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Home > Financing > SBA Loans > 504 Loan Program

SBA 504 Loan Program

The SBA 504 program promotes commercial and industrial development by assisting small businesses with long-term loans at favorable below market interest rates. These loans may be used to finance the purchase of owner-user real estate, machinery, heavy equipment, plant acquisition, construction, renovation, acquisition of land, land and site improvements, acquisition and installation of machinery and equipment, as well as professional fees associated with surveying, engineering, architectural development, and legal considerations.

Basic criteria for eligibility:

1. The business must have a proven history of profitability.
2. The proposed development must create new jobs.
3. Purchases made with these loaned funds must be used by the borrower.
4. The business must be a for-profit company.
5. The loan must be used for financing land, building, and/or equipment.
6. No refinancing permitted.

Loan Process

The typical 504 transaction requires the small business owner(s) to provide 10 percent of the loan value; a private lender, usually a bank, directly finances 50 percent, and the SBA, through local Certified Development Companies (CDCs), finances the remaining 40 percent of the project's costs.

The CDC is certified by the SBA to work with small businesses. SBA loan resources are generated by issuing government-guaranteed debentures. These debentures are pooled monthly from around the country and sold to the public market.

CDC financing provides a number of benefits to the small business owner. A local business that borrows under the SBA 504 program will benefit from long-term fixed rate financing at favorable below market interest rates. The low equity requirement preserves funds for working capital, an option extremely hard to obtain in today's commercial finance sector. The structure also benefits commercial lenders who receive a first mortgage security position with limited exposure, generally 50 percent, on the project being financed while account activity and customer service are enhanced.

The Tidewater Business Financing Corporation

The Tidewater Business Financing Corporation (formerly the Urban Business Development Corporation) is a private, non-profit certified development company serving the southside Hampton Roads cities. This company is certified by the U.S. Small Business Administration to work with small businesses. The TBFC began in 1983 as a program available to Norfolk businesses and expanded its program to include every southside city except Portsmouth. The TBFC has been an unqualified success, providing loans for more than $26 million in projects creating and preserving hundreds of Hampton Roads jobs.

For further information about the 504 Loan Program, contact the Tidewater Business Financing Corporation can be reached at (757)623-2691.