SBA 504 Application (PDF File) Fees Associated with LDC Loans Personal Financial Statement (PDF File)

The 504 Loan Program features a lending partnership: your bank, with its fixed or floating rate loan; and the Certified Development Company (CDC), with a 10 or 20 year fixed rate loan. These loans are generally used to acquire real estate, construct buildings or purchase major equipment. Geared toward healthy expanding businesses, the program provides access to long term, low down-payment financing for major fixed asset financing projects. To qualify, your business must be for-profit and average less than $2 million in annual profits and $6 million in net worth. Second, there must be creation or retention of jobs ( one full time job must be created per $35,000 in loan CDC funds). Last, the project must be owner occupied. 504 financing is user financing. Companies must physically occupy at least 50% of buildings to be acquired to qualify and at least 67% of new construction with plans to occupy the building fully within 10 years. 504 Loans will not finance speculative real estate deals.

The maximum loan amount is $1 million and the minimum project size is $120,000. Projects up to $2 million can efficiently be financed through the program. SBA loans will be collateralized to the fullest extent possible and require the personal guaranty of the principles. A typical financing structure is 50% of project costs from a bank secured by a first security interest or deed of trust in the asset being financed, 40% of project costs by a participating CDC through a SBA guaranteed debenture and 10% equity. Start-up businesses and special use projects will require 15-20% equity. The SBA portion is a subordinated loan with a fixed interest rate and a maturity of 20 years if real estate is involved or 10 years if the loan is used only for equipment. The interest rate is set at the time of closing and is dependent upon market conditions.

The CDC (Certified Development Corporation) handles projects on behalf of SBA. CDC’s are certified to handle specific geographic areas and the St. Louis Local Development Company (LDC) handles all of the City of St. Louis. Loan approval process requires approval of CDC and SBA, so approval can require up to 60 days.