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The purpose of the SBA 504 Loan Program is to provide healthy, expanding businesses with long term below market rate financing for the acquisition of land and building, machinery and equipment and construction and renovation. The 504 Loan Program, established by Congress in 1986, is the first national financing program to recognize contributions of small and medium sized businesses toward local economic development and job growth in the U.S. This financing is specifically designed to meet those needs. Businesses can access the 504 Loan Program through Florida Business Development Corporation (FBDC).
Commercial loans for healthy expanding businesses.
Fixed rate below market financing.
Financing for fixed assets: real estate, machinery and equipment.
Terms of 20 years for real estate, 10 years for machinery and equipment.
Eligible Borrowers
For profit businesses (corporation, partnership or proprietorship)
Tangible net worth not to exceed $7.5 million
Net profit after taxes not to exceed $2.5 million during previous 2 years
Maximum Amount
Up to 40% of eligible cost, with a $2,000,000 debenture maximum. Manufacturers are eligible for up to $4,000,000 (request details). Total project size is unlimited.
Use of Funds
Purchase of land
Construction of building
Modernization, renovation or improvement of building
Purchase of machinery or equipment with useful life of 10 years or more
Financing Method
Private lender provides 50% of project cost, and the Small Business Administration 504 Loan provides 40%.
Equity Requirements
At least 10 percent.
504 Loan Terms
Maximum of 40 percent of project
Terms of 20 years for real estate, 10 years for machinery and equipment. 504 loans are fully amortized.
Fixed, below market interest rate.
Total fees of 2.65% plus an attorney closing fee. These fees can be included in the 504 loan amount and financed over a 20-year term.
Application Process
If interested, a business should call Florida Business Development Corporation. Generally a summary of project cost estimates and two (2) years of financial statements should be available to discuss eligibility of the small business for the 504 program.
Term: Maturities of 10 and 20 years are available on the 504 debenture, depending on the useful life of the assets. A minimum of 10 years is required from the private lender on real estate financing and 7 years on machinery and equipment.
Collateral: Second Mortgage and / or lien on assets purchased with proceeds of 504 loans.
Personal Guarantees: Personal guarantees of the principals (ownership of 20% or more) are required. Corporate Guaranties are also required.
Down Payment: The small business concern must provide at least 10% of the project cost as equity or subordinated debt.
Typical Structure:
50% first mortgage from private lender.
40% second mortgage from FBDC (100% SBA guaranty)
10% equity or subordinate debt. __________________________________________________________________________________
FBDC Direct Loan Fund
The purpose of the Direct Loan Fund is to provide small businesses with a source of gap financing otherwise not available through conventional lending sources. Loans will be made to 504 loan eligible recipients.
Eligible Projects
Acquisition and/or construction of real estate
Acquisition of machinery and equipment
Working capital
Management buy-outs
Corporate acquisitions
Eligible Businesses
The business should be at least 2-3 years old with proven performance and growing cash flow. Management must be knowledgeable, experienced and financially committed to the business.
Loan Amount
Loans will range from $50,000 to $250,000.
Interest Rate
Fixed for the term of the loan at Prime rate.
Fees
Borrower will be responsible for out of pocket closing costs to include, but not limited to, attorney fees, title insurance, recording fees, etc.
Collateral
Loans will require a subordinate lien on non-504 project real estate. 20% or greater owners will provide guarantees.
Response Time
5-10 days to receive commitment.
Source of Capital
Florida Business Development Corporation Direct Loan Fund.
