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busines partners meet to discuss the SBA 504 loan program

SBA 504 Loans

The CDC is an Indiana Certified Development Company authorized by the U.S. Small Business Administration (SBA) to administer the 504 loan program. We provide a solution to businesses with the permanent financing needed to acquire, renovate, or expand an owner-occupied commercial facility or purchase fixed assets with a useful life of at least ten (10) years.

 

The CDC works with the business owner and commercial lender to arrange financing that bridges the gap in the owner’s available equity. The 504 program’s primary focus is to create jobs within our communities. A private investment firm issues an U.S.-backed debenture in the capital markets to fund the 504 program. Therefore, there is no cost to the taxpayer.​​

SBA504 LOAN PROGRAM

Eligibility

  • Established as a legal entity – corporation, partnership, sole proprietor, or limited liability company

  • Located in the United States

  • Net worth under $20 million and net profits under $6.5 million

  • Participation by another lender who finances up to 50% of project costs

  • Economic development goals must be achieved through the project financing

  • Owner-user of the project being financed must occupy at least 51% of the property for an existing building or 60% of a newly constructed building. Two or more unrelated small businesses can receive a SBA 504 loan if they combine to meet occupancy requirements.

  • Job creation of one (1) job for every $95,000 or one (1) job for $150,000 for manufacturers lent out with SBA funds (not required for rural areas, businesses owned by at least 51% women, minorities or veterans)

A small business is not eligible for an SBA loan if it is or has:

  • A not-for-profit

  • Engaged in lending, a passive holder of real estate and/or personal property, or a life insurance company – however, an insurance agency is eligible

  • Located in a foreign country or owned by aliens who do not have legal permanent resident status

  • Restrictions on patronage

  • A government-owned entity (exception for Native American tribes)

  • Engaged in promoting religion

  • A consumer and marketing cooperative (producer cooperatives are eligible)

  • Engaged in loan packaging

  • Owned by persons of poor character

  • Equity interest by lender, CDC, or associates in applicant concern

  • Provides prurient sexual material

  • Previously defaulted on a federal loan

  • Engaged in political or lobbying activities

  • A speculative business

Loan Terms

Three terms are available for financing an SBA 504 loan project. Depending on the nature of the project, the term options are either 10 years, 20 years, or 25 years with a fixed interest rate. A typical project would be structured as a commercial lender providing 50% of the project total, the CDC providing 40%, and the business contributing a minimum of 10%.  The business equity injection requirement may be higher if it is a newly established business or if the project is considered single purpose.

 

Examples of a single purpose facility would include a hotel, a bowling alley, or a car wash.

Loan Fees

An application fee is due at time of application equaling 1% of the SBA loan amount or $2,500 – whichever is less. This fee is fully refunded after the SBA loan has been disbursed or if your loan request is not approved by either the CDC Board of Directors or the SBA.

 

Please refer to the SBA Application Fee Agreement form for details pertaining to the application fee and the SBA 504 Loan Fee Sheet regarding the ongoing fees.

Sample SBA 504 Loan: $3,000,000 Total Project
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Sample
Elligibility
Terms
Fees

SBA504 LOAN PROCESS

SBA REFINANCE PROGRAM

This program is for refinancing only. Business expansion, purchase, or construction projects must adhere to guidelines for NEW SBA 504 loans.

Refinance
Refinancing Program Details

  • Eligible expenses include current secured debt not already part of a 504 project and business operating expenses that will become due within 18 months of application.

  • Secured debt-only refinance projects are limited to 90% LTV of an appraisal on project collateral. Additional collateral can be pledged.

  • For refinance projects that will include business operating expenses, a 75% LTV limit applies, and these itemized operating expenses cannot exceed 25% of the appraised value of project collateral (such as salaries, rent, utilities, and inventory).

  • Eligible long-term fixed assets include land, buildings, machinery, and equipment.

  • All loan projects submitted for refinancing will be subject to tight underwriting to ensure no detrimental impact will occur because of the refinance.

  • An SBA guarantee fee to sustain the program will be determined annually and made part of the interest rate.

Refinance “Qualified Debt” Requirements

  • Eligible expenses include current secured debt not already part of a 504 project and business operating expenses that will become due within 18 months of application.

  • Secured debt-only refinance projects are limited to 90% LTV of an appraisal on project collateral. Additional collateral can be pledged.

  • For refinance projects that will include business operating expenses, a 75% LTV limit applies, and these itemized operating expenses cannot exceed 25% of the appraised value of project collateral (such as salaries, rent, utilities, and inventory).

  • Eligible long-term fixed assets include land, buildings, machinery, and equipment.

  • All loan projects submitted for refinancing will be subject to tight underwriting to ensure no detrimental impact will occur because of the refinance.

  • An SBA guarantee fee to sustain the program will be determined annually and made part of the interest rate.

Sample SBA 504 Refinancing Project

  • Eligible expenses include current secured debt not already part of a 504 project and business operating expenses that will become due within 18 months of application.

  • Secured debt-only refinance projects are limited to 90% LTV of an appraisal on project collateral. Additional collateral can be pledged.

  • For refinance projects that will include business operating expenses, a 75% LTV limit applies, and these itemized operating expenses cannot exceed 25% of the appraised value of project collateral (such as salaries, rent, utilities, and inventory).

  • Eligible long-term fixed assets include land, buildings, machinery, and equipment.

  • All loan projects submitted for refinancing will be subject to tight underwriting to ensure no detrimental impact will occur because of the refinance.

  • An SBA guarantee fee to sustain the program will be determined annually and made part of the interest rate.

Applications
Laptop and Paperwork

SBA504 Application Forms

Required Documents for Loan Review (the below documents must be completed along with the required information stated on the loan application prior to submitting to the board for loan approval):

​

Loan Application Form

SBA Application Fee Agreement

413 Personal Financial Statement Form

SBA 4506-C Form

1244 Statements Required by Law and Executive Order Form

Borrower Certification Form (Citizenship Information)

Job Creation Form (Form A)

Projections Form (Form B)

Outstanding Loans Form (Form C)

Customer Identification Notice

CDC DOCUMENT VAULT

Have more questions?
Book an appointment with a Loan Specialist!

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