An SBA 504 loan, sometimes called The CDC/504 Loan Program is a US government guaranteed loan that provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation. SBA 504 loans are available through Certified Development Companies (CDCs), SBA’s community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA.
Eligible loan purpose: Purchase of major fixed assets like land, buildings, equipment, and machinery
Loan amoun: Up to $5 million on CDC portion, up to $5.5 million for specific businesses
Interest rates: Fixed, typically about 5% to 6% for CDC 2nd; bank rates for 1st can vary
Up to 25 years
Down payment: 10% of the loan amount
Project assets being financed are often used as collateral; personal guarantees for business owners of 20% or more are required
The borrower will pay 10% of the loan as a down payment. The CDC will put up 40% of the loan’s value. An SBA-approved lender will then supply the remaining 50% of the value.
Loan Amount: $1,000,000
Borrower provides $100,000 as a down payment
Your CDC supplies $400,000 – This is provided through a second lien, usually with a 20 or 25-year, fixed interest rate.
The bank/lender supplies $500,000 – This is a first lien from a private sector bank/lender.
A 504 loan can be used for a range of assets that promote business growth and job creation. These include the purchase or construction of:
