The SBA 504 Loan Program: Long-Term Fixed-Rate Financing
The SBA 504 loan program is a powerful economic development tool designed to provide Florida small businesses with long-term, fixed-rate financing for major fixed assets. This program is the premier choice for business owners looking to purchase, construct, or renovate owner-occupied commercial real estate or acquire heavy machinery and equipment.
Advantages of an SBA 504 Loan
- Low Down Payment: Retain your cash with equity injections as low as 10%.
- Fixed Rates for Decades: Lock in a low, predictable interest rate for 10, 20, or 25 years.
- No Balloon Payments: Unlike many conventional commercial mortgages, the 504 program is fully amortized.
- Support for Large Projects: Total project costs can often exceed $10 million, with the SBA portion reaching up to $5.5 million.
- Lower Monthly Payments: Longer amortization periods mean lower monthly debt service, improving your business’s cash flow.
Understanding the 504 Loan Structure
The SBA 504 program uses a unique tiered structure to maximize your leverage:
- 50% First Trust Deed: Provided by a private-sector lender (Bank or Investor).
- 40% Second Trust Deed: Provided by a CDC and guaranteed 100% by the SBA.
- 10% Borrower Contribution: The small business owner's equity injection.
Note: For startups or special-purpose properties (such as hotels or gas stations), the borrower contribution may increase to 15% or 20%.
Eligible Project Costs
- Real Estate Acquisition: Buying land or existing buildings.
- Construction & Improvements: Building new facilities or renovating existing ones.
- Machinery & Equipment: Purchasing long-term machinery with a life of at least 10 years.
- Soft Costs: Professional fees, appraisals, environmental studies, and interest during construction can typically be financed
Eligibility Requirements
- First point
- Second point
- Third point
Contact us today for a free analysis of your commercial real estate project and see how the 504 program can transform your business's future.
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Frequently Asked Questions
What is the SBA 504 loan program?
The SBA 504 loan program provides Florida small businesses with long-term, fixed-rate financing for major fixed assets, including purchasing, constructing, or renovating owner-occupied commercial real estate and acquiring heavy machinery and equipment.
What are the advantages of an SBA 504 loan?
Advantages of an SBA 504 loan include a low down payment as low as 10%, fixed rates for decades, no balloon payments, support for large projects with total costs often exceeding $10 million, and lower monthly payments due to longer amortization periods.
How is the SBA 504 loan structured?
The SBA 504 loan structure consists of a 50% First Trust Deed from a private-sector lender, a 40% Second Trust Deed from a CDC guaranteed by the SBA, and a 10% borrower contribution, which may increase for startups or special-purpose properties.
What types of project costs are eligible for SBA 504 financing?
Eligible project costs include real estate acquisition, construction improvements, purchasing long-term machinery and equipment, and financing soft costs such as professional fees and interest during construction.
How can I find out if I qualify for an SBA 504 loan?
You can contact the team for a free initial assessment of your project to determine if you qualify for an SBA 504 loan.
What should I do if I'm interested in the SBA 504 loan program?
If you're interested, you can contact the team for a free analysis of your commercial real estate project to see how the SBA 504 program can benefit your business.