The 504 loan program provides small businesses with affordable financing for the purchase, construction, expansion and/or renovation of real estate and/or the purchase of machinery and equipment (i.e. fixed assets).
- Low down payment – conserves valuable capital
- Below-market fixed interest rates – prevents future adverse rate fluctuation
- Lon-term financing – promotes steady business growth with predictable monthly payments
- Tailored ownership options – gives the business owner the flexibility to maximize tax benefits of ownership and minimize liability (this option works especially well for professionals ion the medical, veterinary, legal and accounting fields)
- Possibility to refinance certain existing debt at long-term, low, fixed interest rates – THIS SPECIAL PROGRAM WILL END ON SEPTEMBER 27, 2012 SO DO NOT HESITATE AND CONTACT US AS SOON AS POSSIBLE!
How it works?
An SBA loan is a partnership between a Certified Development Company (CDC), i.e. IBFS, and a lender. CDCs are economic development organizations that have been certified by the SBA to make loans under the SBA 504 Loan Program.
Working with a lender, IBFS provides up to 40% of the financing of the project cost. A lender must partner with IBFS to typically provide 50% of the financing, while the business owner ends up paying as little as 10% down.
Note that the 50-40-10 structure of the SBA 504 loan is the most common one but higher equity requirements exist for start-up or leveraged companies and/or projects involving acquisition, change of ownership or construction of limited or single purpose real estate.
How much can I borrow?
There is no limit to the total project costs, however, IBFS can lend you up to 40% of the project cost with a dollar cap of $5,000,000 depending on the type of project. IBFS can go as high as $5,500,000 of SBA 504 financing for eligible manufacturing projects and for projects that incorporate energy saving technologies for sustainable design.
- Land and existing building acquisition
- Constructing, renovating and/or converting existing facilities
- Constructing of new facilities
- Purchase of long-term machinery and/or equipment
- Parking lots and landscaping
- Grading and street improvements
In addition, furniture and fixtures, some soft costs (such as professional fees), and reasonable contingencies (up to 10%), usually can be included in the SBA 504 loan project as well.
SBA 504 loans can NOT be used for working capital, mortgage broker fees, bridge or interim loan during the construction period, business inventory, or rolling stock (i.e. vehicles).
Also, according to the SBA guidelines, eligible projects must promote economic development and the SBA 504 loan size is linked to job creation and/or retention.
- Be operating a for-profit business
- Be organized as a corporation, sole proprietorship, partnership, LLC, etc.
- Be located in the US
- Have a tangible net worth of less than $15 million and profit after taxes of less than $5 million (including affiliates)
- Occupy at least 51% of its property for existing buildings or 60% of a newly constructed building
- Have a successful track record and growth potential
- Business involved in illegal activities
- Business owned by person(s) who do not have permanent legal resident status
- Business that has restrictions on patronage
- Government-owned business
- Marketing cooperative
- Business engaged in loan packaging and lending
- Business that has previously defaulted on a federal loan
- Business engaged in political or lobbying activities
- Speculative business (real estate, financial)
- Insurance companies (although independent insurance agents may qualify)
- Offshore facilities
- Gambling business
* If you are not sure if your business qualify for the SBA 504 loan program, please contact one of our Business Development Executives
