Common Questions Concerning SBA 504 Loans

What down payment is required for my project to get financed?

• 10% is required as the down payment. Funds should be seasoned and sourced.
• Special Use properties will require an additional 5% extra and we will help you determine that.
• Any new business will require 5% extra.

How do I know if my project is considered a special use project?

• Best way to determine is can your property be used for multiple purposes? If not, then its considered Special use.
• A car wash, a restaurant, funeral home are examples of special use properties.
• When in doubt an appraiser can normally determine.

What is considered a “new” business?

• Key criteria is ownership experience  and not the life of the business that is being financed.
• Experienced owners can get lower down payments if starting a new business unit in a field in which he/she has ownership experience.
• Inexperienced owners require higher down payments, even if acquiring an existing business.
• People with strong management experience  may qualify for a lower down payment when starting a new business if they hard profit and loss responsibility over a comparable business.

How many jobs am I required to create by using an SBA 504 loan?

• 1 job within the first two years of completion for every $50,000 of SBA financing.
• Waivers do exist for public policy goals; minority owned; women-owned; veteran owned and rural locations are major qualifiers.

Can my business be too big for a 504 loans?

• Maximum net worth of the business should be less than or equal to $7.5 million.
• Average net profit after taxes for any business should be less than or equal to $2.5 million.

Can my business not be eligible for an SBA 504 loan?

• Standard SBA exceptions include finance companies, speculative mining, gambling establishments, etc.
• Some franchise businesses are ineligible for financing because they are overly controlled by the parent corporation which is  common among insurance agents, real estate agents, and financial advisors.

What are the requirements for owning a building with an  SBA 504 loan?

• If acquiring an existing building, the owner can lease up to 51% of the property.
• If the owner is building a new building, the owner must occupy 60% at completion and can lease out an additional 20% for 5 years but then they must occupy 80% the building and can only lease out 20% during the life of the SBA 504 loan.

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]