Maturities of 10, 20 or 25 years are available on the SBA 504 debenture, depending on the useful life of the assets. A minimum of 10 years is required from the private lender on real estate financing and 7 years on machinery and equipment.
The small business concern must provide at least 10% of the project cost as equity or subordinated debt. This can be in the form of equity from the business itself or the borrower’s personal resources and other sources may provide a loan for the borrower’s equity contribution.
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 SBA 504 Program is not designed for use by developers or speculators. The small businesses must occupy at least 51% of the building being purchased or renovated immediately upon acquisition and/or completion of renovations. If constructing any new building, the small business concern must occupy at least 60% of the space upon completion of construction and may lease out the remaining 40%.