Apply for the SBA 504 Loan
I worked closely with several individuals from the LiftFund team, including La Tisha Venters, who was an exceptional person to work with. She helped to coordinate the loan, with a focus on requesting documentation throughout the process. She was a great communicator, friendly to talk to, and I was able to create a good relationship with her.
It’s time for OWNERSHIP!
Stop Renting! It’s time for ownership! Explore the benefits of owning your own property using the SBA 504 Loan Program. This program can be used to purchase real estate and heavy equipment. It can also be used to construct a new building or improve an existing building. With low fixed rates, low down payments, and 25-year terms, you may end up paying less on your mortgage than you did on your rent!
You must be located in Texas or certain surrounding areas (contact your LiftFund CDC Business Development Officer to determine if your location is eligible).
You must occupy at least 51% of the building (60% for new construction)
Your Tangible Net Worth must be less than $15MM, with less than $5MM net-profit after taxes
The business must be a For Profit business
Typical 504 Financing Structure
The 504 is an SBA loan that finances the purchase of commercial real estate and equipment for small businesses 0at a below-market fixed interest rate for up to 25 years.
The graph shows how LiftFund partners with a participating lender (typically a bank) to finance part of the project. Most projects require a 50-40-10 split. However, businesses and/or projects considered “special purpose” require an additional 5% from the owner. Similarly, start-ups also require an additional 5% equity investment.
- The Bank finances 50% of the project
- The Bank has the first-lien position
- The borrower can retain more cash
- The equity injection can be cash or land equity
- Projects must be fixed asset-related with no goodwill or working capital allowed
What’s the Process?
We work with your local bank or one of our bank partners to provide up to 90% financing. The typical structure on a $1,000,000 project is:
Typical 504 Structure
Bank (50%) – $500,000
SBA/CDC (40%) – $400,000
Borrower (10%) – $100,000
Total – $1,000,000
Land & Building – $300,000
Renovations – $400,000
FF&E – $250,000
Professional Fees – $30,000
Other Expenses – $20,000
*If you have a start-up, or a Special Purpose property, add 5% for each
Conditions & Benefits
What can a 504 loan finance?
- Purchase of land (with the intention to develop)
- Purchase of existing commercial building
- Construction of a new building
- Renovating, expanding or upgrading existing buildings
- Machinery and equipment
- Furniture, fixtures and equipment
- Debt Refinancing
What can a 504 not be used for?
- Working capital and inventory
- Investment properties
- Titled vehicles
- Tenant improvements
- Franchise fees
What is the process for getting an SBA 504 loan approved?
If you have a project that you think is 504 eligible, contact LIftFund CDC early in the process. Our team will help determine if your project is eligible and will help you structure it for financing. We will work you and the participating lender to answer questions and help understand requirement and process. Once the participating lender has approved their part of the project, we will process our portion for approval by SBA.
What are the conditions for using the SBA 504 loan to refinance debt?
- Debt must be six months old or older and the business must meet SBA guidelines regarding existing businesses
- There must have been no ownership change in the last six months
- Debt must be current for the past 12 months to be eligible
- 85% of the debt from original funding must have been “504 eligible” – meaning it financed CRE or machinery & equipment
- 20% of the appraised value can be cashed out for “eligible business expenses”
- Maximum LTV for refinance is 85%
What are the benefits of the 504 program compared to the 7(a) loan program?
- The lender does not need to be SBA certified or have any knowledge of SBA lending at all. LiftFund provides all the SBA lending expertise!
- Lender can charge origination fees and finance the first lien with mini-perm as long as term at least 10 years.
- The lender never needs to provide reports to the SBA.
- The lender can offer a blended rate to the borrower, combining their private rate and the SBA 504’s low fixed rate.
- The only collateral required is the assets financed by the project.
- The SBA 504 fees are lower than SBA 7(a) fees and are always financed into the project.
- Green-certified projects can exceed the traditional limits of 7a.
- There is no upper limit on a project’s size.
Advantages with the SBA 504 Loan