The SBA 504 Loan Program provides long-term, fixed rate, subordinate financing for acquisition and/or renovation of capital assets including land, buildings and equipment.

The Appalachian Development Corporation (ADC) provides the SBA 504 Loan Program statewide. An SBA 504 loan offers long-term, fixed rate, subordinate financing for acquisition and/or renovation of capital assets including land, building and equipment, eligible soft costs such as architect, engineering, and environmental fees, change of ownership of capital assets and certain debt refinancing. SBA 504 funds cannot be used for working capital, A/R, inventory or vehicles. Projects are financed in partnership with financial institutions (banks, credit unions, etc.) who obtain a senior position on the above assets.

Why consider an SBA 504:

  • reduced equity requirement
  • fixed rate financing for a portion of the loan
  • longer terms offered by the SBA 504 can improve cash flow
  • limits the risk of the primary lender
  • lender can obtain Community Reinvestment Act credit
SBA 504 Guidelines:

  • Bank finances 50% of the cost
  • SBA 504 portion (max 40%) of a loan: $100,000 to $5,000,000; up to $5,500,000 for manufacturing
  • SBA fees financed in SBA loan
  • Borrower provides 10% to 20% equity; can be cash, land and/or borrowed
  • Terms: 10 yrs for equipment and up to 25 yrs for fixed assets
  • Below market, fixed interest rates
  • Soft costs such as appraisal, contingencies, environmental reports, interim interest, survey, etc. can be financed
  • Must be a for-profit business
  • Collateral is typically the project assets and key person life insurance
  • Must create or retain 1 full time job per $75,000 ($120,000 if manufacturing) of SBA loan amount within 2 years of loan funding or
  • Meet a community development or public policy or Energy Public Policy goal

TYPICAL LOAN STRUCTURE IF

Standard Financing New Business OR Limiter or Special Purpose Property Both NEW and Limited or Special Purpose Property
Lender 50% 50% 50%
SBA (ADC) 40% 35% 30%
Borrower 10% 15% 20%

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