA provides loans to businesses; so the requirements of eligibility are based on specific aspects of the business and its principals. The CDC/504 Loan Program provides financing for major fixed assets such as equipment or real estate. To be considered for a Certified Development Company/504 loan, applicants must meet certain eligibility requirements. All programs and rates are subject to change at any time.
Lending Criteria | 504 Loan Program |
Maximum Loan Amount | 504 CDC maximum amount ranges from $5 million to $5.5 million, depending on type of business or project. |
Percent of Guaranty | Project costs financed as follows: CDC: up to 40% Lender: 50% (Nonguaranteed) Equity: 10% plus additional 5% if new business and/ or 5% if special use property. |
Use of Proceeds | Long-term, fixed-asset loans; Lender (nonguaranteed) financing secured by first lien on project assets. CDC loan provided from SBA 100% guaranteed debenture sold to investors at fixed rate secured by 2nd lien. |
Maturity | CDC Loan: 10- or 20-year term fixed interest rate. Lender Loan: Unguaranteed financing may have a shorter term. May be fixed or adjustable interest rate |
Maximum Interest Rates | Fixed rate on 504 Loan established when the debenture backing loan is sold. Declining prepayment penalty for 1/2 of term. |
Guaranty Fees | SBA guaranty fee on debenture is 0.0%. A participation fee of 0.5% is on lender share, plus CDC may charge up to 1.5% on their share. CDC charges a monthly servicing fee of 0.625%-2.0% on unpaid balance. Ongoing guaranty fee is 0.914% of principal outstanding. Ongoing fee % does not change during term. |
Who Qualifies | Alternative Size Standard: For-profit businesses that do not exceed $15 million in tangible net worth, and do not have an average two full fiscal year net income over $5 million. Owner Occupied 51% for existing or 60% for new construction. |
Benefits to Borrowers | Low down payment – equity (10,15 or 20 percent) (The equity contribution may be borrowed as long as it is not from an SBA loan) Fees can be financed; SBA /CDC Portion: Long-term fixed rate Full amortization and No balloons |
Closing Time Frame | 30 – 45 Days |
Broker Origination | 1 point + $1,495 Processing fee – subject to minimum loan amount. |