SBA 504 Loan Criteria

An SBA 504 loan is fixed-asset financing for land, buildings and manufacturing equipment or machinery with a useful life of 10 years.

Size of loan

The maximum loan size through the SBA 504 loan program is typically $5 million. Manufacturing companies with certain specific NAICS codes and projects meeting certain environmental or energy efficiency goals can obtain up to $5.5 million in SBA funds. The minimum loan size is $50,000.

A business can obtain more than one loan from the SBA, as long as the total outstanding balances do not exceed the maximum loan amount.

For a business to qualify for an SBA 504 loan:

Business is a for-profit, owner-operated entity that has a net worth of less than $15 million and a net-profit-after-tax averaging less than $5 million for the previous two years.

The small business must create or retain one full-time equivalent job for every $75,000 loaned by the federal government ($120,000 for manufacturing). Alternative economic development goals can be met in lieu of job creation goals in many cases.

Start-up businesses are not excluded from the SBA 504 loan program, but higher levels of financial equity injection are required for companies less than two years old.

SBA 504 Loan Program Parameters

Debenture Amounts

• Debenture limits range from $50,000 to $5,000,000
• Up to $5.0 million in SBA funds
• Up to $5.5 million in SBA funds are available for manufacturing industries within the NAICS sectors of 31, 32 and 33, or for projects that meet an environmental or energy efficiency public policy goal.
• The debenture amount cannot be greater than 40% of the project cost, or the maximum dollar amount for the type of project being financed (typically $5,000,000) whichever is less. The debenture amount cannot exceed the bank’s portion of the loan.
• At least one job must be created or retained for every $75,000 of 504 funds (for manufacturing companies, at least one job for every $120,000 in SBA funds). Alternative economic development goals can be met in lieu of job creation goals in many cases.

Number of SBA Loans Outstanding

• A business can obtain more than one loan from the SBA, as long as the total outstanding balances do not exceed the maximum loan amount.

Interest rates and Payments

• The SBA will establish a rate of interest each month, typically on the second Tuesday.
• Loan payments are automatically debited from the company’s bank account on the first day of each month, commencing with the first month immediately following the sale of the debenture.

Occupancy

• For new construction, the company must occupy at least 60% of the building immediately and 80% of the space by year 10. Only 20% of the total space may be rented out permanently.
• For acquisition of an existing building, the company must permanently occupy 51% of the building.
• The owner(s) of the company may own the real estate and lease it back to the company; however, the company must provide a full corporate guaranty on the loan.

Personal Guaranty

• Anyone owning 20% or more of either the operating company and/or the real estate entity will be required to give a full, unlimited personal guaranty on the loan.
• Life insurance in the amount of the debenture may be required to be collaterally assigned to the SBA on some projects.

Amplio’s Role

• Our trained professional staff assists business owners in completing the application, structuring the project, preparing loan documentation and monitoring the project through closing. In addition, this staff services all aspects of the SBA loan, including monitoring annual financial statements, for the entire term of the loan.