SBA 504
Explore 504 Loan Solutions
The SBA 504 loan offers a promising avenue for business owners looking to acquire commercial property or expand their existing facilities. This loan can fuel new construction projects, renovations, or land purchases tailored to specific business needs. With the possibility of building from the ground up or enhancing current establishments, the 504 loan presents a valuable opportunity for entrepreneurs to elevate their ventures to the next level. Take the first step towards realizing your business aspirations by exploring 504 loan solutions today.
The SBA 504 loan can be used to buy a commercial building to house your business.
The SBA 504 loan can be used for new construction, renovations or other improvements. Business owners may build commercial property from the ground up or expand existing facilities.
The 504 can help you purchase a building that has a very specific purpose like a hotel or gas station.
With the SBA 504 loan refinance program, you can not only refinance debt but also cash out up to 20% of the value of the property for working capital needs.
Whether you need business financing to improve your building’s energy consumption, build a renewable energy source, or construct “green” buildings, this initiative can give you the support you need.
The SBA 504 loan can be used to purchase equipment (with a 10+ year life expectancy), or equipment can be included in the building purchase.
It’s our pleasure to help grow your business
Are you ready to purchase a building for your business? Whether it’s to expand your business or replace the rent you’re paying to a third party, we can make that happen. The SBA 504 program provides up to 90% financing, resulting in only a 10% cash injection on your part, which frees up operating capital. We’ll provide you with a below-market, fully amortizing fixed rate. If you have a vision for your business and need some extra funding to realize that vision, we can help secure your financing.
How does a SBA 504 Project Work?
A SBA 504 project is made up of 3 components:
- A first mortgage is provided by a conventional lender, such as a bank, and generally represents 50% of the total project cost. The bank of your choosing sets the terms of this loan.
- A 2nd mortgage backed by the SBA generally represents 40% of the total project cost. The terms of this loan are 10, 20, or 25 years with a fixed interest rate fully amortized for the loan term. The SBA sets the rate each month.
- Your cash injection for the remaining amount of the total project cost is generally 10%. Think of this as your down payment. Note: Minimum injection requirements may differ for new businesses or special purpose properties.
Example Structure
Using a $2,000,000 total project cost, the financing structure would look like this:
- Conventional loan (1st): $1,000,000 – 50%
- SBA 504 loan (2nd): $800,000 – 40%
- Borrower Injection: $200,000 – 10%
Please use this payment calculator to give a rough estimate of what the loan amounts and payments will look like for your project. All you need to enter is your estimated total project cost, which includes land purchase, building, construction or renovations, and equipment; the calculator will do the rest. Our payment calculator will give you rough estimates, but the best way to determine if the 504 is the right tool is to talk to one of our experienced loan officers.
What are the Eligibility Requirements?
To qualify for an SBA 504 loan, your business must be for-profit, occupy at least 51% of the property purchased with the 504 loan, demonstrate financial stability, and be organized within the U.S. Additionally, personal guarantees from all principal owners will be required.
What are the eligibility requirements for obtaining an SBA 504 loan?
To qualify for an SBA 504 loan, your business must be for-profit, occupy at least 51% of the property purchased with the 504 loan, demonstrate financial stability, and be organized within the U.S. Additionally, personal guarantees from all principal owners will be required.
What is the process?
Pre-Qualification
The first step is to obtain our pre-approval, which determines creditworthiness and SBA eligibility. Within 48 hours of obtaining a loan application and the basic financial package, we will provide a pre-approval that outlines the terms and conditions of the SBA 504 loan.
Obtain SBA Authorization
Loan Closing
Once the SBA authorizes the loan, we’ll collaborate with the bank to close the loan. The bank funds their permanent loan and temporarily funds the SBA portion of the financing. If there’s construction, the bank will manage the construction draws. At this stage, you’ll own the building or begin construction. In the case of a refinance, the previous loans are now paid off.
SBA Loan Funding
Once the bank has fully disbursed both its loan and the SBA portion of the financing, we’ll begin the SBA loan funding process. The process generally takes 60-90 days. Once the SBA loan funds, the temporary bank loan is paid off, and your loan payments to the SBA begin. At this point, your rate for the SBA loan is set and fixed for the loan term.
Why a 504 Loan?
- Own the building rather than pay rent
- Low fixed interest rate
- Preserve working capital
- No balloon payments
- Manageable and predictable monthly payments
- Premium Customer Service
- Have more questions? Check out our FAQ Page