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What a Typical 504 Project Looks Like.

XYZ Corporation has been leasing a 15,000-square-foot building for five years. A 25,000-square-foot building on the same block has just gone on the market for $3,000,000. XYZ’s owner wants to make an offer on the building, but he doesn’t know where he can get the 25% ($750,000) down payment that would be required with conventional financing. Luckily, his commerical real estate agent has the solution: an SBA 504 loan!

Here’s how it works: The bank will finance a $1,500,000 first mortgage for 50% of the cost, and Mountain West Small Business Finance will finance a $1,200,000 second mortgage SBA 504 for 40% of the cost. The good news is that XYZ Corporation’s down payment will only be $300,000, allowing them to conserve working capital to expand business.


*504 loan maximum is up to $2.0 million ($4 million for manufacturers), but projects up to $9 or $10 million make good 504 candidates.
 
**  Bank rates vary with lender. 504 rate is set at funding at the 10-year U.S. Treasury note plus estimated 2.1%. 504 loan has a repayment ability.
 
***  Bank loan has minimum 10-year term and 15- to 30-year amortization. The 504 loan is a 20-year fully amortizing loan and payments are estimated.
 
Both loans use the same appraisal and environmental Phase I. Lender provides bridge financing until the 504 debentures are sold.
 
Loan fees for the Bank range from 1 to 2.0% of the loan. 504 fees are 2.65% of the loan, plus a $2,000 attorney closing fee which are financed with the loan.
 
Small business must have a net worth of less than $7 million and profit-after-tax of less than $2.5 million.
  
Small business must meet conventional credit underwriting criteria.
 
Mountain West Small Business Finance can pre-qualify customers within 48 hours. No charges to pre-qualify.