SBA 504

ADVANTAGES

Fixed rate on 40% of the project.
Interest rates below conventional market rates.
Long-term financing.

USE OF FUNDS

Real estate acquisition. Construction. Expansion. Renovation. Machinery. Equipment.

SOURCE OF FUNDS

Bank loan (50%) secured by a first mortgage; 40% provided by SBA (secured by a second mortgage and 10% cash or equity).

INTEREST RATE

Bank's rate negotiated rate near current market rates.
Floating, variable rate using prime as an index.
SBA portion determined from sale of an SBA debenture.
Equivalent to the 10-year treasury note rate.

MATURITY TERM

Bank's term loan secured by first mortgage can have maturity of 10-15 years.
SBA portion will have maturity of 15 or 20 years, depending on project.

LIMITS

Bank's commitment not restricted.
No limitation on total amount of project.
SBA participation maximum $750,000.
$1,000,000 may be used for project meeting public policy goals, e.g., district revitalization, rural development, export expansion, etc.

ELIGIBLE BUSINESSES

Must be for-profit corporation, partnership or proprietorship.
Net worth must not exceed $6,000,000.
Average net profit (after tax) must not exceed $2,000,000 for past two fiscal years.

INELIGIBLE USES

Passive investment companies. Non-profit corporations. Unregulated media forms. Financial institutions. Real estate investment companies.

GENERAL

Usually requires personal guarantee of owner.

JOB CREATION

One job must be created per $35,000 of SBA-504 funding.