SBA 504 Maximum Loan Amount Explained

The SBA 504 loan program is a great option for businesses looking to purchase or improve real estate, but one of the key factors to consider is the maximum loan amount.

The maximum loan amount for an SBA 504 loan is $5.5 million, which is a significant amount of money that can help businesses achieve their goals.

Businesses that are looking to purchase or improve existing buildings may be eligible for up to 40% of the project's cost, which can be a game-changer for those looking to expand or upgrade their facilities.

This can be a huge help for businesses that need to upgrade their equipment or facilities, but don't have the cash on hand to do so.

The SBA 504 loan has a maximum loan amount of $5 million, which is a significant amount for small business owners to access capital.

This loan amount can be used for a variety of purposes, including purchasing or expanding an existing business, building a new facility, or acquiring equipment and machinery.

The loan can also be used to refinance existing debt, which can help business owners save money on interest payments and free up cash flow for other uses.

Business owners can borrow up to 40% of the project's cost, with the remaining 50% coming from a partner investor and 10% from the business owner's own equity.

The loan has a fixed interest rate, which is currently around 5.5%, and a repayment term of up to 25 years, depending on the project's cost and the business owner's cash flow.

To apply for an SBA 504 loan, you'll need to find a Certified Development Company (CDC) in your area and assess their eligibility requirements.

The application process typically involves submitting key information such as personal and business credit scores, profit and loss reports, and business tax returns.

You'll also need to complete the application form, which should be done in collaboration with the CDC and uploaded to the SBA's E-Tran system.

To qualify for an SBA 504 loan, you must meet the SBA's minimum requirements and those of the CDC and lender. Here are some of the key requirements:

To apply for an SBA 504 loan, you'll need to follow a standard process. First, find a Certified Development Company (CDC) in your area by searching the SBA database.

Each CDC has its own eligibility requirements, so be sure to assess each lender's qualifications. This may involve reviewing their creditworthiness, business experience, and financial stability.

You'll need to apply for the loan through the CDC, providing key information such as personal and business credit scores, profit and loss reports, proof of down payment, and business tax returns.

The application form should be completed by both the borrower and the CDC, then uploaded to the SBA's E-Tran system.

To qualify for an SBA 504 loan, you'll need to meet the SBA's minimum requirements. These requirements are set by the Small Business Administration, the CDC, and the lender.

You must meet the SBA business size guidelines to be eligible. This means your business must be a certain size to qualify.

A key requirement is that you must be reasonably able to repay the loan. This means the lender needs to be confident that you can pay back the loan with interest.

Your business must be a for-profit company to qualify for an SBA 504 loan. This is a straightforward requirement, but it's essential to note.

You must be based in the U.S. or U.S. possessions to be eligible for an SBA 504 loan. This means your business must be physically located in one of these areas.

Here are the specific financial requirements you'll need to meet:

You won't qualify for an SBA 504 loan if you can qualify for conventional loans. This means you'll need to explore other options if you don't meet these requirements.

If you're not eligible for an SBA 504 loan or need more flexibility, there are other options to consider.

SBA 7(a) loans can be used for general purposes, including buying assets, and are offered through SBA-approved lenders like banks.

The SBA doesn't require collateral for loans under $25,000, but lenders might.

SBA Express loans work well for small expenses under $500,000 and have repayment terms ranging from five to 25 years.

They're also known for faster approvals than the usual SBA loan.

SBA microloans offer funding up to $50,000 and are usually provided through community-based lenders that participate in the microloan program.

These lenders often aim to serve underserved communities and provide education and support to help small businesses succeed.

Equipment loans are secured by the commercial equipment you're buying and may have a lower down payment due to the collateral.

They often have lenient eligibility requirements, such as requiring annual revenue as low as $100,000.

Commercial real estate loans are like a mortgage for your business, except that the lender considers your business income or revenue that the property will bring in when approving the loan.

Here are some alternatives to the SBA 504 loan program:

The SBA 504 loan program charges a few fees to maintain funding, but these fees can be rolled into the repayments, making it easier to manage your loan.

The guarantee fee is actually 0%, which means you won't have to pay any extra for this service.

The annual service fee is 0.4405%, and the lender fee starts at 0.50%. The CDC fee is also variable, starting at 0.625%.

Here's a breakdown of the fees you can expect to pay:

You'll also have some flexibility when it comes to repayment terms, with options for 10-, 20- and 25-year maturities.

Fees are a necessary part of the SBA 504 loan program, but the good news is that they can be rolled into your repayments. This makes it easier to manage your finances and budget.

The SBA 504 loan program charges a guarantee fee, but don't worry, it's a flat 0%. This means you won't have to worry about any extra charges on top of your loan.

The annual service fee is a bit more complex, but it's still relatively low at 0.4405%. This fee is charged annually, so you'll need to factor it into your budget.

You'll also need to pay a lender fee, which can range from 0.50% to a bit more. This fee varies depending on the lender, so be sure to shop around and compare rates.

The CDC fee is another fee you'll need to pay, and it can range from 0.625% to a bit more. This fee is charged by the CDC (Certified Development Company), so be sure to ask about it when you're applying for your loan.

Here's a breakdown of the fees you can expect to pay:

The SBA offers a range of repayment terms for the 504 program, including 10-, 20- and 25-year maturities.

You'll need to consider different repayment terms for the portions guaranteed by the bank versus the Certified Development Company.

The maturity date is the key to understanding your repayment terms, and it's set by the SBA for the 504 program.

For example, you could have a 10-year maturity date for one part of your loan and a 20-year maturity date for another part.

The maximum SBA loan amount for commercial real estate under the 504 program is approximately $16 million with 20% down/20% equity or $11.25 million with 10% down/10% equity.

This limit is determined by the size of the 504 second mortgage, which has a maximum amount of $5 million, unless you qualify as an SBA Green Loan or are a manufacturer, in which case the maximum is $5.5 million.

SBA 504 loans can be used for a range of purposes that help create new jobs or business expansion and growth, including construction or improvements on existing buildings or land, construction of new facilities, and purchase of long-term machinery and equipment.

Some common uses for SBA 504 loans include:

Commercial real estate loans, like the SBA 504 loan, can be a great option for businesses looking to expand or grow. The maximum SBA loan amount for commercial real estate or commercial property under the 504 program is approximately $16 million with 20% down/20% equity.

The loan amount is dictated by the size of the 504 second mortgage, which has a max amount of $5 million unless your loan qualifies as an SBA Green Loan or if you are a manufacturer. In that case, the maximum 504 loan amount is $5.5 million.

The SBA defines a manufacturer as a “for profit” U.S.-based business that produces a product using mechanical, chemical or physical processes. This means that businesses that make something and sell it can qualify for the higher loan amount.

Here are some key facts about SBA 504 loan limits for commercial real estate:

These loan limits can make a big difference for businesses looking to expand or grow, and can provide a great option for those who don't qualify for other types of loans.

SBA 504 loans can provide up to $5 million in funding to buy fixed assets like real estate, with some energy efficiency or manufacturing projects eligible for up to $5.5 million.

The SBA guarantees up to 40 percent of the loan amount borrowed, which is lower than the 7(a) loan that guarantees up to 85 percent.

A third party, such as a bank or credit union, may guarantee as much as 50 percent of the loan, and your business will be required to put down at least 10 percent of the loan amount.

The SBA works like a mortgage insurance company, guaranteeing a certain percentage of the loan amount in case of borrower default. This is similar to an FHA loan, where a borrower pays a fee that's rolled into the loan.

Exporters can increase their odds of getting a large 7a loan amount by getting a 90% guaranty from the SBA, which reduces the lender's risk and increases the odds for approval.

The SBA programs cannot be used for "investment property" financing, except for self storage, boat and RV storage, hotels, and some RV parks, campgrounds, and marinas if the majority of the income is derived from short-term stays.

SBA 504 2nd mortgages are underwritten by a Certified Development Company – or CDC – a local non-profit authorized to originate loans for the SBA.