Maturity options of 25 or 20 years are available on the SBA 504 debenture which include commercial real estate. 10 year maturity options are available on equipment only deals and are subject to a useful life of at least 10 years.
A minimum of 10 years is required from the private lender on real estate financing and 7 years on machinery and equipment projects.
The small business must provide at least 10% of the project cost as equity or subordinated debt. An additional 5% injection is required for a new business as well as an additional 5% on “special” purpose properties. The maximum down payment, which could ever be requested, on a 504 loan would be 20%!
The down payment can be in the form of equity from the business itself or the borrower’s personal resources. If necessary, other sources may provide a loan for the borrower’s equity contribution.
The down payment requirement may change based on business type and other factors.
The SBA 504 loan is secured with a lien on real estate and equipment assets. If credit is unusually risky, additional collateral may be required.
The business must occupy at least 51% of the building being purchased or renovated immediately upon acquisition and/or completion of renovations.
If constructing a new building, the business must occupy at least 60% of the space upon completion and may lease out the remaining 40%.
The SBA 504 Program is not designed for use by developers or speculators.