SBA 504 Loans
The Best Kept Secret in Commercial Real Estate Financing
As a business owner, the Small Business Administration (SBA) 504 loan program is the best tool for purchasing or constructing owner-occupied commercial real estate. By using the SBA 504 you will be able to finance your project with the lowest down payment and a 20-year fixed rate term.
SCED is licensed by the SBA to market, package and service SBA 504 loans in California.Why should you use the SBA 504?
- Commercial Real Estate’s lowest down payment retains capital in the business. The SBA 504 has a down payment minimum of 10% (15% for start-up businesses)
- 20-year fixed interest rate on commercial real estate
- No balloon payments
- Subject property is the collateral
- Projections can be considered for growing businesses
- Purchase land with a building
- Construction of a new building
- Renovating an existing building
- Refinance of existing debt with expansion (under certain circumstances)
- Machinery and equipment with a minimum useful life of 10 years
- Working Capital
- Do you operate a for profit business?
- Do you intend to occupy a minimum of 51% of the property for your business?
- Do you have cash available for the down payment & closing costs?
- Does your business have the ability to repay the loan from existing cash flow (or if growing, projections)?
Structure of an SBA Loan
An SBA 504 Loan has Three Participants
- Bank – provides a loan for at least 50% of the total project cost secured with a first mortgage
- SCED – provides a SBA-guaranteed 504 loan for up to 40% of the total project cost or a maximum of $5 million secured by a second mortgage
- Business Owner – contributes a down payment of at least 10% (15% for start-up businesses or single purpose properties)
- 51% owner occupancy for existing building
- 60% owner occupancy for new construction