:::SBA 504 Loans

The U. S. Small Business Administration (SBA) has several loan programs designed to help small businesses grow, including the CDC/504 Loan Program, as well as the 7(a) and Microloan Programs.

Business owners and ReProp Financial find that 504 loans are geared to a greater variety of businesses than conventional bank loans. The SBA describes 504 loans as a “long-term financing tool, designed to encourage economic development within a community.” The 504 program is available to a broad array of businesses, from local theaters to motels, wineries, limousine rental companies, restaurants, and everything in between.

What kinds of businesses are eligible to apply for the SBA 504 program?

Owner-operated, for-profit business that occupy 50% or more of their premises.
Business tangible net worth must not exceed $7.5 million.
Annual net income must not exceed $2.5 million (after taxes, for preceding two years).
504 loans are not available for businesses to use in speculation or investment in rental real estate.

Typical structure of a 504 loan

SBA 504 financing is a collaboration between a first lien loan from a lender like ReProp and long-term, fixed-rate financing provided by the SBA. This commercial real estate financing can be used for expansion, modernization or acquisition of major fixed assets.

Borrower secures a loan from ReProp Financial to cover up to 50% of the project cost.
The remainder of the financing is from the SBA and is processed by a Certified Development Company (CDC). This SBA loan is a junior lien covering up to 40% of the project cost.
The borrower should expect to cover at least 10% of the project cost (equity).

How can you use 504 loan funds?

Proceeds from a 504 loan must be used for fixed asset projects such as:

The purchase of commercial real estate with existing buildings.
The purchase of land and construction of new facilities; including grading, street improvements, utilities, parking lots and landscaping.
Renovation, remodeling, etc. of existing facilities.
The purchase of long-term machinery and equipment.

Maximum SBA Loan

The maximum SBA loan can be between $1.5 and $4 million depending on what the business is. ReProp financial makes loans for $200K to $1.9 million in the Western United States.

Other SBA Financing