(SBA) 504 Loan Program

PURPOSE

To provide long term, below market rate financing to businesses that will retain jobs and create new employment opportunities in the State of Georgia, and Beaufort, Hampton and Jasper Counties in South Carolina.

ELIGIBLE USES

• Land and building acquisition
• New construction
• Renovation, modernization and restoration of current facilities
• Acquisition of long-lived machinery and equipment

FINANCING PROVISIONS

1. Loan Amount

 

Minimum Amount: $125,000 as regulated by SBA.
Maximum Amount: None. However, SBA's maximum participation is ordinarily $1,500,000.  In case of a national priority, $2,000,000 is attainable.  Small manufacturing qualify for an amount up to $4,000,000.

 

2. Participation Levels

• Private lender50% of total project cost.
• SBAUp to 40% of total project cost; $1,500,000/$4,000,000 maximum.
• Small Business Concern 10% of the total project cost; maximum of 20% as regulated by SBA.

3. Collateral

• Second Mortgage on project property and/or pledge of personal assets, personal guaranty of owner(s).

4. Term

• 10 or 20 years, as regulated by SBA.

5. Interest Rate

• Bank: Current prime rate plus percentage points, variable or fixed, depending on project feasibility as determined by the bank.

• SBA: Interest rates on 504 loans are set monthly at an increment above the 10 year U.S. Treasury issues. (Fixed).                                                  

6. Fees to Borrower

• Bank: One-time participation fee of one-half of 1% of the First Mortgage and other out-of-pocket expenses related to it.

• SBAC: One-time processing fee of 1.5% of the total SBA debenture amount. A $1,000 deposit is collected prior to processing the 504 request, and credited towards the origination fee at funding. Approximate 2.75% fee for the 504 loan plus a fixed fee of $2,500 for legal review. Weighted average fee for both loans is 2.1%.

7. Minimum Equity Investment

• Minimum 10% to 20% equity in the project is required as regulated by SBA. Start up businesses require an additional 5% and single purpose real estate projects require and additional 5% for a maximum down payment requirement of 20%.

ECONOMIC DEVELOPMENT CRITERIA

Standard SBA criteria mandate the following:  one new job or job retained per $50,000 of total 504 loan amount (i.e., $500,000 = 10 jobs required). Job creation criteria can be waived if the project involves exporting, is located in a revitalization district, rural area, is woman, veteran or minority owned, or meets any other national priority. Small manufacturing is calculated at $100,000 per job.