Advantage Capital Investments Specializes in SBA 504 Loans.  Through our Non Bank asset funds we can fund SBA 504 Loans with greater flexibility. The US Small Business Administration 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates] As part of its mission to promote the development of businesses, the SBA offers a number of different loan programs tailored to specific capital needs of growing businesses. The 504 program works by distributing the loan among three parties. The business owner puts a minimum of 10%, a conventional lender (typically a bank) puts up 50%, and a so-called Certified Development Company (CDC) puts up the remaining 40%. Certified Development Companies are established under the SBA 504 codeas non-profit corporations set up to support economic growth in their local areas.   There are a few hundred such CDCs nationwide. 

Loan Amount                                        SBA 504 Loans minimum $350,000, up to $25MM on 1st TD loans and $5MM on 2nd                                                                     TD interim  loans; $1.5MM maximum construction per loan

Term                                                       25 years on 1st; 20 years on 2nd 

Lending Territory                               SBA 504 Loans Nationwide

LTV                                                           CLTV 90%

Property Types                                    Owner Occupied Hotels, Restaurants, Office, Mixed Use, Retail, Gas Station/C-Store,                                                                   Day Care, Medical Office, Assisted Living,  Warehouse/Manufacturing, Self                                                                                   Storage, Industrial

Collateral                                               Commercial Real Estate

Prepayment Penalty                          5 or 10 years

Guarantees                                            Personal Recourse Required

Closing Time                                         45-60 days                                  

SBA 504 Loan Structure

Typical SBA 504 loans consist of two separate loans: 1. A first mortgage (or 1st Trust Deed), which provides

50-65% of the commercial real estate project cost; and 2. A second mortgage (or 2nd Trust Deed), which provides 25-40% of the commercial real estate project cost. The second mortgage is provided by a Certified Development Company (“CDC”), an agent of the SBA, and because it is guaranteed by the SBA, it carries a below-market interest rate that is fixed for 10-20 years. Although the CDC funds the second mortgage, there is a need to provide interim financing on the second mortgage for a short period of between 60 and 180 days.

 

SBA 504 Program Eligibility

To be considered for (CDC)/504 loan, applicants must meet these eligibility requirements: 

  • Operate as a for-profit company 

  • Do business (or propose to) in the United States or its possessions 

  • Has a tangible net worth less than $15 million and an average net income less than $5.0 million after taxes for the preceding two years.

  • Loans cannot be made to businesses engaged in speculation or investment in rental real estate.

  • Be an eligible type of business. While the vast majority of businesses are eligible for financial assistance from the SBA, some are not. 

  • Under the 504 Program, Plan to use proceeds for an approved purpose. SBA 504 loan proceeds may be used for the financing of fixed assets like real estate or equipment. This list explains Eligible and Ineligible Use of Proceeds.

  • Not have funds available from other sources. SBA does not extend financial assistance to businesses when the financial strength of the individual owners or the company itself is sufficient to provide all or part of the financing. Both business and personal financial resources are reviewed as part of the eligibility criteria. If these resources are found to be excessive, the business will be required to use those resources in lieu of part or all of the requested loan proceeds.

  • Ability to repay the loan on time from the projected operating cash flow of the business

  • Good character. SBA obtains a "Statement of Personal History" from the principals of each applicant firm to determine if they have historically shown the willingness and ability to pay their debts and whether they have abided by the laws of their community

  • Relevant management expertise

  • Feasible business plan

 

 

Use of CDC/504 Loan Proceeds

An SBA 504 loan can be used for:

  • The purchase of land, including existing buildings

  • The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping

  • The construction of new facilities or modernizing, renovating or converting existing facilities

        The purchase of long-term machinery and equipment

An SBA 504 loan cannot be used for:

  • Working capital or inventory

  • Consolidating, repaying or refinancing debt

  • Speculation or investment in rental real estate

Typical SBA 504 Loan Structure

Advantage Capital Investments can also arrange Interim Loans. Contact us for more info...

To get a loan started simply Apply now using our online application.

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