SBA 504 Loan Program

"The 504 program provides the benefits of minimum equity requirements, below market fixed rates and long-term amortization of the loan. I have recommended to my clients to take advantage of this excellent program." - Robert S. Dempster, Local Banker

Frequently Asked Questions

Loan proceeds may be applied to fixed assets, including:

• purchase of land and/or buildings
• machinerty and equipment with a life expectancy of at least 10 years
• construction
• renovations/leasehold improvements
• related costs (legal, architectural, etc.)

The financing package is a combination of two loans involving Mo-Kan Development, Inc. and a private lender. The typical structure of the loan, while somewhat flexible, is usually:

• 50% Private Lender (applicant's choice), at prevailing rates and terms of the private lender. The lender's rate of interest can be fixed or variable and the term of the laon must be at least 10 years.
  
  
• 40% Mo-Kan Development, Inc, guarenteed by the SBA at a rate determined at the time a debenture is sold. The interest rate is fixed for 10 years is loan is for equipment only or 20 years when real estate is involved. The interest rates of 504 debentures are expected to be 1.5% to 3.5% below market rate.
  
  
• 10% Borrower's Equity Injection. When the application is for the start-up of a new business, the borrower's injection increases to 15%, and if the project includes a single-purpose building, the borrower's injection can be as high as 20%. 20% is the maximum borrower's equity injection.

Processing Time
Time required to process this loan application totally depends on the ability of the applicant to provide required documents. Upon submission of all information, processing generally requires 60-90 days to obtain approval of both the Certified Development Company and the Small Business Administration.

Advantages for the borrower

• Long Term Financing - maturities up to 20 years
• Low down payment - up to 90% of the total project costs can be financed
• Low interest rates - 1.5% to 3.5% below market rates

Advantages for the private lender

• Little paperwork - Mo-Kan Development staff assures that a completed loan package is assembled for consideration.
• Little "red tape" - the private lender is regarded as a separate part of the package
• Reduced exposure
• 50% loan to value ratio with first mortgage or security interest

For more information, visit the 504 FAQ or the 504 Loan section of the SBA website.