SBA 504 Financing

For over 31 years, Ocean Pacific Capital has offered SBA 504 Financing. SBA 504 loans mostly benefits growing business owners looking for long-term, fixed rate financing for major fixed assets (land and buildings). Our experience and knowledge of this type of financing allows us to assist our clients in obtaining the loan they best fit at one of the most competitive interest rates available in the market. There are important reasons that an SBA 504 Financing Program can benefit business.

First, the interest rates on the SBA 504 part of the financing project is fixed in the private capital market for life of the loan, which is usually 20 years. This is significant because the fixed interest rate and accountability of stable payments and debt services over a length of time (normally 20 years), provides a large advantage to business owners who are looking for future growth and planning cash flow requirements.

Secondly, under the SBA 504 lending program, the private sector lender will provide 50% of the financing for the total project. It is nearly not possible for a small business owner to secure or obtain the necessary 90% financing on a project. It is required that businesses put down at least 10% minimum contribution to the project. The exception is if the business is a start-up (start-up is defined by the SBA as a business that is one less than two years old), or is specialized and is single purpose use, then the business owner must put down a minimum equity contribution of 15%. And if the project comprises of a start-up business with a single specialized purpose, then the minimum equity contribution from the business owner(s) must be at least 20% and the maximum loan amount for the SBA 504 loan is 30%. The businesses are also required to pay for the associated related project costs, which can include site plans, zoning, engineering fees, appraisals, etc. These soft costs must be paid from working capital reserves or credit lines, but can be counted for and included in the total project cost calculation for the purposes of financial planning. Usually, 90% of the costs can be financed over the life of the loan. The SBA 504 loan can also stay with the project property if in the future, the business grows and needs to relocate or sells, the future buyer can assume the remaining portion of the SBA 504 Loan.

Lastly, the terms for the SBA 504 loan, for both 10 and 20 years, matches the life of the project asset.

For more information and to get started on this process today, call us to speak to an experienced SBA 504 commercial loan specialist.