About The SBA504 Program
Use of Proceeds:
• Acquisition of land (actual cost)
•Improvements including grading, street improvements, parking lots and utilities
•Construction or acquisition of a building (appraised value)
•Purchase of machinery and equipment
•Contingency amount of up to 10% of construction costs
•Professional fees such as surveying, appraising, accounting, engineering, architectural, and legal costs
•Construction interest, provided the contingency amount approved is adequate
•Debt Refinance with an expansion component (not to exceed 50% of total project)
The 504 Loan may not be used for working capital, debt consolidation or repayment, or venture capital. However, the SGRC can companion the 504 with an SBA 7(a) Loan which may be used for any legitimate business purpose. To ensure eligibility of all project costs, construction should not begin until the SBA application process has been started.
The borrower must contribute at least 10% of the project cost either in cash or equity in project-related land. (15% required for start-ups or special purpose buildings)The SGRC/SBA provides a maximum of 40% of the project cost or $5,000,000 (5.5MM maximum for manufacturers); whichever is less in second lien position. A private lender provides the balance on a first mortgage basis. Minimum SBA portion of the loan is $50,000.
Type of Business
Eligible businesses include legal, for-profit enterprises with a net worth not exceeding $15M. Average net profit after taxes may not exceed $5 million for the last two years. Passive investment companies, not-for-profit companies, unregulated media firms, lending institutions, real estate investment companies, gambling establishments, and recreation facilities not open to the public can not qualify for the 504 loan.