Small Business Administration (SBA) 504 loans are provided through EDC Finance Corporation in conjunction with the United States Small Business Administration to assist growing businesses with long-term, fixed-rate financing for major fixed assets such as land, buildings, and equipment.
Key Benefits
- 10, 20 or 25 year fixed rate options
- Equity injection as low as 10%
- Subordinate financing to primary lender
Funding Uses & Purposes
- Land acquisition
- Building construction \ expansion \ renovation
- Long-term machinery & equipment
- Soft costs related to above items
- Commercial mortgage refinancing
Eligibility
Borrowers must be for-profit businesses or farms with a tangible net worth < $15 million and 2-year average net income < $5 million
Loan Structure
- A commercial bank will provide senior financing for 50% of project costs
- EDC Finance will provide an SBA 504 loan in a subordinate position for up to 40% of project costs
- Borrower will provide a minimum 10% equity injection into the project
Amounts
- $5 million maximum loan amount for most borrowers up to 40% of project costs
- $5.5 million maximum loan amount for manufactures & certain energy efficient projects up to 40% of project costs
Special purpose properties and new company loans reduce the maximum loan amount to no more than 30-35% of project costs
Terms
- Market interest rate based on prevailing 5 & 10 year Treasury notes plus a fixed rate spread
- 20 or 25 year fixed rate term for real estate
- 10 year fixed rate term for machinery and equipment
- 10% minimum equity requirement from borrower in the form of cash, real estate, or other loans
Special purpose properties and new company loans increase the minimum equity amount to 15-20% of project costs
Job Requirements
Borrowers are requested to create or retain 1 full time equivalent job per $75,000 borrowed ($120,000 for manufacturers), however, EDC Finance can often utilize excess jobs in its loan portfolio to meet the required ratio if a project alone does not have enough jobs
Closing Costs
- 0.5% participation fee based on senior loan amount (out-of-pocket)
- 2.7% commitment and underwriting fee (debenture funded)
- $3,000 attorney and recording costs (debenture funded)
- Title insurance is required for real estate transactions