SBA 504 Loan Parameters
- Proceeds can be used to purchase, build or renovate owner occupied commercial real estate and for machinery and equipment.
- Total loan amount up to $6,000,000 split into 2 parts.
- Bank Conventional First Mortgage Loan: Up to $4,000,000
- SBA 504 Debenture/Second Mortgage Loan: Up to $2,000,000
Time to Close
- Term Sheet within 5 days of completed application!
- Closing within 30 – 60 days from Term Sheet acceptance.
- Up to 90% for office, retail and warehouse space.
- Up to 85% for special use properties like funeral homes, motels and restaurants.
- Conventional First Mortgage Loan – Typically varies from Prime to Prime + 2.75%
- SBA 504 Debenture/Second Mortgage Loan – Fixed rate as set by the SBA for the term of the loan.
- First Mortgage Loan has a term of up to 25 years, fully amortizing.
504 Debenture/Second Mortgage Loan has a term of up to 20 years for
commercial real estate, 10 years for machinery and equipment, fully
- Prepayment penalties will apply.
- Loan must be fully secured by commercial real estate or a combination of commercial real estate and business equipment.
- All principals who own 20% or more of the business are
required to provide a full guarantee. Principals or key managers owning
less than 20% may be required to provide a guarantee on a case-by-case
- The guarantee of affiliated companies may be required
based on the percentage of ownership of the affiliate and the borrower's
relationship with the affiliate.
Debt Service Requirements
- A minimum projected debt service coverage ratio of 1.25 times is required.
- Loans can be made to all for-profit businesses except those
that do not meet SBA eligibility requirements. These are primarily firms
involved in real estate investment/speculation, gambling, adult
entertainment, lending money and pyramid sales schemes. Firms involved
in nuclear waste, utilities, natural resource development, fishing
vessels, biotechnology and internet technology are also excluded from
- Appraisal and Environmental reports will be required for real estate used as collateral.
- Borrowers cannot have filed for bankruptcy within the last three years.
- Payment reserves are generally required
- Life insurance equal to 50% of the Conventional First Mortgage Loan will generally be required.
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