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

Eligible Uses

• 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

Ineligible Uses

• Inventory

• Working Capital

Self-Prequalification

• 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)

Occupancy Requirements

• 51% owner occupancy for existing building

• 60% owner occupancy for new construction

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