SBA 504 Commercial Loans

SBA Loans - 504 Program & Refinancing

Commercial Loan Direct offers SBA loans including the 504 program and the 7a program. Please note that the House and Senate are making some important changes to SBA loans and the 504 program as part of the new economic stimulus package.

SBA 504 Loans - Requirements
Loan Size: $750,000 to $10Million
Occupancy: >51% Owner Occupied
Minimum Personal Credit Score (FICO): 650 - No Bankruptcy
Acceptable Markets: Urban/Suburban Areas
Non-Acceptable Collateral: -Gas Station
-Auto Dealerships
-Night Clubs
-Athletic/Fitness Centers
-Special Use Start-ups
-Hotel/Motel (temporarily discontinued)

-Multi-Use Properties

Minimum Equity Injection: 10%
Minimum DSC: 1.2x
Management Experience: -Prior Ownership & Management Preferred
Prepayment Penalty: SBA 504 Prepayment Penalty Calculator
Other sources of DSC: If Start-Up, 1.20x from outside source
Collateral (1st Position): Real Property
Origination Fee: 1%
Assumability: Allowed



  • 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?

5 or 10 year treasury bond rate plus approximately 210 basis points.

  • 50% Lender/Bank in 1st Lien
  • 40% 504 in 2nd Lien
  • 10% Equity
  • 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.
  • Personal guarantee by 20% or greater owner.
  • CHANGE 1 - The combined loan amount has been increased to $10 Million
  • CHANGE 3 - Refinances under 504 were previously ineligible. That has been amended.
  • CHANGE 3 - To create liquidity and allow banks to lend, the SBA will guaranty up to $3 billion for 504 first mortgage pools to be sold.

SBA 504 Loan Refinance - Now Available

Newly enacted legislation will allow small businesses to refinance existing debt within the 504 program. These permanent changes will permit 504 debt refinancing:

Not Sure How to Refinance Under the 504 Program?  

USES Proceeds may be used for the refinance of existing loans whose proceeds were used substantially (85%) to acquire fixed assets eligible for the SBA 504 program. In addition, loan proceeds may be used to pay Eligible Business Expenses such as maintenance of building (no expansion to building), equipment purchases, rent, utilities, inventory or other obligations. These expenses must be incurred but not paid prior to the date of the application or come due within 18 months of the date of the application. All proceeds must have been used for the benefit of the small business concern.


  •  50%, varies - Loan secured by a senior lien from a third-party lender for not less than the net 504 loan.
  •  Up to 40% - SBA 504 Loan secured by a junior lien from CP/SBA. 
  •  Not <10% - Borrower equity in the existing real estate and/or cash injection as needed. Additionally, the Borrower may pledge equity in any other fixed assets that are acceptable to SBA as collateral.
The Third Party loan and the 504 loan combined may not be more than 90% of the fair market value of the fixed assets securing the loan. In no event may it exceed the outstanding principal balance of the debt refinanced, eligible business expenses & closing costs. COLLATERAL An independent appraisal supporting the fair market value of the fixed assets being refinanced and any other assets being offered as collateral whether commercial or residential must be submitted at SBA application. The appraisal(s) must be dated within six (6) months of the date of application. FEES The Borrower is required to pay an annual guarantee fee to cover the cost of the refinancing program in the amount of 1.043%. ELIGIBILITY REQUIREMENTS 
  •  Loans being refinanced must have been current for the past year according to the original or modified terms, with no payment being past due for more than 30 days. Any modification must have been entered into prior to issuance of SBA final rule on 10/12/11. A transcript must be provided to demonstrate compliance with this requirement. For the refinancing of same institution debt, the transcript of account for the entire period of the loan must be provided. This will be used to determine the overall creditworthiness of the Borrower.
  •  No refinancing where the creditor on the debt to be refinanced is in a position to sustain a loss; causing a shift to SBA of all or a portion of a potential loss from an existing debt.
  •  Debt being refinanced must have been incurred not less than two years prior to the date the application is received by SBA. Additionally, the small business concern must have been in business for two years prior to the submission of the application.
  •  Debt may be refinanced even if it does not meet the job creation requirement or other public policy goals set forth by the SBA. In such case, the 504 loan size may not exceed the amount obtained by multiplying the number of full-time equivalent employees (40 hour work week) of the Borrower by $65,000.
  •  Borrower must currently occupy 51% of the building being refinanced.
  •  No refinancing of loans with an existing federal guaranty; such as an SBA 7(a) or 504 loan or an USDA loan.
  •  No refinancing of debt to an Associate of the Borrower, an SBIC, or New Market Ventures Capital Companies (NMVCC).
  •  When the debt being refinanced is same institution debt, the Third Party Loan cannot be sold on the secondary market as part of a pool of guaranteed loans.
  •  All loans approved must be closed within 6-months. Loans will be canceled by SBA if not funded during this time period.
  •  When loan being refinanced is Same Institution Debt, either an escrow account or an interim loan may be used. When loan being refinanced is not Same Institution Debt, an interim loan must be used.
  •  Any delinquency on loans being refinanced after SBA approval but before the loan funding must be reported to the SBA as an adverse change.

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 Program Is 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.