Advantages of SBA 504 for the Small Business
1. The 504 program provides longer terms and an attractive rate financing which matches the maturity of a loan to the useful life of the   
    assets acquired with the loan.

2. The 504 program provides lower down payment  financing which enables the small business to keep its working capital investment in 
    receivables and inventory where it earns a profit. 

3. The 504 financing can reduce project risk, with debt service better matched to cash flow and with existing working capital invested 
     into profit making receivables and inventory, the credit risk to the lender may be reduced. The net cost is generally lower than  
     conventional financing. 

Because 504 financing may be subordinated, lenders collateral risk is also educed with reduced credit and collateral risk, a lender is more likely to participate and the small business is able to realize it's full growth potential.     
What are the functions and advantages of a Certified Development Company and SBA 504 financing? 
New Ventures CDC helps promote and assist the growth and development of small businesses. The program offers subordinated mortgage financing to help expand eligible small commercial and industrial business concerns. The program combines the incentives of long term (10 or 20 years), low down payments and reasonably priced financing 
SBA 504 Loan vs. Conventional Loan - Borrower Contribution
504 Financing Structure

Third Party Lender            $500,000        50%
504 Portion                       $400,000        40%
Borrower Contribution  $100,000        10%
Total Sources                   $1,000,000    100%
Conventional Financing Structure

20% of Hard Costs            $190,000
Soft Costs                            $50,000
Borrower Contribution    $240,000
Eligible Project Costs

Land/Building              $500,000
Renovation                  $400,000
Equipment                   $50,000
Soft Costs
Title Charges               $3,500
Recording Taxes         $15,000
Appraisal                     $3,500
Environmental            $3,000
Architect/Engineer     $15,000
Bank Points                $10,000       
Total                            $1,000,000
Private Lender                                   504 Financing                                    Equity

50% of Project Cost                                                   40% of Project Cost                                                   10% of Project Cost
1st Lien Holder                                                           2nd Lien Holder
$ Amount: No limit                                                     $ Amount: $50,000 - $5,000,000
                                                                                       - up to $5,500,000 on manufacturing projects and energy                   
                                                                                         saving projects

Interest Rate: Variable or Fixed                                 Interest Rate: Fixed
Terms: 10+ years                                                        Terms: 10 or 20 years
Equipment Term: 7 years                                           Equipment Term: 10 years
How much can the CDC or SBA 504 participation be?
NVCDC's 40% participation is normally no more than $1.5 million unless the project meets one of the Agency's public goals. If a business meets on the goals outlined above then the 40% participation can not exceed $2.0 million. If the firm is involved in manufacturing then the 40% cannot exceed $4.0 million. 
Who is eligible and what can be financed using the SBA 504?
The borrower must be an owner  and must be located in the State of Nevada with a business net worth of not more than $7.5 million and average net income of not more than $2.5 million over the last two yeas. 
SBA 504 "Temp-to-Perm" Refinance Loan Program


The Commercial Real Estate Economic Development Act (CREED) a previously temporary program now congressionally enacted as a permanent program, can be used by small businesses to refinance conventional Commercial Real Estate and Capital Equipment loans:

  • Borrowers can finance up to 90% of the current appraised property value, or 100% of the outstanding principal (whichever is lower), plus 504 eligible refinancing costs.
  • A long-term, fixed interest rate will be available on the 504 portion of the loan. 

Loan Structure

  • A Bank/Private sector lender will provide a loan for at least the amount of the 504 loan (the 504 maximum is 40%, combined the loans can cover up to 90% of the appraised value). The lender will take a first deed of trust and charge a market interest rate.
  • The SBA 504 loan will provide for up to 40% of the appraised value with a maximum of $5MM and a minimum of $25K ($5.5MM is available for manufacturers and businesses meeting the SBA's energy efficiency public policy goal). The 504 loan will take the second deed of trust position and be tied to a fixed interest rate.
  • ​The small business is required to have at least 10% equity in the building or capital equipment being refinanced. 
Use of Funds

Funds can be used to refinance commercial real estate and/or capital equipment for business use, provide cash-out for eligible business expense up to 90% of the current appraised value, including "working capital related assets or liabilities" for immediate or expansion purposes. Items being financed as collateral (appraisals, title insurance, engineering, architectural and environmental costs can be included).

Eligibility Requirements

  • The business must be for a for-profit, in operation for no less than 2 years & have a net worth less than $15MM and net profit of no more than $5MM (two year average after taxes). Individuals owning 20% or more of the business must personally guarantee.
  • At least 85% of the original loan proceed must have been 504 eligible and the remaining amount incurred for the benefit of the small business. 
  • Borrower must be 12 months current on payments and the original loan must be at least 2 years old. 

Interest Rate

  • ​Interest rates tied to the SBA 504 portion of the loan re sent once a month with a bond sale. These rates are fully amortized over the life of the loan.
  • Rates are fixed for 20 years on commercial real estate and 10 years for capital equipment/machinery (the 10-year bond sells only in odd numbered months)
Commercial Real Estate Economic Development Act of 2015
(CREED ACT 2015)
SBA Guaranty Fees

  • There is an ongoing guarantee fee of 0.9140% on the total unpaid balance of the debenture factored in to the overall effective interest rate. 
  • The borrower pays a one time fee of approximately 2.65%. A bank participation fee of 0.5% usually paid by the applicant is provided at closing and prior to SBA funding.
  • In addition to the SBA Guaranty Fee, the borrower will pay the SBA  Attorney Closings Costs of $3,500 plus applicable recording and title costs. (Most of these fees are typically financed as part of loan.)
SBA Prepayment Penalty

There is a prepayment penalty if the borrower voluntarily prepays in the first half of the life of the SBA loan/debenture. 
The U.S. Congress approved and the President of the United States signed into law the much anticipated CREED Act of 2015. We believe there will be some final restrictions imposed  by the SBA on what can or cannot be eligible for the refinancing program. The following is a guesstimate based on conversation with SBA management on what you might expect from this new & improved program. This notice is for pre-application purposes subject to SBA final rules and regulations covering this program.

Refinance program approved by Congress but not yet finalized by SBA officials, launch date expected in early to late 2nd quarter 2016. The above program particulars are not yet official but expected based on previous program rules and regulations. Some additional congressional mandates are to be incorporated into the program. 

Applications are encouraged due to the expected volume and demand, early discussion could save valuable time for lender and applicants.  
Today's Rate
20yr. Debenture: 4.553%
10yr. Debenture: 4.333%