Unlocking Business Growth with SBA 504 Loan Financing Criteria
At KRAM Capital, our daily mission is to empower small business owners, helping them secure the crucial funding required to transform their entrepreneurial dreams into thriving realities. Enter the world of SBA 504 loans, also known as the Certified Development Company program, meticulously designed to offer financing for the acquisition of fixed assets, such as real estate, buildings, and machinery, all at an enticingly affordable below-market rate. This program presents an unparalleled opportunity to elevate your business ambitions, and KRAM Capital is your trusted partner throughout this journey. Commence your application process today, and let’s embark on this path to success together!
SBA 504 Loan Financing FAQ’s
What Can the SBA 504 Loan Be Used For?
The SBA 504 Loan program unlocks access to financing on a grander scale compared to the 7(a) program. If your funding requirements exceed $5 million and are directed towards long-term assets, the total project scope can far surpass $12,500,000.
What is the SBA 504 Loan Borrowing Limits?
The SBA 504 Loan offers flexible borrowing limits, catering to diverse project needs:
Up to $5 million of aggregate SBA eligibility on standard and public policy 504 projects.
Up to $5.5 million per 504 project involving small manufacturers, with no cap on the total SBA funding available.
Up to $5.5 million per 504 project for energy-efficient green projects, with the total SBA loan amount being the only limit (no restriction on overall project size).
What are the SBA 504 Loan Terms?
When it comes to SBA 504 loans, you can expect versatile loan terms that cater to your specific asset needs:
Real estate financing can extend for up to 20 years.
For equipment financing, loan terms can reach up to 10 years.
How Are the SBA 504 Loans Structured?
The structure of SBA 504 loans varies based on your business type and purpose:
Standard: 10% down payment for new businesses or special-purpose properties.
New Business or Special Purpose: 15% down payment for new businesses or special-purpose properties.
New Business or Special Purpose: 20% down payment for new businesses or special-purpose properties.
Bank loans account for 50% of the financing in all cases.
CDC/SBA provides 40% financing for standard projects, 35% for new businesses, and 30% for special-purpose properties.
Who Can Occupy the Real Estate Under SBA 504?
For existing buildings, businesses must occupy at least 51% of the project within one year of ownership.
In the case of new construction, businesses must occupy at least 60% of the project upon occupancy, with an increase to 80% within 10 years.
Borrowers have the option to create a real estate holding company, leasing 100% to the operating business, which can then sublease surplus space (up to 49%).
What Is the MAX Loan Leverage with an SBA 504 Loan?
Experience the potential of SBA 504 loans with a maximum loan leverage of up to 90%.
Eligible Use of SBA 504 Loan Proceeds
SBA 504 loans open doors to an array of eligible uses, including but not limited to:
Acquisition of land and construction of new buildings.
Acquisition of land and existing buildings.
Remodeling, conversion, expansion, or renovation of existing buildings.
Leasehold improvements.
Purchase of improvements, including grading, street enhancements, utilities, parking lots, and landscaping.
Energy-efficient green projects (achieving at least a 10% reduction in energy consumption or generating at least 10% renewable energy).
Purchase of office furniture, fixtures, and equipment.
Contingency reserve (not exceeding 10% of construction costs).
Associated fees and soft costs (architectural and engineering fees, appraisals, environmental investigations, closing costs, etc.).
Repayment of interim points, fees, and interests.
Are you ready to scale your real estate investment business?
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