SBA 504 Project Structuring Guides
You ready to submit a 504 loan request but before you do use our project structuring guide as a valuable resource.
Hard costs for fixed-asset acquisitions that are eligible with a 504 loan:
- Land
- Acquisition of land and existing building
- Construction and upfit
- Eligible equipment: 10 year useful life, no rolling stock
Soft costs that can be included in an SBA 504 loan are:
- Design Fees
- Appraisal
- Environmental review
- Closing Costs
- Lender Origination Fee
- Interest during construction/interim period
- Contingency reserve (as needed for project)
What exactly is an “equity injection” in a 504 loan?
- Cash invested by business owner is standard source of down-payment
- Owners cannot pledge outside collateral, i.e, lien on vacation home-in lieu of investing cash into the project
- Owners can count previous expense on project, i.e., land down payments and initial architectural drawings–toward the needed down payment.
- If owner has owned project land or building for 2 years or more, the 504 loan program can use the existing appraised value as “base” value for project structure
Typical Limitations for a CDC in a 504 loan program:
- $1.5 million 504 loan maximum for most customers
- $2 million maximum for customers that meet SBA public-policy goals
- $4 million maximum for manufacturers
- They must factor in any other existing SBA debts in determining maximum eligibility of any one borrower
If you have a question that you would like to ask concerning the SBA 504 loan program please use the form below
[faq ask SBA 504]
