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The objective of the SBA 504 loan program is to achieve community economic development through job creation and/or retention, or other economic development impacts by providing long-term fixed asset financing to small business concerns.

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Terms

  • The SBA 504 loan may finance up to 40% of an eligible project, not to exceed $5,000,000 ($5,500,000 for manufacturing firms). The small business concern is required to inject at least 10% of the project (an additional 5% will be required for a business of less than two years in operation, or an additional 5% if the asset is of a limited or special purpose). Then the private third party lender provides the remaining amount, usually 50%.
  • Eligible small businesses include those with fewer than 500 employees, or who have an aggregate business net worth of less than $15 million dollars, and/ or an aggregate net profit of less than $5 million dollars. They must be for profit companies with a sound business purpose, and demonstrate sufficient economic impact through the project.
  • The interest rate is a fixed rate set by the sale of a Debenture (or type of commercial bond), which funds the SBA 504 loan, and is guaranteed 100% by the SBA. The interest rate is generally set at a fixed price slightly above the 5 and 10 year Treasury bill rates, and will remain fixed for the term of the loan. Terms are 10 years for Equipment loans, and 20 years for Real Estate loans.
  • An eligible project can include: plant acquisition, new construction, renovations or expansions, acquisition of machinery, equipment and fixtures, land and site improvements, and certain eligible soft costs associated with the above.