SBA 504 Loan Program
Could an SBA 504 Loan Be the Key to Your Business Growth?
Discover how the SBA 504 Loan Program can help you purchase commercial property or acquire heavy equipment, offering long-term, fixed-rate financing to propel your business forward.
Low Down-Payment
Long-Term, Fixed Rates
Preserve Working Capital
Trusted By Lenders Across The Southeast
What is an SBA 504 loan?
A financing tool designed to help small businesses purchase or renovate commercial property or acquire essential equipment for growth, with the major advantage of typically requiring only a 10% down payment.
Questions?
Who Qualifies for a SBA 504 Loan?
This program is designed for small businesses that operate for profit in the United States. Small businesses looking to invest in their long-term growth through the acquisition of major fixed assets such as real estate and large machinery.
Eligible Businesses
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)
These companies can include manufacturing, hospitality, medical and healthcare providers, professional services, and retail businesses.
Ineligible Businesses
Passive Businesses (non-owner occupied)
Businesses that do not actively conduct business operations, such as landlords who only generate income from rental property, are ineligible unless the rental income supports an operating business.
Speculative Businesses
Businesses involved in speculative activities, such as property flipping or investing in speculative real estate.
Non-Profit Organizations
Lending Institutions
Gambling Businesses
Religious Organizations
Businesses Engaged in Political or Lobbying Activities
Businesses with Prior Losses on Federal Loans
Includes PPP or EIDL Loans
Businesses in Default on Taxes
Businesses that owe back taxes without an approved repayment plan are typically excluded.
Insurance Companies
How the SBA 504 Loan Works
The SBA 504 loan program involves collaboration between three parties
The Borrower: That's you, contributing as low as 10% of the total project costs in the form of a down payment.
Bank or Credit Union: Provides up to 50% of the total project costs.
Alabama Small Business Capital (A Certified Development Company): A nonprofit corporation that contributes approximately 40% of the loan, backed by a 100% SBA-guaranteed debenture.
Loan Features & Benefits of the SBA 504 Loan
Lower Down Payments
Typically only 10% down payment!
Long-Term, Fixed Interest Rates
Enjoy stable, fixed rates for the life of the loan.
Extended Repayment Terms
Benefit from repayment terms up to 25 years, ensuring manageable monthly payments.
Economic Advantages
Competitive rates and long-term financing make managing your finances easier.
Things to consider
Fees: While there are associated fees, they are financed with your loan, reducing upfront costs.
Down-Payment Assistance Program: ASBC can provides 50% of down payment for smaller projects in underserved communities.
Financing Structure
The typical SBA 504 Loan structure is as follows: 50% lenders note, 40% SBA 504 note and 10% borrower contribution.
SBA 504 Loan
Structure
Structure
Bank or Credit Union - 50%
CDC / SBA 504 - 40%
Borrower Contribution - 10%
December 2024 Rates
6.096%
25-Year Debentures
6.125%
25-Year Refi
6.160%
20-Year Debentures
6.190%
20-Year Refi
6.459%
10-Year Debentures
6.484%
10-Year Refi
Loan Terms
- Maximum 40% of project
- Terms of 20 or 25 years for real estate, 10 years for machinery and equipment
- Fixed, below-market interest rate
- Approximate fees of 2.17% added to the loan amount
Questions?
Sample financing breakdown
This breakdown would be for a project with total costs of $1 million:
| Entity | Loan Amount | Percent of Project | Term | Interest | Collateral |
|---|---|---|---|---|---|
| Bank of Credit Union | $500,000 | 50% | 10 Years | Market | 1st Mortgage |
| CDC/SBA | $400,000 | 40% | 10, 20, or 25 Years | Below Market/Fixed | 2nd Mortgage |
| Business/Borrower | $100,000 | 10% | N/A | N/A | N/A |
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Frequently Asked Questions
Whether you're curious about our loan programs, general information, or application specific faqs, we've got you covered.
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.
Still have questions?
Can’t find the answer you’re looking for? Get in touch with a loan officer today who can help!
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