General Information
The U.S. Small Business Administration (SBA) established the 504 loan to help businesses purchase commercial real estate and equipment. Each business should occupy at least 51% of the commercial real estate purchased with 504 funds. The business must have tangible net worth no greater than $15 million and average net profit after taxes no greater than $5 million for the most recent two years.
The SBA 504 loan puts financing within reach for small businesses through low down payments and long-term, fixed interest rates. The SBA 504 loan also reduces the risk to lenders through a shared financing structure.
Eligible 504 loan uses
- Land and building purchases
- New construction or renovation
- Heavy machinery or equipment purchases and moving expenses
The SBA 504 loan promotes business expansion and supports economic development in communities nationwide.
Are there any pre-payment penalties?
The 504 debenture has a re-purchase premium (RP) during the first ten years of the 20-year debenture period.
This is a declining premium (10/9/8/7/6/5/4/3/2/1) that is calculated based on the year of the loan, remaining balance (B) and interest rate (I).
For example, if a debenture is repurchased in year 5, the repurchase premium would be as follows: RP = B(I x .60).
A 10-year debenture has a re-purchase premium during the first five years (10/8/6/2).