What is a traditional SBA 504 loan?
By changing size parameters for eligible borrowers in September 2010, the Small Business Administration has made the SBA 504 loan program available to even more businesses. And the recent drop in rates makes a 504 loan all the more attractive.
Harborstone Credit Union partners with a Certified Development Company (CDC) to help local businesses purchase, or construct, their owner-occupied buildings. Commercial condominiums are also eligible. Financing is through a combination of a term loan from Harborstone and an SBA 504 loan through a CDC, a local non-profit approved by the SBA to facilitate 504 loans to help our local businesses.
With as little as a 10% down payment, a business can own its building and enjoy a a blended below market fixed rate. This helps a business control rising rent costs and conserve cash to meet every day working capital needs. Why would the SBA provide this type of support? The goal is to help small and mid-sized businesses create more jobs and strengthen our local economy.
How does SBA 504 financing work?
A typical 504 financing structure looks like this: Harborstone contributes 50%, a CDC contributes 40%, and the borrower contributes 10%
There are two term loans involved. Harborstone's loan is made with a 1st deed of trust on the building. CDC's SBA loan has a 20 year fixed rate note with a 2nd deed of trust. The SBA 504 rate is below market rates and is set monthly.
The SBA 504 program finances the purchase of an existing building or commercial condominium, land purchase and building construction, major renovations, as well as purchase of heavy equipment with a lifespan of over 10 years. Soft costs like title insurance, legal fees, appraisals, and environmental reports can also be financed. Refinancing and working capital are not eligible.
What is a SBA 504 Loan?
What is a SBA 504 Refinance?
How Do I Qualify?