What is the SBA 504 Loan Program?
The 504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. The 504 loan is a direct loan delivered through a local Certified Development Corporation(CDC). CDCs are private, non-profit corporations set up to contribute to the economic development of their communities or regions.
What can 504 loan Funds be used for?
Proceeds from 504 loans must be used for fixed asset projects such as: purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; construction of new facilities, or modernizing, renovating or converting existing facilities; or purchasing long-term machinery and equipment.
What is the benefit of a 504 Loan?
The 504 loan program typically enables small business owners to provide a lower down payment towards the eligible project being financed. It also provides what is often a below market interest rate fixed over a longer period of time than traditional banks can provide, (i.e. 10 or 20-year fixed rates).
How does the 504 Loan Program work?
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the participating CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being assisted.
How does a business apply for a SBA 504 Loan?
504 loans are provided through local CDC offices, and most often involve a senior loan from a bank. For this reason, interested applicants should contact their local bank and/or CDC office to make further inquiries.
In Charlotte, the following CDC offices are available:
Business Expansion Funding Corporation
Centralina Development Corporation
Self Help Credit Union
For more information visit the SBA's web site
