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SBA 504 Loan Parameters

Loan Purpose

  • Proceeds can be used to purchase, build or renovate owner occupied commercial real estate and for machinery and equipment.

Loan Amount

  • Total loan amount up to $6,000,000 split into 2 parts.
  1. Bank Conventional First Mortgage Loan: Up to $4,000,000
  2. 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.

Interest Rate

  1. Conventional First Mortgage Loan – Typically varies from Prime to Prime + 2.75%
  2. 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. 
  • SBA 504 Debenture/Second Mortgage Loan has a term of up to 20 years for commercial real estate, 10 years for machinery and equipment, fully amortizing.

Prepayment Penalty

  • 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 basis. 
  • 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 eligibility.

Other Considerations

  •  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.

Click here to inquire about SBA 504 Loans

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