A Certified Development Company (CDC) is the entity authorized by the U.S. Small Business Administration (SBA) to originate, close and service 504 loans for small businesses.

The SBA 504 Loan Program is a long-term fixed rate loan program for the purchase of owner-occupied commercial real estate and new building construction, as well as machinery & equipment. The program is a partnership between a Certified Development Company (CDC), in this case Capital Partners, a participating bank lender, and the small business owner.

An SBA 504 loan provides many advantages such as a low-down payment, low fixed interest rate, and fully amortizing loan, thus preserving cash to grow the small business.

Purchasing real estate can often be less expensive then renting, and a long-term fixed rate can help control occupancy costs into the future.

Closing costs and fees can be financed in the loan. SBA fees are 2.17% of the 504 loan and .5% of the Bank First Mortgage. Bank fees are negotiated with the financial institution. Closing costs may include but are not limited to appraisal report, environmental report, title search & insurance, recording fees, and GA intangible tax.

Click Here to contact Capital Partners for an estimate on your particular project.

The down payment varies depending on project type, but is typically 10%. However, new businesses (less than 2-years) and loans for special purpose properties (Example: Gas Station, Hotel) require an additional 5% down payment. Loans for new businesses purchasing special-purpose properties require a 20% down payment.

There is no limit to the size of the Lender First Mortgage.

The SBA 504 Second Mortgage is limited to 40% of the total cost of the project, and is typically no more than $5 million, which is the maximum guaranty available to an individual business. However, this amount can be increased to $5.5 million for small manufacturers or projects under the Green Energy program. Additionally, small businesses utilizing the Green Energy Program may do multiple projects totaling up to $16.5 million in guaranteed 504 loan funds.

Yes, as with any financing  you will incur various fees to close and fund your 504 loan. You will incur an attorney fee (typically $2,500 – $4,500), SBA/CDC fees of 2.17% of the 504 loan amount, and closing costs including title insurance, Georgia intangible tax, and recording fees. The SBA/CDC fees and closing costs are financed in the loan, along with attorney fees up to $2,500.

Fees on the Bank First Mortgage are negotiated with the Lender, but will typically include loan fees and closing costs as well.

The SBA 504 program offers small businesses an opportunity to secure long-term funding at fixed rates from the public capital markets. This is made possible through the sale of government-guaranteed loan pools on a monthly basis. By securitizing these loans, the government creates attractive investment options that result in cost-effective fixed-rate funding for small business borrowers.

The interest rate is pegged to an increment above the 10-year treasury yield on 20 and 25-year debentures, and over the 5-year treasury yield on 10-year debentures.

In addition to the loan’s interest, the 504 effective rate includes ongoing servicing fees to the CDC (.625%), SBA (.4405%), and Central Servicing Agent (.100%).

Once your 504 Debenture/Loan is funded, you will receive an amortization schedule that details each monthly payment, including the principal, interest, and fees for the duration of the loan. The fees are recalculated every 5 years based on the current loan balance, resulting in a decrease in the monthly payment at 5-year intervals.

When you apply for a 504 loan, we will calculate your payments based on the most up-to-date rates available.

Find more information on Rates here.

Capital Partners has great relationships with many commercial banks/credit unions in Georgia. We can work with your current bank or we can help you find a lender. There are many different lenders to choose from, each with their own set of specialties, rates and way of doing business. Ultimately, you decide who you want to work with on your project, and we will be there to assist  you each step of the way.

Yes, it is possible to pay off your current building loan with the SBA’s 504 Refinance program. In fact, many business owners benefit by refinancing when they are faced with a pending balloon payment or have high interest mortgages.  

VIEW SBA 504 REFINANCE PROGRAM 

You can have multiple 504 loans, as long as you do not exceed the SBA Guaranty limit of $5 million, or $5.5 million for Small Manufacturers or Green Energy Projects. Business owners utilizing the Green Energy Program, may get up to $16.5 million in SBA Guaranty.

Businesses that have an existing SBA 7(a) loan will have that guaranteed amount included in their total.

Every loan is different and time frames may vary, but here are the steps to getting your loan approved and closed. Click here to find out more information on how to get started.

Yes, you can pay off a 504 loan early; 504 loans with a 20/25-year term can be paid off with no penalty after the 10th year of the loan. Loans with a 10-year term can be paid off with no penalty after the 5th year of the loan.

504 loans with a 20 or 25-year term will have a re-purchase premium (RP) during the first ten years of the loan. This is a declining premium, 10% annually, that is calculated based on the year of the loan, remaining balance, and interest rate. For example, if a debenture is repurchased in year 5, the repurchase premium would be as follows: RP = Balance x (Note Rate x .50). Similarly, the 10-year loan has a repurchase premium for the first five years, and a declining penalty of 20% annually.

Very often, borrowers will choose to pay down the First Mortgage Loan faster or earlier, because in many cases it has a higher rate and/or no prepayment penalty.

504 Loans may be assumed by another Borrower who is purchasing the asset. Approval by the CDC and the U.S. Small Business Administration will be based on credit factors and the quality of the applicant.