Lending Partners

What are SBA's requirements regarding the Loan terms from the Participating Lenders?

  • The Lender Loan must have a term of at least 7 years when the 504 loan is for a term of 10 years and at least 10 years when the 504 loan is for 20 years.
  • Interest rates must be reasonable.
  • The Lender Loan must not have any early call feature or contain any demand provisions unless the loan is in default.

What are the general rules to determine if a Project Financing Structure qualifies for an SBA 504 loan?

  • The Lender financing must be equal to or greater than the debenture.
  • The net debenture may not exceed 40% of the project's total cost.
  • The borrower’s injection must be at least 10% of the total project cost, and may be more, as required by statute or for credit reasons.
  • No more than 50% of the project costs can come either directly or indirectly from Federal sources.

Does the SBA 504 Program finance investment properties?

No, the program is designed for owner-occupied facilities.

Does the business have to occupy the entire building?

The applicant must occupy 51% of an existing building and 60% of a newly constructed building. The remaining space may be leased to a third party. No proceeds of the 504 financing can be used for fitup of the leased space.

What type of property is classified as Special Purpose? And therefore require an additional 5% equity contribution.

The SBA classifies the following types of properties as Special Purpose:

Dormitories; Cold storage facilities where more than 50% of total square footage is equipped for refrigeration; Tennis clubs; Golf courses; Swimming pools; Amusement parks; Sports arenas; Bowling alleys; Theaters; Marinas; Gas Stations; Service centers with pits and in-ground lifts; Car wash properties; Hospitals; Surgery centers; Urgent care centers; Nursing homes; Assisted living facilities; Funeral homes with crematoriums; Cemeteries; Sanitary landfills; Museums; Clubhouses; Hotels and motels; Wineries; Railroads; Farms (including dairy facilities); Oil wells; Mines; Quarries; and Gravel pits.