Is the SBA 504 Program Right for My Business?
Is your business ready to buy a building or invest in new equipment? Does your current location need repairs and updates? The SBA 504 loan program offers an affordable way for small businesses to fund fixed-asset purchases or re-finance qualifying existing debt. Rates are fixed for the life of the loan and are typically lower than rates on conventional loans. View Brochure
Eligible Projects
Program Benefits
- Borrower down payments are as low as 10%.
- For a start-up business, an additional 5% down is required.
- An additional 5% down is required for a borrower's first Special-Purpose Property loan.
- A below-market, fixed rate for 10, 20, or 25 years on the SBA portion of the financing
- Longer amortization (Up to 25 years)
- More inclusive financing (can typically include furniture and equipment with a building)
- Significant risk reduction for participating banks allowing for better terms and more likely approval
- Potential for start-up financing or projection-based expansion financing.
- Typical turnaround is between 45 and 60 days depending on how quickly the borrowers get us the necessary documentation.
- While there is technically no project maximum, the SBA 504 portion maximum is typically $5,000,000.
- $5,500,000 per project for manufacturing or green projects.
Typical SBA 504 Loan Structure
- The participating bank provides 50% of the project financing.
- St. Charles EDC/SBA provides up to 40% of the project financing.
- The customer is responsible for as little as 10% of the project financing.
- The customer can borrow the down payment from the seller or a third party.
Business Eligibility
- Business must be for-profit and must average less than $6.5 million in profits after taxes in the last two fiscal years and have less than $20 million in tangible net worth (with affiliates)
- The EDC can service 504 loans in Missouri and the Illinois counties of Jersey, Madison, St. Clair, Monroe, Bond, and Clinton.
- The minimum project size is $125,000, with no maximum project size.
- Each owner of 20% or more of the operating company or property owner must guarantee the loan.
- Per SBA guidelines, the project must promote economic development either through job creation or another economic development goal.
- Operating Company with common ownership must occupy at least 51% of existing property or 60% of new construction (no passive investment real estate).
- While there is no minimum required credit score, the SBA does not like random missed payments, recent bankruptcies, or a previous default on government-backed debt.
504 Refinance Program
- Up to a 90% loan-to-value
- No cash is required to be injected as long as the total project costs do not exceed a 90% loan-to-value.
- Allows cash out for Eligible Business Expenses (working capital or other business expenses)
- Can refinance conventional bank loans of other SBA or government-backed debt
- Debt was incurred at least six months prior to the application date.
- The business must have been operating for two years before the application date.
- The business must have had the same ownership during the two years before the application date.
- The original loan (s) must be current on payment for the last 12 months.
- 75% of the original loan proceeds of the loan must be for 504-eligible expenses (acquire, construct, or improve long-term fixed assets)
- 100% of the loan was strictly for the benefit of the small business
- Small businesses must meet the occupancy resident requirement at the time of application (51%).
- Approved 504 refinanced loans must be funded within six months of the approval date (timely submission of all required information is essential).
504 Refinance with Expansion
- Refinance your existing loan with additional funds for expansion. Get a long-term fixed rate for 20 or 25 years on 40% of the project costs.
- The loan (s) to be refinanced must be at least two years old.
- Loan(s) must be current on all payments for at least the previous 12 months.
- The maximum loan-to-value is 90%.
- The borrower must occupy at least 51% of the building.
- Up to 50% of the total project cost can be used to refinance existing debt.
- A refinance with expansion involved adding an additional location or adding or making improvements to fixed assets.