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SBA 504 Loans – Information and Overview


What is an SBA 504 loan?

An SBA 504 loan provides long-term, below-market, fixed-rate financing to small businesses for construction and renovation of facilities or to acquire real estate, machinery, or equipment. The loans are administered by Certified Development Companies (CDCs), such as Mountain West Small Business Finance. 504 loans are typically financed 50 percent by a commercial lending institution such as a bank, 40 percent by the CDC, and 10 percent by the business itself.

In exchange for this below-market, fixed-rate financing, the SBA expects the small business to create or retain jobs or to meet certain public policy goals.
 


What are the advantages of an SBA 504 loan?

The SBA 504 loan program allows small businesses to get loans at Fortune 500 interest rates and terms. This powerful financing tool offers many advantages over conventional financing such as:
 
 

• Low Down Payment

504 Loans require between 10% and 20% down. Small businesses receive up to 90% financing, allowing them to preserve working capital for business expansion.

• Low Fixed Rate

504 Loans utilize fixed rates that are usually one to two percent under conventional financing.

• Low Monthly Payments

Small businesses pay low monthly loan payments by utilizing 15- to 30-year amortization schedules from a first mortgage lender.

• Savings on Bank Rates

Due to the favorable financing structure, the participating bak interest rate is often lower than conventional rates.


Who qualifies for an SBA 504 loan?

The SBA 504 Loan Program is for fixed-asset financing. Proceeds from an SBA 504 loan cannot be used for working capital or inventory, consolidating or repaying debt or refinancing. It can be applied to these specific needs:

Land acquisition and improvements
Construction of new facilities
Purchase of existing or build-to-suit facilities
Renovation or restoration of existing facilities
Equipment and machinery purchases

To qualify for an SBA 504 Loan, a business:

Must be an operating for-profit business
Must use the financing for a project located in the U.S.
Must have a tangible net worth of less than $7 million and profits after taxes of less than $2.5 million (includes affiliated entities)
Must meet an economic development objective such as the creation of new jobs or other community improvement
 


How does a typical SBA 504 loan process work?

   
 

1. Call Mountain West Small Business Finance

Let us help in your business expansion planning. We have helped over 3000 small businesses build their dreams and we can do the same for you. As experts in the SBA 504 Loan Program, we have the knowledge and the experience to guide you through the loan process. Give us a call and we will help you evaluate your options to find solutions to meet your needs.

2. Documentation

After helping you determine you best course of action, Mountain West Small Business Finance will work with you and your private-sector lender to collect and analyze the required documentation.

3. Loan Package

Once the necessary documentation is in place, MWSBF completes the loan package and reviews it with the business. If everything is in order, business signs loan package and MWSBF submits it to the SBA.

4. Bank Financing

Mountain West Small Business Finance works closely with your first mortgage lender, broker and/or CPA to reduce redundancy and streamline the process.

5. Financing Completed

Typical time frame from submission of loan application to SBA approval is 5 to 10 working days. Upon approval, your lender will provide interim or construction financing to complete your project.

6. 504 Financing Completed

A Mountain West Small Business Finance attorney works with the business to prepare closing documents for a permanent SBA loan. Once complete, the attorney submits the final closing package to SBA, which typically funds within 60 days of project completion, replacing your interim/construction financing with long-term financing.
 
   


SBA 504 rate history.