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These are some of the most commonly asked questions from our clients regarding 504 loans. If you still have a question that is not answered here, please contact us.
Q: What loan amounts are available with the SBA 504 loan program?
A: The maximum SBA 504 loan is $4 million. There is no maximum total project cost. The SBA portion cannot exceed 40 percent of the eligible project costs.
Q: What amount of equity is required from the borrower for the SBA 504 loan program?
A: The minimum equity injection is at least 10 percent of the total project cost. In addition, if the project involves the purchase or construction of a single-purpose facility, the required equity injection increases by five percent. If the business is new (less than two years old), the required equity injection also increases by an additional five percent. Start-up businesses need to be sufficiently capitalized.
Q: What are the terms of the SBA 504 loan?
A: SBA 504 loans used for the acquisition of real estate have a term of 20 years, while equipment loans typically have a term of 10 years. The SBA 504 loan has a low interest rate, which is fixed for the term of the loan. The interest rate is based on a spread over the current market rate for 10-year U.S. Treasury issues and is determined when the loan funds.
Q: What collateral is taken to secure the SBA 504 loan?
A: Collateral taken to secure the SBA 504 loan typically includes a second mortgage on the land and building or a second lien on the equipment that is financed.
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