SBA 504 Loan The SBA 504 Real Estate Loan Program allows a company to purchase its own building, construct or do a major renovation with a 50-40-10 financing, allowing the applicant to inject only 10% of the total project cost. Loans to start-up businesses or special purpose would require an extra 5% down each.
The building (7(a) and 504) must be 51% owner occupied or 60% owner occupied in the case of new construction.
The bank provides a 50% conventional first mortgage with the remaining 40% of the project provided through a Certified Development Company (CDC). The CDC portion is a fixed rate tied to the debentures, fully amortized over 25 years. There is a ten year prepayment penalty. The maximum amount at this time is $4.5 million with additional allowed for manufacturing. Check with your lender and a CDC.
Many people think SBA loans are only for businesses in trouble. Often, SBA loans are granted during the gap time between when a company billed out for goods or services and when they receive payment. A company may be experiencing growth on paper during this time, but funds may not be available for additional investments. Your best resource for SBA loans is iBank.com.
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