Frequently Asked Questions
Whether it's general information, application specific questions, or questions about fees and rates, we have the answers to some of your most commonly asked questions.
General Information
What is an SBA 504 loan?
A loan for businesses to purchase real estate, heavy machinery, or equipment.
Why a SBA 504 loan instead of a commercial loan? What are the advantages?
- Down payment as low as 10%
- Long term, fixed rate financing
- Terms of 10, 20 or 25 years
Why Alabama Small Business Capital?
Our team provides seamless processes from application to closing – giving our customers the certainty, speed and service they deserve
What can I use a SBA 504 loan for?
- Funds can be used as follows:
- Purchase of land
- Purchase of Building
- New Building Construction
- Purchase of machinery and equipment with 10-year useful life
- Modernize, renovate or improve building
- Soft Costs
- Purchase of land
- REFINANCE
- Existing Commercial Real Estate Debt
- Existing Machinery and Equipment Debt
- Other eligible business debt
- Existing Commercial Real Estate Debt
Who is eligible for an SBA 504 loan?
For-profit businesses with a tangible net worth not to exceed $20 million and a net profit not to exceed $6.5 million (after taxes).
Who is ineligible for an SBA 504 loan?
Ineligible borrowers include non-profits, lending institutions, and insurance companies, as well as borrowers affiliated with speculative development, gambling concerns and private clubs.
What are ineligible use of funds?
Ineligible use of funds includes working capital, inventory, rolling stock, broker fees and bank attorney fees.
Application Specific FAQs
How can the equity injection be derived?
The source of equity can come from a person/business cash or gifted funds that you don’t have to repay. The equity injection may be borrowed if the business can sustain all of their debt obligations; however, the note may need to be on standby.
I've had past credit issues, can I still qualify?
We generally like to see that you are current on all debt and that past issues occurred greater than two years ago. For all past issues, you will need to provide a reasonable explanation as to what happened.
Is there a prepayment penalty?
There is a prepayment penalty for the SBA portion of the note. In the event you would like to reduce principal, you may typically be able to pay down the private lender portion without a penalty.
Do I need to identify my location prior to applying for a loan?
An ASBC professional can provide general terms and structure based upon a specific location. To formally apply, an executed contract or term sheet is necessary.
Is a business plan a requirement? If so, where can I receive assistance in putting together a plan?
If the business is less than 2 years old a plan is required. An ASBC professional can point you in the right direction to obtain assistance.
Fees/Rates
What are the fees associated with the SBA 504 loan?
The SBA fees are 2.17% of the SBA loan amount. All of these fees are financed into the SBA loan and are paid out over the 25/20/10 year loan.
Are there additional legal costs?
An SBA approved attorney typically charges $2,500 for their work in closing and funding the SBA 504 loan. This $2,500 may also be financed.
How are the 504 loan rates determined?
504 loan rates are determined based upon the sale of a pool of government guaranteed securities. The rate is indexed off of the ten-year treasury yield which fluctuates daily. Once the rate is set, it is fixed for the term of the SBA/ASBC loan.
How are the bank rates determined?
Our participating lenders charge market rates on their portion (typically 50% of the project).
When are the rates set?
The first Thursday of the first full week of each month.
What are the 'all-in' effective SBA 504 rates?
Effective rates are published monthly by NADCO that correspond to the securities sold that month. ASBC publishes NADCO rates on the homepage on our website. It is important to note that your final rate will be determined when your SBA loan funds.
Can't find your answer? Reach out to us directly.
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