SBA 504 Loan Program
The SBA 504 Loan Program administered by the Appalachian Development Corporation (ADC) provides long-term, fixed rate, subordinate financing for acquisition and/or renovation of capital assets including land, buildings and equipment. Most for – profit businesses are eligible for this program.
The ADC is approved by the Small Business Administration as a Certified Development Corporation with the service coverage area being the entire of State of South Carolina. The 504 Loan Program operates in partnership with financial institutions that provide financing on a variety of projects.
- The typical financing structure for eligible businesses requires the participation of a financial institution that will provide a 50% permanent loan. The SBA loan applicant typically must provide an equity contribution of 10%. The ADC will provide subordinate financing of 40% of the project. In certain instances the borrower may be required to provide up to a 20% equity contribution.
- The SBA portion funded through the ADC can be up to 40% of the eligible project costs with a maximum of $5,000,000. Manufacturing companies may qualify for a maximum of up to $5,500,000.
- The term for the SBA portion is either 10 or 20 years with monthly amortizing payments.
- The SBA 504 loan interest rate is a fixed interest rate for the duration of the loan.
- Loan fees for the SBA loan can range between 2% and 3.5% of the amount of the SBA loan. These costs are included in the loan amount and are financed in the transaction.
- The financial institution sets its own interest rate, terms, and fees on its portion of the project.
- All project costs can be financed including acquisition costs and soft costs, such as life insurance, legal costs, appraisals, environmental reports, and bridge loan costs.
- Collateral typically consists of the assets being financed leaving other company assets available as collateral for other borrowings.