504 LOAN PROGRAM

The 504 Loan Program allows certified development companies through the Small Business Administration, to coordinate funding through private lenders and SBA to finance projects for eligible small businesses as defined by SBA.  As much as 90% of the total project may be financed under this program, requiring owner equity of as little as 10%.  The maximum loan amount is usually $1,850,000, with the SBA portion not exceeding $750,000 or 40%, whichever is less.

The structure of a financial package, while somewhat flexible, is typically as follows:

• Participating bank's loan of 50% on the bank's terms and interest rate, with the bank taking a first mortgage position.
• SBA guaranteed debenture of 40%, with interest rates comparable to long-term U.S. Treasuries fixed for ten or twenty years.
• Small business concern equity of 10%.

Proceeds may be used for fixed assets, renovations, machinery, equipment, leasehold improvements, and professional fees.