A US Small Business Administration (SBA) 504 loan can be used to purchase owner-occupied commercial real estate or fixed assets. The funds can be used to remodel, expand or acquire property as well as purchase equipment. Your bank can finance up to 50% of the cost and SBA will finance up to 40% of the cost, leaving as little as 10% to be covered by the borrower. SBA 504 loans are only available through a Certified Development Company like TxCDC. TxCDC is here to facilitate and promote the SBA 504 loan program to contribute to the economic development of Texas.
What are the SBA 504 Program Benefits?
Low down payment and enhanced cash flow: SBA 504 loans can offer an affordable down payment with financing up to 90% of the projects cost with your lender
Long term financing at competitive fixed interest rates: SBA 504 loans offer 10, 20 to 25 year, fully amortized financing with lower monthly fixed payments
Customized ownership options: the borrowers can hold the title to the building personally or even set up a holding company for the real estate. They have the flexibility to maximize tax benefits and minimize liability.
Which Businesses are Eligible?
For-Profit business located in the US
Business with less than $15 million tangible new worth and less than $5 million profit after taxes including affiliates.
Business that occupancy at least 51% of their existing property or initially occupy 60% of a newly constructed property
All owners with 20% ownership must provide a personal guarantee
How can funds be used?
For businesses to own their facilities: for expanding, setting up a new location or purchasing a building they have been renting
For purchasing of major equipment: purchase new or used long-term machinery and equipment (Cannot finance equipment on wheels)
For soft costs: such as architect and engineering fees, interim interest, environment and appraisal reports, closing costs and other fees
May come from equity of existing land or real estate if owned for more than 2 years
New businesses require minimum 15% down
Established businesses purchasing special purpose property require minimum 15% down
New businesses purchasing special purpose property require minimum 20% down
Ineligible use of funds
Working Capital Business Inventory Broker Fees Finder Fees Franchise FeesIncorporation Organizational Costs Advertising Fee Bank Attorney Fee Business Inventory Payroll Liability insurance Goodwill Tenant Improvements