SBA 504 Loan Program: Step-by-Step Procedural Guide

The SBA 504 loan program is a small business financing option that provides long-term, fixed-rate financing for major fixed assets like real estate and equipment.

• First Mortgage (50%): Conventional lender
• Second Mortgage (40%): CDC/SBA portion
• Down Payment (10%): Business owner
  • May increase to 15% for new businesses
  • May increase to 20% for special-use properties

1. Verify business eligibility:
   • For-profit business
   • Net worth under $15 million
   • Net income under $5 million after taxes
   • Owner must occupy 51%+ of property
   • Project must create/retain jobs or meet public policy goals
2. Gather required documentation:
   • Business financial statements (3 years)
   • Tax returns (3 years)
   • Business plan
   • Personal financial statement
   • Real estate information or equipment specifications
   • Project costs breakdown

1. Identify and apply with a Certified Development Company (CDC)
   • CDC is a nonprofit organization certified by SBA
   • Will assist with application package
   • Helps structure the deal
2. Secure conventional lender for first mortgage
   • Usually a bank or credit union
   • Must provide minimum 50% of project cost
   • Conducts own underwriting process
3. Complete CDC/SBA application package:
   • SBA Form 1244
   • Business organization documents
   • Environmental studies
   • Real estate appraisal
   • Equipment appraisals (if applicable)
   • Construction plans (if applicable)

1. CDC Review
   • Analysis of business financials
   • Verification of job creation/retention
   • Project feasibility study
   • Credit analysis
2. SBA Review
   • Final approval authority
   • Reviews CDC recommendation
   • Issues authorization if approved

1. First Mortgage Closing
   • Conventional lender closes their portion
   • Funds held in escrow
2. CDC/SBA Debenture Closing
   • CDC prepares closing documents
   • SBA reviews and approves
   • Debenture sale scheduled
3. Funding
   • Debenture sold to investors
   • Funds disbursed
   • Project completed

1. Ongoing Reporting
   • Annual financial statements
   • Tax returns
   • Insurance certificates
   • Job creation verification
2. Compliance Monitoring
   • CDC annual inspections
   • Occupancy requirements
   • Job creation/retention verification
   • Insurance maintenance

• Prequalification: 1-2 weeks
• Application preparation: 2-4 weeks
• CDC/SBA approval: 4-6 weeks
• Closing process: 4-6 weeks
• Total typical timeline: 3-4 months

• Maintain good communication with CDC and lender
• Respond promptly to information requests
• Meet all deadlines for document submission
• Keep detailed records of all transactions
• Maintain required insurance coverage
• Comply with all SBA regulations and requirements