Small businesses require funding for a variety of purposes. CDC/504 loans from the U.S. Small Business Administration are specifically designated to assist companies in upgrading facilities or purchasing real estate, large equipment, or machinery. Here is some information that answers questions you might have about what an SBA 504 loan is and how to qualify for it.
SBA 504 Loan Basics
These loans are partially guaranteed by the government through the U.S. Small Business Administration. The funding is divided between a credit union or bank, a Certified Development Company (CDC), and the small business owner who is acquiring the loan. Usually, the maximum loan amount is $5 million, but sometimes slightly larger amounts are approved. Term lengths vary from 10 to 25 years. Interest rates are generally about 3 percent of the loan amount. There are also additional fees, although some of these have been temporarily waived during the COVID crisis.
Eligibility Requirements for an SBA 504 Loan
To qualify for an SBA 504 loan, companies must be physically located and conducting business in the United States, be for-profit, and have $15 million or less in net worth. Owners must have personally invested money or time in the business, have good personal credit, and not be delinquent on any other government debt obligations.
Applying for an SBA 504 Loan
SBA 504 loan applications are processed by CDCs, which are nonprofit organizations that the SBA certifies and regulates. To apply for a loan, you will need a significant amount of documentation, including your company’s business plan, personal and business tax records, personal and business financial statements, your company’s accounts receivable and accounts payable, proof of cost for equipment loans, and estimates from a contractor for loans involving construction. In addition, the CDC and the credit union or bank may request more documentation.
For more information on obtaining an SBA 504 loan or other financing options such as a commercial real estate loan, a business auto loan, or an equipment financing loan, get in touch with Porter Capital Group.