Frequently Asked Questions
- Why should I consider a SBA 504 loan?
The benefits of a SBA 504 loan includes a low down payment, longer loan terms, and larger loan amounts than may be available through a conventional loan. In most cases, the borrower’s down payment will be 10% of project costs. Interest rates on the SBA 504 loan are below market rate and is fixed for the duration of the loan term (10 or 20 years).
- Is qualification dependent upon how long I have been in business?
There is no rule regarding length of time in business. However, start-up businesses are subject to a higher level of scrutiny. Additional owner equity may be required.
- How much can I borrow?
There is no limit on the bank portion of the loan. The SBA portion has recently been increased to the following amounts: up to $5 million for regular loans and up to $5.5 million for Manufacturers and certain energy-related projects.
- Is there a lot of paperwork?
The paperwork is comparable to that of any business loan. Loan officers at NSDC work with borrowers to help them complete the requirements and process the application.
- How long does it take to obtain an approval?
After an initial meeting to discuss the 504 Loan process and your business needs, we can pre-qualify your application in three business days.
- What fees are involved?
SBA Fees: 2.65% of the SBA portion of the loan, plus a fee for the SBA-designated attorney to review the loan package. Bank Fees: Negotiated with bank, but typically 1% or 2% on the bank portion of the loan. ALL SBA fees and most bank fees are financed.
- What costs can be financed?
All costs that are directly attributable to the purchase or construction project can be financed, with a qualifying appraisal value.
- What are the collateral requirements? Will I have to pledge my home?
The assets to be financed (for example, the land and building) are the only collateral. The SBA does not take personal residences as collateral.
- How is my interest rate calculated, and can I lock in the rate today?
The interest rate on the SBA loan is tied to the 5 or 10 year U.S. Treasury rate in effect on the date of funding and is fixed for the loan term. The rate cannot be locked in prior to funding.
- Is my loan assumable?
Yes, SBA 504 loans are fully assumable, upon qualification.
- Can my equity injection (down payment) be borrowed?
SBA prefers that the borrowers put at least 10% of their own funds into the project. In appropriate cases, the down payment can be borrowed, but owners must show that there is sufficient income to service the debt.
- Is there a maximum project size?
No, there is no maximum project size. For most projects, the maximum SBA loan is between $5 and $5.5 million, but there is no limit on the bank portion.
- Can I refinance a building I already own?
No, unless the project includes an expansion of the building.
- Can my down payment be other than cash?
Yes, the down payment can also be in the form of the value of previously acquired land (which can include building, structures, and other site improvements that will be part of the project property).
- Can you recommend a good bank to use?
NSDC can recommend a SBA approved bank or lender to partner the loan or we will work with any bank of your choice, wherever it is located.
- What if I am not ready to purchase a building yet, but just need some money to get my business started?
NSDC primarily focuses on commercial real estate loans, but we can recommend a lender that might be able to assist you. Feel free to contact us so we can hear about your project and discuss your options.
- It's time to close my 504 loan, now what?
The first step is always to contact your assigned closing officer. Click here for our closing staff directory. We have assembled a simple list of the items typically required to close a 504 transaction. Please click here to be redirected to our 504 Loan Closing Page.
- I am not able to get in touch with my closing officer or it is after business hours, what should I do?
We have assembled a simple list of the items typically required to close a 504 transaction. Please click here to be redirected to our 504 Loan Closing Page.