Introduction: Empowering Businesses with Long-Term, Fixed Rate Financing

The 504 Loan Program is a government-backed initiative that offers long-term, fixed rate financing to support the acquisition of major fixed assets, fostering business growth and job creation. Through Certified Development Companies (CDCs), nonprofit organizations regulated by the Small Business Administration (SBA), eligible businesses can access affordable loans and contribute to the economic development of their communities.

Section 1: Eligibility Requirements

Are You Eligible for a 504 Loan?

To qualify for a 504 loan, your business must meet the following criteria:

1. Operating as a for-profit company in the United States or its possessions.
2. Possessing a tangible net worth of less than $15 million.
3. Demonstrating an average net income of less than $5 million after federal income taxes for the two years preceding the application.
4. Complying with SBA size guidelines, showcasing qualified management expertise, presenting a feasible business plan, demonstrating good character, and having the ability to repay the loan.

Section 2: Loan Features and Limits

Exploring Loan Amounts and Project Scope

The 504 loan program offers the following features and limits:

1. Maximum Loan Amount: Up to $5.5 million, which can be increased to $16.5 million for certain energy projects (limited to three projects).
2. Loan Distribution: Facilitated through Certified Development Companies (CDCs), SBA’s community-based partners.
3. Loan Purpose: Intended for the acquisition or construction of existing buildings or land, new facilities, and long-term machinery and equipment.
4. Project Improvement: Loans can also be utilized for the improvement or modernization of land, streets, utilities, parking lots, landscaping, and existing facilities.
5. Restricted Uses: 504 loans cannot be used for working capital or inventory, debt consolidation or refinancing, or speculative investments in rental real estate.

Section 3: Applying for a 504 Loan

Navigating the Application Process

To apply for a 504 loan, follow these steps:

1. Find a Certified Development Company (CDC) in your area, ensuring you work with a qualified lender.
2. Consult with the CDC to understand eligibility criteria, loan application requirements, and navigate the lender channels to create your project financing.

Section 4: Loan Repayment

Understanding Repayment Terms and Options

504 loan repayment entails the following considerations:

1. Active 504 Loans: Borrowers with active 504 loans can make payments through the Central Servicing Agent, typically via ACH monthly draws, wire transfers, or checks.
   • Repayment Terms: Multiple options available, including 10-, 20-, and 25-year maturity terms.
   • Interest Rates: Tied to an increment above the current market rate for 10-year U.S. Treasury issues, totaling approximately 3% of the debt. The interest rate may be financed with the loan.
   • Contact Your CDC: Reach out to your Certified Development Company (CDC) for assistance regarding your account balance, due dates, and other loan-specific inquiries.
2. Purchased 504 Debentures: Borrowers with debenture-purchased 504 loans can access their loan status and make payments through the MySBA Loan Portal (lending.sba.gov).

Concluding Thoughts

The 504 Loan Program serves as a valuable resource for businesses seeking long-term, fixed rate financing to acquire major fixed assets, foster growth, and create employment opportunities. By leveraging the expertise of Certified Development Companies (CDCs), eligible businesses can access affordable loans that fuel economic development and contribute to the success of local communities.

Lender Match streamlines the process of finding the right lenders, empowering you to secure the financing your business needs.

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