The SBA 504 program not only helps mitigate risks to lenders, but also helps provide businesses with the ability to obtain funding when conventional debt financing is not available. Liberty Bank is a smaller bank and we are able to do 90% LTV on real estate purchases.
In most cases a 504 loan includes the following:
- A loan secured by a private lender (any bank or credit union offering SBA loans) with a lien covering up to 50% of the total project cost.
- A lien secured by the Certified Development Company (CDC) for up to 40% of the total project cost.
- A contribution from the borrower of at least 10% of the total project cost.
SBA Fund Use
The 504 funds must be used for fixed assets. Fixed assets include the following:
- Purchase land or an existing building
- Capital improvements and upgrading
- Street, utilities, parking lots, and landscaping improvements
- Construction of new, renovating, modernizing, or converting facilities
- Purchase of long-term equipment
This program allows a small business to obtain financing with low rates. The only additional cost is an SBA fee, which goes directly to SBA.