SBA Loans - 504 Program - Nationwide
Commercial Loan Direct offers SBA loans under the 504 program and 7a program. Please note that the House and Senate are making some improvements to the SBA loans - 504 program as part of the new economic stimulus package. We will be adding these modifications to our SBA loans section as they become available.
- Learn about the SBA 504 loan program changes - part of the new economic stimulus package.
- New SBA 504 commercial loan refinance provisions
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SBA 504 Loan Program - FAQS
- SBA loans for healthy expanding businesses.
- Loan fixed rate below market financing.
- Financing for fixed assets: real estate, machinery and equipment.
- SBA 504 loan term of 20 years for real estate, 10 years for machinery and equipment.
- Down payment requirement of only 10% or more for customer.
- Lender/Bank can provide 90% financing for customer.
- Lender/Bank can participate in larger transactions.
- Lender/Bank enjoys first lien, lending 50% of value at market rate and fees.
- For profit businesses.
- Tangible net worth not to exceed $8.5 million.
- Net profit after taxes not to exceed $3 million during previous 2 years.
- Purchase land, purchase or construct building.
- Modernize, renovate or improve building.
- Purchase machinery and equipment with 10 year useful life.
- Soft costs and/or closing costs.
- Total project size $125,000 minimum.
- No maximum total project size.
- Non-profits.
- Speculative development.
- Lending institutions, insurance companies.
- Gambling concerns and private clubs.
- Refinancing.
- Working capital.
- Inventory.
- Rolling stock.
What is the SBA 504 Loan Product?
Rate: 5 or 10 year treasury bond rate plus approximately 210 basis points.
Structure: Healthy Expanding Business
- 50% Lender/Bank in 1st Lien
- 40% 504 in 2nd Lien
- 10% Equity
Start-up Businesses
- Start-up or Special Purpose Building will require 15% equity.
- Start-up and Special Purpose Building will require 20% equity.
- Minimum 10 year term on real estate, minimum 7 year term on machinery and equipment.
- Market rat and fees.
- Covenants established by lender.
- One time 1/2% fee to SBA on Lender's participation.
- Debenture Fees: 2.65% of 504 loan.
- All of the fees can be financed.
- Please note new changes and waiving of fees below.
- Personal guarantee by 20% or greater owner.
- CHANGE 1 - The ½% fee that a bank participating in the 504 loan program has to pay to SBA will be waived. This will be effective until September 30, 2010.
- CHANGE 2 - 1 ½% of the roughly 2 ¼% fees associated with the 504 loan will be waived. Normally in a $1,000,000 project when the 504 portion is $400,000, the actual loan amount is $409,000 (IE: $9,000 in fees are financed into the loan). As a result of this change the fees will be reduced by $6,000 and the borrowers Note amount will now only be $403,000. It effectively reduces the fees financed into a SBA 504 loan to 1/3 of the amount they previously were. This change will remain in effect until September 30, 2010, or until the money appropriated to waive these fees has been exhausted.
- CHANGE 3 - Refinances under 504 were previously ineligible. That has been amended to allow up to 50% of the project cost to be a refinance so long as:
- (A) The new loan involves business expansion.
- (B) It is collateralized by fixed asset s.
- (C) Existing debt incurred for benefit of small business.
- (D) Proceeds used to acquire land, to construct or expand building or to purchase equipment.
- (E) Borrower is current on all payments of existing debt for 1 year.
- (F) New financing will provide better terms or interest rate.
- (G) New financing will be used only for refinancing existing debt, or for costs related to project being financed. This change is a permanent change and will not expire.
- CHANGE 4 - To create liquidity and allow banks to lend, the SBA will guaranty up to $3 billion for 504 first mortgage pools to be sold.
Newly enacted legislation will allow small businesses to refinance existing debt within the 504 program. These permanent changes will permit 504 projects to include a limited amount of debt refinancing:
1) If there is a business expansion and
2) If the refinanced debt does not exceed 50% of the projected cost of the expansion. (Note: "Expansion" includes any project that involves the acquisition, construction or improvement of land, building or equipment for use by the small business.)
The following are some of the conditions under which borrowers will be eligible for refinancing:
- The debt being refinanced was incurred to acquire land, to construct a building or to purchase equipment. The assets acquired must be eligible for financing under the 504 program.
- The existing debt is collateralized by fixed assets.
- The existing debt was incurred for the benefit of the small business.
- The new financing provides a substantial benefit to the borrower when prepayment penalties, financing fees, and other financing costs are taken into account.
- The borrower has been current on all payments of existing debt for one year prior to the date.
This program change was authorized in the American Recovery and Reinvestment Act of 2009 and is designed to help business owners restructure debt under better terms and "improve their cash flow and enhance their viability so that they can grow and create jobs," said Hayley Matz, an SBA spokeswoman.
Effective immediately, Commercial Loan Direct is accepting loan applications that include refinances. Please give us a call if you have questions or would like to discuss a specific situation.
The SBA 504 Loan ProgramIs one of the best financing vehicles available for new and expanding businesses. With up to 90% loan-to-cost available under SBA 504 loans, owners of small and mid-sized businesses can preserve capital and maximize cash flow to better afford purchasing commercial real estate instead of leasing. Our borrowers get real estate financing with less money down, longer fixed rate terms, and great customer service and turn around times from Commercial Loan Direct.
Get a SBA 504 Loan quote today