The SBA 504 Loan Program

The Money That Makes Georgia Work

Use of Proceeds

Proceeds may be used for fixed assets with a useful life of at least 10 years. The borrower must be the user of the assets in the case of equipment, and the small business concern must occupy 51% of pre-existing purchased real estate and 60% of new construction with the intention of occupying 80% in the future. Examples of eligible costs are land, building, construction, renovation, equipment, interim interest, professional fees and closing costs.

Down Payment

A minimum of 10% of the project. If the small business concern has been in business less than 2 years or if the project is for a special use facility, a minimum of 15% is required. Should both of the above apply, the minimum equity injection is 20%. Any required down payment over 10% must reduce the debenture (504 loan) portion of the financing.

Loan Amount

There is no limit on the project amount, however projects seldom exceed $4 million.

Terms and Conditions

The 504 debenture may have a maturity of either 10 or 20 years depending on the life expectancy of the project assets and based on the determination of the CDC. Generally real estate will carry a maturity of 20 years and equipment will carry a maturity of 10 years. The first mortgage is negotiated directly with Security Bank, however the term must be at least 10 years on a 20 year debenture and 7 years on a 10 year debenture. The rate on the SBA 504 debenture is fixed for the life of the loan. There is a graduated pre-payment penalty.

Collateral

The bank will hold a first mortgage or first lien on the assets being financed. The SBA loan is secured by a junior lien or second mortgage. In certain cases the CDC may determine the need for additional collateral on the debenture portion of the financing.

Personal Guarantees

Personal guarantees are required for all principals with ownership of 20% or more of the small business.

Benefits to the Borrower

Reduced down payment requirement
Longer terms than generally available through conventional loans
A fixed rate element to the loan which helps protect the borrower against rising interest rates
Larger Size Projects than under SBA 7(a)

Download a Security Bank loan application in Adobe Acrobat. Loan Application Click here to get a free copy of Adobe Acrobat for Windows or Macintosh.

Read the Frequently Asked Questions about the 504 Loan Program.