504 Program

What is an SBA 504 loan?

The 504 Loan Program allows the small business owner to purchase an owner/user industrial or commercial building at below market interest rates with as little as a 10% down payment. The loan proceeds may be used to purchase or remodel an existing building or to construct a new facility.

How much can I borrow?

Up to 90% of the project cost or appraised value of the property, whichever is less.

Typical Structure

• The bank provides a First Trust Deed (TD) loan for 50% of the project cost.
• Certified Development Corporation (CDC)/SBA provides a second TD loan for 40% of the project cost. While the CDC/SBA audits funding for its loan from the sale of a debenture, the bank provides an interim loan for the amount of the CDC/SBA Second TD loan.
• The borrower provides 10% of the total project cost.

What are the terms, rates and fees?

The Bank's loan can have a 10- to 25-year maturity, with an amortization period of up to 25 years at the current market rate.

The CDC/SBA loan will be fully amortized over a 20-year term. The interest rate is fixed and based on the rate of the sold debenture. A declining prepayment penalty applies.

Are there any requirements to qualify for this program?

For the CDC/SBA Second TD loan, the borrower must create or retain one job opportunity for every $35,000 of the CDC/SBA loan.

The business's tangible net-worth cannot exceed $7.5 million, and the average net income after federal income taxes (excluding any carry-over losses) for the last two years may not exceed $2.5 million.

Is It difficult to apply?

Not at all. When applying for an SBA loan — as with any loan — you are asked to fill out a standard application and provide specific documentation. We will work with your accountant, and do all of the analysis, packaging, and interface with the CDC/SBA for you.

What's the turnaround time?

A typical SBA 504 loan undergoes two approval processes. First the bank reviews the application. If the bank approves it, the application is then submitted to the CDC for approval and the accompanying SBA approval. The complete procedure from application submission to disbursement of funds takes approximately 30 to 60 days, depending on the complexity of the loan.

At City National, we serve our clients with promptness and expertise. We not only believe an SBA loan is a great source of funding for small businesses, but we put that belief into action. We're extremely knowledgeable in the field, and try to match our clients' financial needs to the most appropriate program available.

Getting Started

To speak with our Government Lending specialists, contact us or call (800) 722-5945.