ABC Corporation has been leasing their building for five years and has now decided to buy their own building. A building that fits their needs is available for $3,000,000. ABC’s owner wants to make an offer, but he does not have the 25% ($750,000) down payment that would be required with conventional financing. He discusses the options with his commercial lender, who offer the perfect solution – an SBA 504 loan.
* Loan amounts and down payments vary with project type and credit quality. 504 loan maximum is up to $5 million ($5.5 million for manufacturers). Projects up to $9 or $10 million are good candidates for the 504 Loan Program.
** Bank rates vary by lender. The 504 rate is set at the time of loan funding, approximately 60 days after loan closing, at the 10-year U.S. Treasury note rate plus estimated 2.2-4.2%.
*** Bank loan has minimum 10-year term and 10-to-20 year amortization. The 504 loan is a 20-year fully amortized loan and payments are estimated.
- Both loans use the same appraisal and environmental reports.
- The lender provides bridge financing until the 504 debentures are sold.
- Small business must meet conventional credit underwriting criteria.
- SBA 504 loan program fees are approximately 3% of the loan amount