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CDC/504 Fixed Asset Financing2023-01-24T21:28:50+00:00

SBA Small Business Loans

CDC/504 Fixed Asset

A CDC/504 loan is most often used to purchase major assets, such as real estate or heavy equipment with long life spans.

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Name(Required)

Loan Amount up to

$5.5m

Term as long as

20 years

Rate as low as

3%

Funded as fast as

30 days

Access the Capital You Need to Grow Your Business

SBA CFC/504 loans are available through Certified Development Companies (CDCs),  and can be used for a range of assets that promote your business growth and job creation.  These include the purchase or construction of  existing buildings or land,  new facilities or long-term machinery and equipment.

Payment Schedule

Payments can be set at regular intervals

Various Uses

Funds can be used for a wide variety of purposes

Lower Rates

SBA CDC/504 loans have relatively low interest rates

Longer Terms

SBA CDC/504 loans have a longer repayment schedule

Get started with SBA CDC/504
fixed asset financing

Provide basic information about your business. If approved, you can request funds and receive them in your account in as fast as 48 hours.

What you’ll need to qualify

  • 680+ FICO score
  • 2+ years in business
  • 10% down payment if purchasing a business or commercial real estate
  • Collateral: While collateral is not a requirement, the more collateral you can put up, the more likely it is you will get a loan
  •  No delinquencies or defaults, including student loans
  • If purchasing commercial real estate, your business must occupy at least 51% of the building.
  • If building new commercial real estate, your business must occupy at least 80% of the building.

What you need to apply

  • Basic details about you and your business

  • Bank statements for past 3 months

  • Business is in good standing & profitable

Start your application & secure the
funds your business needs today

Apply and Get Funded

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Frequently Asked Questions

What are the typical rates, terms and limits for a SBA CDC/504 loan?2022-12-01T20:31:23+00:00

CDCs have limits for interest rates, terms and fees that are set by the SBA. The loan must have a term of either 10 or 20 years with a fixed interest rate which is set by the US Treasury 5 and 10 year rates. In the case of a 10 year loan set by the 5 year rate, .38% will be added to the interest rate. In the case of a 20 year loan with a 10 year rate, .48% will be added. There are also other additional fees.

Traditional lenders such as banks, who will cover up to 50% of the loan, are not under the jurisdiction of the SBA, so their rates are not subject to SBA regulation. Rates and terms are negotiable but in general you can expect an interest rate on this portion of the loan between 4 and 8% and a term from 5 – 10 years with an amortization up to 25 years. Note that longer amortization schedules will result in lower monthly payments but a higher balloon payment at the end of the term.

Because the purpose of the SBA Loan Program is to stimulate the economy, partially by creating or securing jobs, your CDC/504 Loan must create or retain one job for every $65,000 borrowed, except for small manufacturers where the ratio is one job for every $100,000.

How is an SBA CDC/504 loan structured?2022-12-01T20:31:23+00:00

If using the loan to build or buy commercial real estate, your operation must occupy at least 51% of the building. You could purchase real estate where your operation occupies over half and rent out the rest but you could not buy a hotel or apartment building where the intent is to fully rent the property to tenants.

An example SBA loan might be structured as follows: A 10% investment by the business owner, 50% from a conventional lender such as a bank, and 40% from a CDC (Certified Development Company – see below). In the event of a loan default the conventional lender is paid off first, reducing their risk. The important thing to note is that any amount below the maximum 90% not being funded by the CDC and a conventional lender must be covered by you as a down payment.

Other Examples:

  • Purchase or construction of commercial real estate
  • Purchase of heavy equipment for a construction company
  • Purchase of a large amount of office furniture

 

What is the CDC/504 loan program?2022-12-01T20:31:37+00:00

The CDC/504 Loan Program provides long-term, fixed rate financing for major fixed assets that promote business growth and job creation.

504 loans are available through Certified Development Companies (CDCs), SBA’s community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA.

The maximum loan amount for a 504 loan is $5 million. For certain energy projects, the borrower can receive a 504 loan for up to $5.5 million per project, for up to three projects not to exceed $16.5 million total.

What you’ll need to Qualify

  • 680+ FICO score for all primary business owners.
  • 10% down payment if purchasing a business or commercial real estate
  • Collateral: While collateral is not a requirement, the more collateral you can put up, the more likely it is you will get a loan
  • Must have been in business for 2 years or more. It is possible for startups to get a CDC/504 Loan (as opposed to a 7(a) loan), however you will need all of the above plus be able to prove business management and industry experience.
  • Your business must be profitable
  • You may not have any delinquencies or defaults on record, including student loans
  • If purchasing commercial real estate, your business must occupy at least 51% of the building.
  • If building new commercial real estate, your business must occupy at least 80% of the building.
How do I use a CDC/504 loan?2022-12-01T20:31:37+00:00

A 504 loan  can be used for a range of assets that promote business growth and job creation. These include the purchase or construction of:

  • Existing buildings or land
  • New facilities
  • Long-term machinery and equipment

Or the improvement or modernization of:

  • Land, streets, utilities, parking lots and landscaping
  • Existing facilities

A 504 loan  cannot  be used for:

  • Working capital or inventory
  • Consolidating, repaying or refinancing debt
  • Speculation or investment in rental real estate
What are the pros and cons of an SBA CDC/504 loan?2022-12-01T20:31:56+00:00

Benefits

  • Set payments at regular intervals
  • Can be used for a wide variety of purposes
  • Relatively low interest rate
  • Long repayment schedule

Drawbacks

  • Lengthy application process
  • May carry early payment penalty
  • Variable interest rates may increase

At Big Think, we can help you structure the best loan for your needs. If you’re confused or need clarification about the qualifying requirements for a loan, please contact us. We’ll be happy to help.

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