What are the SBA 504 Loan Limits?
Technically, there are no actual loan limits placed on the SBA 504 loan . That is, the SBA does not limit the amount of money that you can borrow from a conventional lender in this scenario. However, the portion sourced from the CDC is limited to just 40% of the total amount and it cannot exceeBetter Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
SBA 504 Loan Limits: What You Need to Know
Technically, there are no actual loan limits placed on the SBA 504 loan. That is, the SBA does not limit the amount of money that you can borrow from a conventional lender in this scenario. However, the portion sourced from the CDC is limited to just 40% of the total amount and it cannot exceed $5 million (or $5.5 million for small manufacturing companies).
The structure of the loan, up to the $5 million/$5.5 million contribution cap is as follows:
Conventional Lender/First Lien: 50% of the loan total
CDC/Second Lien: 40% of the loan total
Borrower (you): 10% of the loan total
Note that the loan does not have to total $5 million initially. You can take out subsequent 504 loans in order to reach the $5 million cap. However, once you reach the cap, that is the lifetime limit available to your business through the 504 program. There are other options available if you still need capital, though.
The SBA 504 Green Energy Program Allows Borrowers to Take Out Multiple Loans
While most SBA 504 loan borrowers are limited to taking out just $5-5.5 million, the SBA 504 Green Energy program allows borrowers to take out $5.5 million per project, with an unlimited number of SBA 504 loans per business. In order to qualify for the program, a business must either purchase or build a new building that uses at least 10% less energy than their previous building. Alternatively, they can choose to generate at least 10% of their current energy use from a renewable source, such as solar or wind energy. Businesses can also purchase the building they are currently leasing and make upgrades that reduce its energy usage by 10%.
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What are the eligibility requirements for an SBA 504 loan?
In order to take out an SBA 504 loan, your business must meet the following eligibility requirements:
- Your business must be a for-profit organization.
- Your business must meet current SBA size standards.
- Your business’ net worth cannot exceed $15 million.
- Your business cannot earn 1/3 or more of its income from packaging SBA loans.
- Your business must earn an average of $5 million or less per year (after taxes, and only for the preceding two years).
- Your business cannot be engaged in any sort of passive or speculative activities.
Note that additional requirements may be placed by CDCs or conventional lenders. You can find a full list of eligibility requirements and other important information with the SBA here.
What are the advantages of an SBA 504 loan?
The SBA 504 loan program offers several advantages to businesses in need of purchasing fixed assets. These include:
- Lower interest rates than 7(a) loans and express loans
- Lower down payment requirements than 7(a) loans and express loans
- Long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization
- Fully amortized without a balloon payment
- Terms for SBA 504 financing are typically 10, 15, or 20 years
For more information, please visit https://sba504.loans/sba-504-blog/what-is-the-sba-504-loan and https://www.sba.gov/offices/headquarters/ofa/resources/4049.
What are the maximum loan amounts for an SBA 504 loan?
The SBA 504 maximum loan amount is currently set at $5 million in lifetime dollars. However, if your business is a small manufacturer, you can borrow up to $5.5 million in lifetime dollars. It should also be noted that if you decide to embark on energy-related projects that fall under the “go green” heading, you can borrow substantially more. While all projects are capped at $5 million, you can ultimately borrow up to $16.5 million in lifetime dollars.
What are the interest rates for an SBA 504 loan?
The interest rate for an SBA 504 loan is based on the current Treasury bond rate, plus a guarantee fee paid by the lender to the SBA, a servicing fee that the lender will pay to the CDC, and a fee to the central servicing agent. For instance, a 10-year loan will be based on the 10-year treasury bond rate, and a 20-year loan will be based on the 20-year treasury bond rate. Additionally, there is a 2.15% one-time fee payable to the SBA on top of this, as well as other fees that are due at closing.
For more information, please visit https://sba504.loans/rates-and-costs/ and https://www.sba504.loans/sba-504-blog/what-is-the-small-business-administration.
What are the repayment terms for an SBA 504 loan?
The repayment terms for an SBA 504 loan are 10 to 20 years (fully amortizing). The interest rates vary, but the current maximum interest rates for the CDC portion of an SBA 504 loan are between 2.08 and 2.18% above the relevant U.S. Treasury Index (5-year index is used for 10-year loans, while the 10-year index is used for 20-year loans).
For more information, please visit www.commercialrealestate.loans/sba-504-loan and sba504.loans/loan-requirements.