Applicants must be for-profit businesses whose business net worth is less than 15 million and whose after tax income is $5.0 million or less, on average, for the last two years.

What is the Bank's role?

What businesses are eligible?

What are the advantages of an SBA 504 Loan?

What is the Financing Structure?

Project sizes typically range from $250,000 to over $12,000,000 with the 504 loan size ranging from $150,000 to $5,500,000 depending on eligibility and the job creation, community development and economic development goals achieved. The first trust loan can exceed 50% of the project total, which enables larger companies to take advantage of the benefits of the 504 loan up to the maximum amount allowed.


Typical 504 Financing Structure
Source 
 Project Costs
Lien
Funding Limits
Rate
Term Real Estate
Term M&E
Financial Institution
50%
1st 
No limit 
Market 
10 years or longer
7 years or longer 
SBA 504 
40%2ndup to $5.5M
Fixed20 years
10 years
Borrower 
10%n/an/an/an/an/a


​​​To fund the 504 portion of the loan, SoCal CDC issues an Authorization for Debenture Guarantee that is fully guaranteed by the SBA and sold on the private bond market.

SoCal CDC will work closely with you and the borrower to make the application process as easy as possible. We will prepare all the necessary paperwork to obtain an SBA approval.

Advantages for commercial lenders

  • Reduce risk on projects - resulting in 50% loan-to-value-ratio
  • Fixed or variable rate option on bank loan
  • Meets economic development and community reinvestment goals
  • Keeps the bank competitive by offering attractive financing for its clients


Advantages for small business

  • Low down payment - helps conserve valuable operating capital
  • Below market fixed rate - avoids future rate fluctuations, keeps costs of loan low
  • Long-term - brings debt service in line with cash flow generated by business

What projects are eligible and what are the costs?

What are the Down Payment Requirements?

As a norm, the small business contributes 10% of the project costs. If the business is a start-up (when Management has less than 2 years of ownership experience), the down payment increases to 15%. If the loan will finance a single use property, the down payment increases to 15%. If the project is for a single use property being financed for a start-up business, the down payment increases to 20%.

The first trust deed lender processes its portion of the loan as it would any conventional loan request. SoCal CDC and the bank will work together to collect all necessary documents. Once approved, the bank will utilize its own loan documents to close their loan.

Appraisals and environmental reports should be ordered naming all parties (the bank, SoCal CDC, and the SBA) with copies provided to SoCal CDC for CDC and SBA review and approval/release.

The bank provides interim or bridge financing while the CDC's 504 loan is a permanent take-out loan. The bank will provide the full 90% financing up front during the construction, renovation, or closing period based on the 504 commitment to take out the bridge portion of the financing once borrower has taken ownership of the project property.

Previous to the closing of the 504 loan, CDC will ask the bank to provide remaining documentation (i.e. copies of the bank’s notes and deeds of trust, certifications that the loan has been fully funded, among others).

    Lenders FAQ

504 financing is used to acquire, construct, renovate or expand an owner occupied facility. It can also be used to acquire major machinery and equipment with a useful life of at least 10 years.

In addition to the acquisition and construction costs, the "soft costs" (appraisals, environmental, construction interest, closing costs, etc.) can also be financed in the 504 loan. Attorney fees cannot be financed. This allows the business to preserve working capital that will be needed in the larger facility.

What is the project size range?