SBA 504 Loan Program Parameters
Debenture Amounts |
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Debenture limits range from $50,000 to $1,500,000 in $1,000 increments for 'regular' projects.
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Up to $2.0 million in SBA funds are available for businesses in rural areas with a population of less than 50,000, if the business is majority-owned by a woman, veteran, or a racial minority, or the business locates in a revitalization district.
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Up to $4.0 million in SBA funds are available for manufacturing industries within the NAICS sectors of 31, 32 and 33, or for projects that meet an environmental or energy efficiency public policy goal.
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The debenture amount cannot be greater than 40% of the project cost, or the maximum dollar amount for the type of project being financed (typically $1,500,000) whichever is less. The debenture amount cannot exceed the bank's portion of the loan. |
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At least one job must be created or retained for every $65,000 of 504 funds (for manufacturing companies, at least one job for every $100,000 in SBA funds). |
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| Number of SBA Loans Outstanding |
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A business can obtain more than one loan from the SBA, as long as the total outstanding balances do not exceed the maximum loan amount. |
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| Interest rates and Payments |
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The SBA will establish a rate of interest each month, typically on the second Tuesday, which is also published every quarter in the Federal Register. This rate will supersede any state limitations on the rate of interest to be charged for a commercial loan associated with 504 funding. |
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Loan payments are automatically debited from the company's bank account on the first day of each month, commencing with the first month immediately following the sale of the debenture. |
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| Occupancy |
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For new construction, the company must occupy at least 60% of the building immediately and 80% of the space by year 10. Only 20% of the total space may be rented out permanently. |
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For acquisition of an existing building, the company must permanently occupy 51% of the building. |
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The owner(s) of the company may own the real estate and lease it back to the company; however, the company must provide a full corporate guaranty on the loan. |
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| Personal Guaranty |
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Anyone owning 20% or more of either the operating company and/or the real estate entity will be required to give a full, unlimited personal guaranty on the loan. |
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Life insurance in the amount of the debenture may be required to be collaterally assigned to the SBA on all projects. |
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| SPEDCO’s Role |
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Our trained professional staff assists business owners in completing the application, structuring the project, preparing loan documentation and monitoring the project through closing. In addition, this staff services all aspects of the SBA loan, including monitoring annual financial statements, for the entire term of the loan. |
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The project review process is prescribed by SBA guidelines and it is important to coordinate the preparation of the materials to insure timely action on the application. SPEDCO Loan Review Committee members must receive the required information in advance of their meetings to allow time for their consideration. |
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