SBA 504 Loan Structure

SBA 504 loans have 3 partners: you, the SBA, and your bank/credit union. The total project is then split 3 ways, and typically looks like this for a $2,000,000 project: 

SBA 504 Loan Structure Example 

50% Bank/Credit Union      

40% SBA                             

10% Equity                          

$1,000,000

$800,000

$200,000

1st Lien
2nd Lien

Total Project Cost 

$2,000,000

Total Project Cost

The SBA 504 loan can include in your total project cost, the purchase of land with an existing building, or it can be used for the construction of a new facility. Whether you find the perfect building, or decide to build your own, the cost associated directly with the project can often be included in the total project cost. 

What can be included in the total project cost:

  • Purchase land and construct a new building 

  • Purchase an existing building and make necessary renovations

  • Acquire and install machinery and equipment 

  • Cost associated with the project like engineering and architects fees, appraisals, environmental reports, interim interest & interim loan fees, title insurance, impact fees, etc. 

Equity

The low down payment is one of the best features of an SBA 504 loan. Typically, 10% of the total project cost is required as down payment. If your company has less than two consecutive years of operating history, you are considered a start up and SBA requires an additional 5% down payment.  The SBA also classifies certain properties as single purpose, and requires an additional 5% down payment. You can find a list of single purpose properties here