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504 Loan Program
Small businesses often encounter difficulties finding long-term financing at affordable fixed interest rates. With this in mind, the U.S. Small Business Administration offers the 504 Loan Program which provides small businesses a financing alternative. In Washington state, northern Idaho, and northern Oregon, NWBDA serves as an agent for the SBA's 504 Loan Program. Our job is to work closely with the borrower and participating lender to originate, close and service the SBA 504 loan.

The 504 program is a partnership between a participating lender, NWBDA and the business owner. Under the program, a bank or financial institution will lend up to 50% of the project cost, NWBDA can lend up to 40% and the business owner generally provides a minimum of 10% of the project cost.

Benefits
The 504 Loan Program offers several benefits to the business.
  • low down payment
  • below market fixed interest rate
  • 20 year amortization
  • reduced risk to the lender
    • Eligibility
    SBA 504 loan can finance the following items:
  • land acquisitions and improvements
  • construction of a new facility
  • purchase/renovation of existing building
  • purchase of equipment with a useful life of at least 10 years
  • payment of interest/fees on interim financing
  • payment of soft costs related to the project (such as professional fees)
  • One new job needs to be created or retained for every $50,000 provided by SBA funding.
    • Size Standard and Occupation Requirements
  • To qualify the small business must have a net worth less than $7.5 million. Net income can not exceed $2.5 million per year.
  • On new construction projects the small business must utlimately occupy 80% of the building space.
  • For existing buildings the small business must occupy 51% of the building space.
    • Loan Structure
    A loan made under the SBA 504 Loan Program contains the following three parts:

    A First Mortgage Loan provided by the borrower's lending institution, which usually amounts to 50% of the project cost. The lender's note is separate and carries its own rate, terms and conditions. The private lender charges a market rate for his loan with a minimum term of 10 years.

    A Second Mortgage Loan from NWBDA, can be up to 40% of the total project cost or a maximum of $1,000,000 (under special circumstances,such as a small manufacturer, up to $4,000,000 is available). The term of the 504 loan can be as long as 20 years for real estate and 10 years for equipment. The interest rate is below market, fixed and determined at the time of SBA funding.

    A down payment from the borrower, typically 10% of the total project cost. If the business is a new business or the facility is for special usage, the required down payment may be as much as 20% of the total project cost. The down payment can be cash, equity in land or building, existing equipment or any other fixed assets that are part of the project.

    Contact NWBDA if you have questions regarding your project.

    Collateral
    The SBA 504 loan is secured with a second lien on the project assets. Personal guarantees are required for all owners of 20% or more of the company.
    Fees
    Loan fees associated with the 504 portion of the project approximate 2.75% of the SBA loan amount. These fees are financed into the loan. A licensed 504 closing attorney must close the SBA loan and that fee is also financed.
    Effective Rates
    January 2012
    20 Year Rate: 4.84%
    10 Year Rate: 4.01%

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    A-1 Sign Co. and Advantage Printing
    A-1 Sign Co. and Advantage Printing

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    Serving Washington, Oregon & Idaho

    (509) 458-8555 or (800) 540-1748
    9019 East Appleway, Ste 200
    Spokane Valley, WA 99212