SBA 504 Loans

SBA 504 Loan Program

The SBA 504 loan program is a financing tool, designed to encourage economic development within a community. A 504 loan provides small businesses with long-term, fixed-rate financing to acquire fixed assets for purchase, construction, expansion, or modernization.

Lending Partners FAQs

WHAT IS THE FINANCING STRUCTURE?

Georgia Certified Development Corporation (GCDC) provides up to 40% of the total project cost with an affordable, fully amortized loan. The participating lender normally finances 50% of the cost. To fund the 504 portion of the loan, GCDC issues an Authorization for Debenture Guarantee that is fully guaranteed by the SBA and sold on the private bond market. GCDC will prepare all the necessary paperwork to obtain an SBA loan approval.

WHAT ARE THE EQUITY REQUIREMENTS?

A minimum down payment of 10% is required for most 504 projects. However, a 15% down payment is necessary when a business is a start-up enterprise (less than 2 years old) or when the project property is considered special-purpose. A 20% down payment is required in situations involving both a start-up business and a special-purpose property.

WHAT BUSINESSES ARE ELIGIBLE?

An SBA 504 loan is for businesses that are:

• An operating, for-profit business, organized as a Corporation, Sole Proprietorship, Partnership, LLC, etc.

• Located within the U.S.

• With affiliates, have a tangible net worth of less than $15 million and profit after tax of less than $5 million

• Must occupy at least 51% of the subject property for existing buildings.

Once the basic eligibility criteria are met, we'll evaluate the credit-worthiness of your business.

Still not sure if you qualify? Feel free to call us. We're more than happy to answer all your questions.

WHAT PROJECTS ARE ELIGIBLE? WHAT ARE THE COSTS?

The SBA 504 Loan Program is for fixed-asset financing. Proceeds from an SBA 504 can be used for the following:

• Purchase of Land and Improvements, including existing buildings, modernizing, renovating, or converting existing facilities

• New construction

• Refinance

• Purchase of Build-to-Suit Facilities

• Purchase of New Long-Term Machinery and Equipment (with a useful greater than 10 years)

In addition to the acquisition and construction costs, the "soft costs" (appraisals, environmental, construction interest, closing costs, etc.) can also be financed in the 504 loan. Attorney fees cannot be financed. This allows the business to preserve working capital that will be needed in the larger facility. When your loan closes and your SBA 504 loan is funded, you'll incur various fees totaling approximately 1% of the financing package. These fees are financed within the SBA loan proceeds so they are NOT OUT-OF-POCKET expenses.

WHAT ARE THE OCCUPANCY REQUIREMENTS?

WHAT IS THE PROJECT SIZE RANGE?

Project sizes range from $162,500 to $14,000,000 with the 504 loan size ranging from $65,000 to $5,000,000 (up to $5,500,000 for energy projects/manufacturers meeting SBA defined NAICS codes). The first mortgage loan can exceed 50% of the project total, which enables larger companies to take advantage of the benefits of the 504 loan up to the maximum amount allowed.

WHAT ARE THE ADVANTAGES OF THE SBA 504 PROGRAM?

The SBA 504 program has many advantages for business owners. Perhaps the most immediate are the low down payment and lower interest rate. With a minimum of 10% down, your customers can get the financing they need to purchase or construct a new facility or buy long-term equipment without having to go deeply out of pocket. As the bank, you won't carry the risk of the entire loan - just 50% as the first trust deed lender. The 504 program funds 40% of the project cost (with the second deed of trust at below-market fixed interest rate).

• 10% down payment

• Below-market fixed interest rate

• Fully amortizing 25-year loan

• Bank interest rate on the first can be lower than conventional financing

Advantages to using the SBA 504 loan

Lower interest rates and a fully amortized loan allow your customers to keep their working capital for future growth and expansion. Not only are there tax advantages, but a real estate purchase with a fixed rate loan results in an overall lower and predictable occupancy cost. And of course, their property will increase in value, allowing them to realize appreciation in real estate ownership.

• Tax advantages

• Fixed occupancy costs

• Appreciation in real estate purchased

Why partner with GCDC for SBA 504 loans?

All the paperwork of a SBA 504 loan can overwhelm borrowers, and even some lenders. As a leader in providing SBA 504 financing, GCDC has the experience to make the entire process simple and easy. We're with you every step of the way to answer your questions, get your customer pre-qualified in as few as 48 hours, all without a loan packaging deposit. Think of us as your personalized team of lending professionals.

Borrower FAQs

504 ADVANTAGES

Why the SBA 504 Program works for you

With a low down payment, low fixed interest rate and fully amortized loan, you will have more capital available to expand your business. Not only are there tax advantages, but a real estate purchase with a fixed rate loan results in overall lower and predictable occupancy costs. The lender provides first mortgage funding of 50% of the total project cost, with SBA funding 40%.
Advantages of purchasing real estate:

• Real estate appreciation

• Tax advantages

• Fixed occupancy costs

Advantages of the SBA 504

• As little as 10% down payment

• Below-market fixed interest rate

• Fully amortizing 25-year loan

504 ROADMAP

Planning for Growth

Bringing the right experts together is important to the success of any project. That's why it is important that you have all the information right from the start. As one of the leaders in SBA 504 lending, GCDC have the knowledge to make the financial process faster and easier for all parties. We lay the foundation for a successful and seamless loan process.

Finance Process

1. Required documentation for loan package is collected from the business

2. GCDC analyzes and organizes documents and information

3. Loan package is completed

4. Loan package is submitted to SBA

5. GCDC works closely with your first mortgage lender, escrow officer, broker and CPA to reduce redundancy and streamline the process, ensuring that nothing holds up your needed financing.

Bank Financing Completed

1. Lender approves loan

2. SBA approves loan

3. Environmental and appraisal are reviewed and approved

4. The lender closes the first mortgage and interim second mortgage loans. CONGRATULATIONS!!! You own your building.

5. A GCDC attorney works with the business to prepare closing documents for a permanent SBA loan

6. 504 Financing COMPLETED

FAQS

WHY SHOULD I CONSIDER AN SBA 504 LOAN FOR MY PROJECT FINANCING NEEDS?

An SBA 504 loan is a powerful tool to help your business grow. It offers:

• 90% financing allows the business to preserve working capital for business expansion

• Low monthly loan payments

• A variety of options for interest rates from a first mortgage Lender

• The ability to finance the SBA fees into the loan which reduces cash needed upfront to inject into the project.

HOW CAN MY 504 FUNDS BE USED?

loans may be used for:

• Land or building acquisition

• Building construction or remodeling

• Acquisition of fixtures and heavy machinery

The qualifying business must become the primary occupant of the property financed. Proceeds cannot be used for working capital or costs unrelated to the project.

HOW LONG DOES IT TAKE TO OBTAIN APPROVAL FOR AN SBA 504 LOAN?

With complete information and documents, GCDC can approve your SBA 504 loan for as little as 3-5 business days. We routinely meet the demands of a 45-day escrow. We recommend bringing us into the process early in order to discuss the project timing.

WHAT IS THE MINIMUM DOWN PAYMENT REQUIRED?

A minimum down payment of 10% is required for most 504 projects. However, a 15% down payment is necessary when a business is a start-up enterprise (less than 2 years old) or when the project property is considered special-purpose. A 20% down payment is required in situations involving both a start-up business and a special-purpose property.

HOW MUCH DOES A 504 LOAN COST?

When your loan closes and your SBA 504 loan is funded, you'll incur various fees totaling approximately 1% of the financing package. These fees are financed within the SBA loan proceeds so they are NO OUT-OF-POCKET expenses.

WHAT WILL BE MY INTEREST RATE ON THE SBA 504 LOAN?

The interest rate on the loan will be determined by a market sale of the bond at the time the 504 debenture pool (the pool of 504 loans) is sold and the interest rate will be fixed for the term of the loan. It is this 100% government guarantee that experts predict will enable the bond to be funded at below conventional lending interest rates and on a fixed rate basis. The effective rate (which includes all ongoing fees) is roughly equal to the 10-year Treasury bill rate when the debenture is sold, plus approximately 2.2-3.4%.

WHO IS ELIGIBLE?

Independently-owned, for-profit businesses that meet 504 project requirements are eligible. Net worth must be $15 million or less, and the average net profits after taxes cannot exceed $5 million per year for the previous two years.

CAN I OBTAIN ANOTHER SBA 504 LOAN?

YES! A Borrower may obtain a second or even a third SBA 504 Loan to finance additional locations, expand existing locations, or purchase major machinery and equipment.