The SBA 504 Loan Program
The SBA 504 Loan Program provides long-term, fixed-rate financing to help small businesses expand by acquiring land, buildings, machinery and equipment. The loans are administered by Certified Development Companies such as Amplio in conjunction with commercial lending institutions.
In exchange for attractive long-term, fixed-rate financing, the SBA expects that its small business loan recipients will continue to expand, create and retain jobs, thereby benefiting the surrounding businesses and communities. The SBA 504 loan program is an economic development stimulus package designed for Main Street America!
SBA 504 Loan Features & Benefits
For Small Business Customers
| Low down payment | Borrowers typically fund 10% of the project cost, which preserves working capital for business expansion. Start-up projects or specialized purpose facilities require more equity. |
| Loan size | Up to $5 million. Manufacturing companies with specific NAICS codes can obtain up to $5.5 million in SBA funds, as can companies meeting certain environmental or energy efficiency goals. |
| Fixed interest rate | Helps minimize cash flow crunch that companies face during an expansion mode. |
| 10, 20 or 25-year loan terms | Keep monthly debt service affordable and constant, plus peace of mind knowing payments will not increase in the future. |
For Lenders
| Reduced risk | The bank lends 50% of the project cost as the first mortgage lender. The SBA 504 loan program funds 40% of the project cost in a second mortgage position, and the borrower provides 10% cash or land equity. |
| Alternative option | The low down payment makes SBA 504 financing possible even if conventional financing is not an option. |
| Commitment to business growth | SBA 504 loans are another way lenders can help their small business customers expand and grow. |
SBA 504 Loan Structure
Amplio works with the SBA to provide up to 40% of the total project cost. The participating lender normally finances at least 50% of the cost. The borrower typically puts down as little as 10% of the total project cost.
| % | Project Cost | Source of Funds | Interest Rate |
|---|---|---|---|
| 50% | $1,250,000 | Private Lender | Fixed or Variable |
| 40% | $1,000,000 | Amplio/SBA | Fixed |
| 10%* | $250,000 | Business Borrower | |
| Total | $2,500,000 | ||
| *Start-up AND/OR Special Purpose Building may require a higher percentage of equity. Costs do not include fees. | |||
Why Is An SBA 504 Loan The Right Choice For Commercial Lending?
Compared to a 7(a) loan, an SBA 504 loan offers:
- A fixed rate of interest
- Lower fees, upfront and during the life of the loan
- Huge cost savings, especially in a rising-interest rate environment
| CDC 504 Debenture Loan | Bank 7(a) Loan | ||||
|---|---|---|---|---|---|
| *including bank closing costs | |||||
| Total cash savings calculated using the assumption that the prime interest rate remains at the current level. An increase in the prime interest rate would substantially increase the total cash savings.
The above is our best estimate with the information that is currently available. |
|||||
| SBA 504 (net) | $400,000 | 40.00% | |||
| Bank | $500,000 | 50.00% | $900,000 | 90% | |
| Down Payment | $100,000 | 10.00% | $100,000 | 10% | |
| Total Project | $1,000,000 | 100% | $1,000,000 | 100% | |
| Bank | Debenture | Total | Bank | ||
| Loan Amount | $500,000 | $400,000 | $900,000 | $900,000 | |
| Interest Rate | 6.0000% | 5.2500% | 6.00% | ||
| Terms | |||||
| Years Amortized | 20.0 / 20.0 | 20.0 | 25.0 | ||
| Bank Points | |||||
| SBA Guaranty Fee | |||||
| CDC Process Fee | $6,000 | ||||
| CDC/SBA Legal Fee | $2,000 | ||||
| SBA Guarantee Fee | $2,000 | ||||
| Funding Fee | $1,000 | ||||
| Underwriter Fee | $1,652 | ||||
| Other Fees | |||||
| Total Fees | $2,500 | $12,652 | $15,152 | $28,125 | |
| Total Loan Amount | $502,500 | $413,000 | $915,500 | $928,125 | |
| Monthly Payment | $3,600.07 | $3,079.22 | $6,679.28 | $5,979.92 | |
| Effective Interest Rate | 6.00% | 5.25% FIXED | 5.62% | 6.00% FLOATING | |
| Total Principle and Interest | $756,278 | $739,012 | $1,495,290 | $1,739,977 | |
| Cash Down* | $100,000 | $100,000 | $100,000 | ||
| Total Cash | $1,595,290 | $1,893,977 | |||
| Total Cash Savings | $298,687 | ||||
What role does Amplio play in an SBA 504 loan?
Amplio is the liaison with the SBA, helping lenders and borrowers through the paperwork and approval process. We structure the project, prepare loan documentation and monitor the whole project through closing. We also service all aspects of the SBA 504 loan for the entire term of the loan. We have earned the reputation for being ethical, efficient, and totally committed to customer service.
Calculate a Loan: Click to insert your own loan statistics to determine your monthly and annual payments.
Read through the loan application to learn more about the information you’ll need to provide to the SBA.
