Referrals for Financing
Financial Assistance and Management
SBA 504 Loans
The CDC/504 loan program is a long-term financing tool for economic development within a community. The 504 Program provides small businesses requiring “brick and mortar” financing with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization. A Certified Development Company (CDC) is a private, nonprofit corporation set up to contribute to the economic development of its community. CDCs work with SBA and private sector lenders to provide financing to small businesses.
Typically, a 504 project includes:
- A loan secured from a private sector lender with a senior lien covering up to 50 percent of the project cost;
- A loan secured from a CDC (backed by a 100 percent SBA-guaranteed debenture with a junior lien covering up to 40 percent of the total cost;
- A contribution from the borrower of at least 10 percent equity.
How Funds May Be Used
Proceeds from 504 loans must be used for fixed asset projects, such as:
- Purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping;
- Construction of new facilities or modernizing, renovating or converting existing facilities;
- Purchasing long-term machinery and equipment.
The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.
Eligibility
To be eligible for a CDC/504 loan, the business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, the business qualifies as small if it does not have a tangible net worth in excess of $8 million and does not have an average net income in excess of $3 million after taxes for the preceding two years. Loans cannot be made to businesses engaged in speculation or investment in rental real estate.
