Eligibility Information
SBA 504 Eligibility and Overview
The Small Business Administration (SBA) 504 Loan Program offered through Carolina Business Capital provides available and affordable long-term capital for the purchase of major fixed assets, such as owner-occupied commercial real estate, energy efficient “green” initiatives, and/or heavy duty machinery and equipment, without the high down payment requirements often associated with conventional financing programs.
Loan Structure & Down Payment Schedule
The 504 Loan Program is a partnership program between Carolina Business Capital, which is a nonprofit SBA Certified Development Company (CDC), and participating lenders. Working with participating lenders, Carolina Business Capital provides up to 90% financing at below-market, fixed interest rates and long amortization terms for eligible fixed asset purchases.
Typically, a commercial lender provides financing for 50% of the 504 loan project and takes a first lien position; Carolina Business Capital/SBA provides 40% of the project financing and takes a second lien position; and the borrower provides a down payment of just 10%. The maximum loan amount for a 504 loan is $5 million, but certain eligible energy-efficient or manufacturing projects may qualify for more than one 504 loan up to $5.5 million each. The $5 million loan limit equates to a maximum project size of $12.5 million with the 40% maximum SBA 504 loan amount. The $5.5 million loan limit equates to a $13.75 million maximum project size with the 40% maximum SBA 504 loan amount. Both maximum project sizes assume the borrower only wants to put the 10% minimum down on the project. The project can be larger if the borrower wishes to put more than the required 10% in funds down on the project in these examples.
If a project is a start-up business (less than two years in operation) or a special purpose facility, the borrower’s down payment increases to 15%. If a project is a special purpose facility and a start-up business, the borrower’s down payment increases to 20%.
Machinery and equipment only loans may qualify with a 10% or 15% borrower down payment.
To be considered for a SBA 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 $20 million (previously $15 million) and an average net income less than $6.5 million (previously $5 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. Check this list of eligible and ineligible types of businesses to see if your company qualifies.
- Under the 504 Program, Plan to use proceeds for an approved purpose. CDC/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
We’re not your ordinary commercial real estate lender. Because you, the client, expect and deserve the best. On top of all that, you get to work with a team of real, knowledgeable, local people who care deeply about helping small and mid-size business owners buy commercial property the right way in order to help them grow their businesses. Take our 9 Question Quiz, or make an “Online Application”. We look forward to speaking and working with you. So contact us today to let so we can help your business grow.