Use of Proceeds

Borrower Equity


Loan Amount

Terms and Rate




Benefits to Borrower

Benefits to Lender

PDF's to Download

Purchase Information

Refinance Information


The SBA 504 Loan Program provides small businesses with fixed rate financing for the purchase of long-term fixed assets. Proceeds can be used for the purchase of land, building and equipment as well as finance eligible closing costs.

The 504 loan, or debenture, is made in conjunction with the borrower's local financial institution, which provides a first mortgage for 50% of the project cost, Capital Partners provides a second mortgage for 30 -40% of the project while the borrower provides a 10 - 20% equity injection.

The financial institution provides a minimum 10-year term on the first mortgage but the terms of the loan are negotiated with the bank. The SBA 504 loan will be a 20 or 25 year fully amortizing loan at fixed rate of interest.

If you have additional questions please contact Capital Partners.



504 Purchase Program

Proceeds may be used for the acquisition, expansion or renovation of owner-occupied commercial real estate or the purchase of equipment with a useful life of ten years. Project costs may also include interest on interim financing and professional fees related to the project.

504 Refinance Program

Proceeds may be used for the refinance of existing loans whose proceeds were used substantially (85%) to acquire fixed assets eligible for the SBA 504 program. In addition, loan proceeds may be used to pay Eligible Business Expenses such as building maintenance, equipment purchases, rent, utilities, inventory or other obligations. These expenses must be incurred but not paid prior to the date of application or come due within 18 months of the date of the application. All proceeds must have been used for the benefit of the small business concern. Proceeds cannot be used for expansion purposes such as equipment and real estate purchases. Those items must be done under the 504 program.


504 Purchase Program

A minimum of 10% equity is required. If the small business concern has been in business less than 2 years or if the project is for a special use facility, the minimum injection is 15%. Should both of these apply then the equity injection is increased to 20% of the project.

504 Refinance Program

The Third Party Bank loan and the 504 loan combined may not be more than 90% of the fair market value of the fixed assets securing the loan. In no event may it exceed the outstanding principal balance of the debt refinanced, eligible business expenses and closing costs.


The 504 purchase loan is typically structured as follows:

  • 50% Loan secured by a senior lien from a private-sector lender.

  • 40% SBA 504 loan secured by a junior lien from Capital Partners through the SBA.

  • 10% Equity from the borrower.

The 504 refinance loan is typically structured as follows:

  • 50%, varies, Loan secured by a senior lien from a private sector lender.

  • Up to 40% SBA 504 loan secured by a junior lien from Capital Partners through the SBA for not more than 40%.

  • Not < 10% Borrower equity in the existing real estate and/or cash as needed. Additionally, the Borrower may pledge equity in any other fixed assets that are acceptable to the SBA as collateral.


The 504 portion of the loan generally does not exceed $5 million. In combination with the first mortgage, projects in excess of $10 million can be financed under the program.

In addition, a $5.5 million loan is available to small manufacturers whose production facilities are all located in the United States and businesses reducing building energy consumption by at least 10% or implementing plant equipment and process upgrades of renewable energy sources.

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Terms of 10 and 20 years are available on the 504 loan. Interest Rates on the 504 loan are set at a fixed rate for the life of the loan at the time the debenture is funded. The first mortgage is negotiated directly with the lender; however, the term must be at least 10 years on a 20 year debenture and 5 years on a 10 year debenture.


504 Purchase Program

Generally the project assets being financed are used as collateral. Personal guarantees are required from all 20% or more principal owners of the business. Liens on the personal assets of the principals may be required.

504 Refinance Program

An independent appraisal supporting fair market value of the fixed assets being refinanced and any other assets being offered as collateral. The appraisal(s) must be dated within six (6) months of the date of application.


Fees on the 504 loan total approximately 2.67% of the debenture. Bank fees are negotiated with the lender. The Bank is required to pay the SBA a 1/2% fee on the 1st mortgage amount.

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The project must have a positive economic impact, generally evidenced by one job created or retained for every $65,000 of 504 debenture amount, or every $100,000 in debenture amount for manufacturing companies.

Loans that meet a public policy goal do not have to meet the job creation requirement, except in the case of manufacturing debentures in excess of $2 million.

To be eligible, the business generally must be operated for profit and have a tangible net worth of less than $15 million and an average net income of less than $5.0 million, after taxes for the preceding two years.

Requirements Specific to the 504 Refinance Program

  • Loans being refinanced must have been current for the last year according to the original or modified terms with no payment being past due for more than 30 days.

  • No refinancing is allowed where the creditor on the debt to be refinanced is in a position to sustain a a loss; causing a shift to the SBA of all or a portion of a potential loss on existing debt.

  • Debt being refinanced must have been incurred not less than two years prior to the date the application is recieved by the SBA. Additionally, the small business must have been in business for two years.

  • Small Business Borrower must currently occupy 51% of the building being refinanced.


  • Reduced down payment requirement.

  • Borrower is able to reserve capital for company growth.

  • 20-year fixed rate, below market financing on the second mortgage.

  • 504 debenture is assumable to a qualified borrower.


  • Low Risk - High Quality Loan

  • Improve working capital position and liquidity of the borrower.

  • Provide additional ability to make loans within bank lending limits.

  • Ability to earn premium income through loan sales on the secondary market.

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