SBA 504 Loan Program

The Small Business Administration (SBA) 504 loan program helps businesses purchase real estate, build facilities, renovate leasehold space or buy equipment.

 
DCDC will partner with your bank who provides 50% of the financing, DCDC provides 40% of the financing, leaving your business to provide the remaining 10%. DCDC can assist any business throughout the state of Delaware.

• Low down payment (as little as 10%).
• Low, fixed interest rates.
• 20-year fully amortized loans for real estate, 10-year loans for equipment.
• Project financing can include soft costs such as appraisals and environmental study fees.

1. What are the terms of the SBA 504 loan?
2. What can my business finance with the 504 loan?
3. Is there a minimum or maximum project amount?
4. Who is eligible for a 504 loan?
5. Is it difficult to apply?
6. How long is the approval process?
7. How does this compare to conventional financing?
8. How does the 504 loan compare to a 7(a) loan?
9. What are the fees associated with the 504 loan?
10. How do I apply?

• Low down payment (as little as 10%). For start-up businesses or special-purpose building, an additional 5% down payment is required. If the business is BOTH a start-up and is to be situated in a special purpose building, then an additional 10% is required.
• Low, fixed interest rates.
• 20-year fully amortized loans for real estate, 10-year loans for equipment.
• Due to its reduced risk, the partner bank is competitive in its pricing and terms.

• Site or building acquisition
• New building Construction
• Renovation of an existing facility
• Equipment or machinery purchases
• Soft costs such as appraisals, architectural or engineering fees, environmental studies, construction period interest, closing costs, etc.
• Construction contingency costs.
• Minor equipment, furniture or fixtures can be included in a real estate purchase.

Is there a minimum or maximum project amount?         TOP
There is no maximum project size! 504 projects typically range in size from $250,000 to $10,000,000. For the 504 portion of the project (typically 40%), loan sizes range from $100,000 to $1,500,000. If your business meets specific goals or is a manufacturer, then the 504 portion of the loan can be as high as $4,000,000. Often, the partner bank's portion of the loan exceeds 50% of the total project cost.

Who is eligible for a 504 loan?         TOP
Most for profit, small businesses are eligible. Because this is an economic development tool offered by the federal government, the small business must meet various goals, such as creating jobs or enhancing market competition. The business must be the primary occupant (51% for an existing building and 60% for new construction) of the project real estate.

Is it difficult to apply?         TOP
No! It is easy to apply. As with any financing application, the small business will need to complete an application and provide certain documents about its company and its owners. The team at Delaware Community Development Corporation will make this process as easy as possible for you. Call us at 302-571-9088 or click here to go to the 504 Application.

How long is the approval process?         TOP
Once we have received all of your information, it will take approximately three weeks for the loan to be underwritten and reviewed by our loan committee. Once our team approves your application, we forward it to the SBA who will typically respond within four business days.

How does this program compare to conventional financing?         TOP
The SBA 504 loan has many advantages over conventional financing.

1. Lower down payment. Many banks require a 20% down payment.
2. The interest rate is fixed for the life of the loan.
3. The interest rate is set by the public capital market, not by a local lender.
4. The interest rate is generally one to two percentage points lower than what your bank would offer.
5. The loan is generally for a longer term, 20 years, than what a bank may be willing to offer to you.
6. Almost all project costs can be financed into the loan. Many banks do not allow soft costs to be financed.
7. The 504 loan is assumable. If you sell your business, the new owner can assume your 504 loan and does not need to refinance.

How does the 504 loan compare to a 7(a) loan?         TOP
Both are SBA loan products. The 504 loan is a long-term, fixed interest rate product designed to assist a growing small business to acquire a larger facility or more equipment. While the 7(a) loan can also be used for to finance these costs, the down payment and interest rates are generally higher. Hence, the total cost to a small business to use a 7(a) loan can be significantly higher than the cost of a 504 loan. The DCDC team can provide you with a detailed cost comparison for your project.

What are the fees associated with the 504 loan?         TOP
The fees are approximately 2.25% of the 504 portion of the total project. These costs are financed as part of the loan. Small business owners do not have to pay these costs out of pocket; they are not due at closing.

How do I apply?         TOP
Call 302-571-9088 or click here to go to the 504 Application.