Local Incentive

SBA 504 Program

Summary

The CDC/504 Loan Program provides long-term, fixed rate financing of up to $5 million for major fixed assets that promote business growth and job creation.

504 loans are available through Certified Development Companies (CDCs), SBA's community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA.

Loan proceeds can be used for fixed assets such as real estate and long-life equipment (10 years of life or more), new construction and even improvements to existing properties.

Borrowers can benefit from a low down payment, fixed interest rate and the long terms available through the program.

Lenders benefit from an excellent loan to value ratio, no restrictions on their rates, less paperwork and low fees. In addition, lenders can often participate in projects which exceed their lending limit and have the federal government as a subordinate lender. The SBA 504 Loan Program involves a partnership between the SBA and Lenders. Typically, Lenders loan 50% of the eligible project costs, the SBA lends 40% and the borrower injects the remaining 10%.

In some cases, the SBA may require that the borrower inject as much as 20% reducing the SBA portion to 30%.

Small businesses with a net worth of less than $15,000,000 and an average income, after taxes, of less than $5,000,000 are eligible. Income is averaged over a 2-year period.