frequently asked questions
Q: What is a 504 Loan?
A Small Business Administration (SBA) 504 loan is facilitated by a Certified Development Company (CDC). This program was created to provide financing to small business owners to aid in the purchase of real estate, property, and heavy equipment or machinery.
Q: What is a Certified Development Company (CDC)?
CDCs are nonprofit organizations established to promote business development and economic prosperity. There are a few hundred nationwide, aiding small businesses across the country.
Q: How do I qualify for a 504 loan?
To be eligible for an SBA 504 loan you must own a small business as defined by the SBA and meet the following qualifications:
- Company average net income of less than $5 million after taxes for the previous 2 years.
- Tangible net worth less than $15 million
Q: How long does a 504 loan take to process?
Your SBA 504 loan will typically require one or two months to fund. Many variables may affect this timeline.
Q: What is the maximum amount available with a 504 loan?
A standard SBA 504 loan will be funded by three parties; 10% investment from the borrower, 40% from CDC like 504 Capital, and 50% from the lender. The maximum amount from the lender is $5 million, or up to $5.5. million for manufacturing businesses.
Q: What is the minimum down payment available with a 504 loan?
The business owner is expected to pay 10% as an initial investment in the project.
Q: How do I qualify as a small business?
The SBA considers businesses to be “small” when they have as much as $38.5 million in sales, and 1,500 employees.