In this article, you will learn the typical terms of an SBA 504 loan.

The SBA 504 loan program is a Small Business Administration (SBA) loan program that provides financing for the purchase of fixed assets, such as real estate or equipment, with long-term repayment and low down payments. The SBA 504 terms are very favorable to small businesses because they offer low interest rates and long repayment terms. This makes the SBA 504 loan program an ideal financing option for small businesses looking to invest in long-term growth.

This article will provide an overview of the SBA 504 Loan Program, focusing on the terms of a typical SBA 504 loan.

In a strict sense, the SBA 504 loan does not have any actual loan limits that are set on it. In other words, the Small Business Administration does not place any restrictions on the amount of money that you are able to borrow from a conventional lender under these circumstances. 

However, the share that comes from the CDC can't go over $5 million (or $5.5 million for small manufacturing enterprises), and it can only make up 40% of the overall sum.

The following is a breakdown of how the loan will be structured up until the $5 million/$5.5 million contribution cap:

• First Lien/Conventional Lender: They fund fifty percent of the entire loan amount.
• CDC/Second Lien: They fund forty percent of the overall loan amount.
• Ten percent of the total loan amount is to be paid by the borrower (you).

It is important to keep in mind that the initial amount of the loan does not have to be $5 million. You are permitted to take out further SBA 504 loans in order to reach the maximum limit of $5 million. On the other hand, once you have reached the limit, that is the maximum amount that will ever be made available to your company through the SBA 504 program. 

However, if you are still in need of financial assistance, there are further choices open to you. If you run into this situation, it’s best to consult with an experienced commercial loan advisor.

The SBA 504 loan program offers both 10- and 20-year terms.

SBA 504 Green Program

In contrast to the majority of SBA 504 loan borrowers, who are restricted to taking out only $5-5.5 million, participants in the SBA 504 Green Energy program are permitted to take out $5.5 million per project, and can get a total of three SBA 504 loans overall for their business, for a total of $16.5 million.

In order for a company to participate in the SBA 504 loan program, they will need to either purchase or construct a new building that has an energy consumption that is at least ten percent  lower than their prior building. 

Alternately, companies have the option of deriving at least ten percent of their current energy use from a renewable source, such as energy derived from the sun or the wind. Additionally, companies have the option to buy the building they are currently leasing and then make improvements that cut the facility's energy consumption by ten percent.