FREQUENTLY ASKED QUESTIONS
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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 designed to provide financing to small business owners to aid in the purchase of real estate property, heavy equipment, or machinery. 504 Capital grants assistance with Real Estate Loans, Equipment Loans, and Construction Loans.
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.
A tangible net worth of less than $15 million
Q: What are the benefits of SBA 504 Loans?
Some benefits include a low down payment, up to 90% financing coverage, below-market fixed interest rate, long, flexible amortization periods, no large business asset collateral, helps working lines of capital credit, minimizes credit risk, and fixed asset financing.
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?
Three parties will fund a standard SBA 504 loan; 10% investment from the borrower, 40% from the CDC and 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: What are the advantages of the SBA 504 loan’s low down payment?
The SBA 504 loans beat the typical 20-30% down payment with a low 10% base. This conserves working capital, lowers real estate down payments, minimizes credit risk, maximizes cash flow, and allows room to obtain other loans.
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.
Q: How can I learn more about SBA 504 Loans?
Our Blog is filled with effective finance tips and tricks for improving your business and leveraging everything the SBA 504 loan program has to offer.
