SEDA-Council of Governments      Your Resource for Business Solutions

"The money that makes America work."

Coming up with a down payment of 20% or more knocks many small businesses out of the running for expansion financing.  But there's another way.  If you're a healthy business whose expansion plans call for the investment and use of real estate or equipment, you may qualify for 90% financing through the 504 Loan Program.

More detailed information on the SBA 504 program.

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General 504 advantages:

• Low down payment - Preserves valuable working capital, increases return on equity.

• Below market, fixed rate - Reduces the risk of future rate fluctuations.  Current rates for the SBA 504 program.

• Long term - Brings debt service in line with the cash flow generated by the asset.

Advantages for Banks:

• Finance larger projects by spreading risk with lower loan to value ratio.

• Finance in specialized markets and/or specialized equipment.

• Gives your small business client access to capital markets without the high expense of bond council.

• Blended fixed/variable rate with re-pricing capability.

• A large portion of the project is financed at a fixed rate.

• Offers creative financing to differentiate your bank in the market place.

• Hedge your client’s exposure to rate increases as prime changes.

• Gives your client a cushion in their credit limit and allows you to keep those cultivated relationships without effecting your legal lending authority.

• The long term fixed rate leaves more money available in your customer’s cash flow to pay your debt service.

• CRA credits on SBA portion.

• Strong market for the purchase of the first lien mortgage.

Advantages for Borrowers:

• Finance up to 40% of the project at a long-term fixed rate.

• Lower equity contribution, as little as 10% of project, helps preserve working capital.

• Decreased risk for banks – makes most deals happen.

Typical SBA 504 project loan structure ($1,000,000 project example):

  
  

Bank	50%	$500,000
SBA 504	40%	$400,000
Borrower Cash Contribution	10%	$100,000

SEDA-COG, your local Certified Development Company (CDC) for the 504 program for the last 20 years, will help you from start to finish.  Our professional staff works directly with you to tailor a financing package that meets program guidelines and the credit criteria of your business.  As of December 2002, SEDA-COG has closed over 70 SBA 504 loans for a total of over $30 million in loans for projects valued at a total of over $90 million.

Below are some of the projects that SEDA-COG has been able to impact through the SBA 504 program:

A Day Care/Pre-School Learning Center used the SBA 504 program to assist in financing its $995,000 new building project. The financing consisted of a bank loan in the amount of $485,000 for a 15-year term; SBA 504 funds in the amount of $410,000 for a 20-year term at a fixed rate of interest; and equity in the amount of $100,000. As a result of this project, the company committed to the creation/retention of at least 13 new jobs within the next two-year period.

A canning company accessed the SBA 504 program to assist in financing its $2,300,000 new equipment project. The financing consisted of a bank loan in the amount of $840,000 for a 10-year term; SBA 504 funds in the amount of $920,000 for a 10-year fixed rate term; economic development loan funds in the amount of $100,000 for a 5-year fixed rate term; and equity in the amount of $440,000. As a result of this project, the company committed to the creation/retention of at least 50 new jobs within the next two-year period.

A graphics firm borrowed $640,000 from the SBA 504 program to assist in the financing of a $2,580,000 new building project. The financing consisted of a bank loan in the amount of $650,000 for a 15-year term; SBA 504 funds in the amount of $640,000 for a 20-year fixed rate term; $1,032,000 in PIDA financing through the State of Pennsylvania for a 15-year fixed rate term; and equity in the amount of $258,000. As a result of this project, the company committed to the creation/retention of at least 46 new jobs within the next two-year period.

Types of projects financed with the SBA 504 program:

Testing Laboratory	Engineer & Design Company	Printing Company
Auto Dealership	Truck/Trailer Sales and Service	Apparel Manufacturer
Vegetable Canning	Home & Business Security Co.	Plastic Resin Manufacturer
Pre Press Graphics	Moving and Storage Company	Pre-School Learning Center
Quarry Company	Trucking Company	Restaurants
Scientific Oven Manufacturer	Arts Academy (Private)	Motel/Hotel
Supermarket	Catering Company	Medical Practice
Tour Buses Company	Tool and Die Manufacturer	Veterinary Hospital
Box and Display Manufacturer	Orthopedic Group	Beer Distributorship
Mail Forwarding Company	Furniture Manufacturer	Martial Art Academy
Machine Tool Equip. Whole.	Machine Shop	Sport Complex
Electronics Manufacturer	Weather Forecasting Company

More detailed information on the SBA 504 program.

Sign up to receive our SBA 504 Monthly Newsletter.