SBA 504 commercial mortgage loans are made to companies for the purpose of acquiring and sometimes refinancing owner occupied commercial real estate. The company is required to make a minimum 10% cash equity injection in contrast to what banks generally require which is between 20% – 30%. Property types include office, office condominium, warehouse, industrial, light industrial, gas stations and car washes, churches, schools and more.
SBA 504 owner occupied real estate loans are collateralized by real property.
Rate An Term
Rates are fixed and are typically a percentage above the US Treasury market rate. Rates are subject to SBA maximums and are negotiated by the lender and the applicant.
The loan is split between the participating bank, 50%, and the SBA 40%. Therefore, the bank sets its own rate and the SBA sets its own rate.
SBA 504 loans have a maximum loan amount of $20 million; the loan maximum is dependent upon how the funds will be used.
Maturity terms for a 504 loan are available at 10, 20 and 25 years and are fully amortizing.
Businesses seeking a SBA 504 loan must meet the following requirements:
- Must be for-profit.
- Must be located in and do business within the U.S.
- Cannot be a business that is considered ineligible for assistance by the SBA. A full list of ineligible businesses is available on the SBA website.
- Must have a satisfactory FICO SBSS score.
- 51% owner occupancy for existing building
- 60% owner occupancy for new construction