SBA 504 Loans

SBA 504 loans are federally backed small business loans provided by intermediaries like banks or Certified Development Companies. The U.S. Small Business Administration (SBA) 504 loan program provides small businesses with long-term, low, fixed-rate financing for owner-occupied commercial real estate and heavy machinery projects to drive business growth.

The intention of the SBA 504 loan is to promote business growth and economic development by providing the small business owner access to low down payment financing, so small companies can preserve cash to operate their business.

10 Years:
as low as

4.92%

20 Years:
as low as

5.13%

25 Years:
as low as

5.19%

We Make it Easy for You

How does an SBA 504 Loan work?

SBA 504 loans provide small business owners with fixed financing of up to $5 million for major fixed assets. The SBA 504 packages two loans together, one from Alloy and one from a private lending partner, such as a commercial bank, credit union, or Certified Development Company.

The structure of the loan is typically 50/40/10. The lending partner makes a commercial loan to the business owner, typically 50% of the total project costs and holds a first mortgage. Alloy Commercial Capital provides a subordinated, fixed-rate financing, long-term loan for up to 40% of project cost up to $5 million ($5.5 million in special cases). The borrower typically provides an equity injection of as little as 10% of the project cost. SBA loans are not counted toward taxable income for federal income taxes.

Private Lender

Alloy SBA 504 Loan

Borrower Down Payment

SBA Loan Structure: 50% - 40% - 10%

Source Percent Amount Security
Bank/Private
50%
$500,000
1st Mortgage/Lien
Alloy
40%
$400,000
2nd Mortgage/Lien
Business Borrower
10%
$100,000
Cash
Totals
100%
$1 million

Why this program is right for your project?

Immediate and Long-Term Benefits for Small Businesses

  • 90% financing
  • Longer loan amortizations, no balloon payments
  • Fixed-rate interest rates
  • Savings that result in improved cash flow for small businesses

Benefits for Lenders

  • Minimize collateral risk with a first lien position and typically a 50% loan-to-value ratio.
  • Smaller banks can work on larger projects while bigger banks can limit exposure to certain industries.
  • Assist more customers by leveraging lending capacity across more borrowers.
  • Leverage the guarantee by the SBA to help customers who otherwise would not meet lending standards.
  • Alloy’s SBA Loan Experts will handle all the application paperwork, processing, and review required by the SBA.
  • Provides Community Reinvestment Act credit.

Who is eligible for the 504 Loan Program?

  • For-profit corporations, partnerships, and sole proprietorships.
  • Businesses whose net worth does not exceed $15,000,000.
  • Net profits must average less than $5,000,000 during the previous two years.

What is eligible for the 504 Loan Program?

  • Land acquisition and land improvements
  • Building acquisition
  • Ground up construction
  • Renovation, expansion, or modernization
  • Long-term machinery and equipment with a useful life of 10 years or more.
  • “Soft” costs for appraisals, general surveying, architectural work, and installation.

Applicants involved in the following are not eligible:

  • Speculative lending or investments.
  • Non-profit institutions.
  • Rental property held primarily for sale or investment.
  • Businesses appealing to sexual nature or prurient interests.

FAQs

Answers to the most common questions

For most small businesses, SBA 504 loans are not especially difficult to qualify for. While there are some stipulations, most for-profit small businesses in need of assistance purchasing real estate or equipment in the US are eligible.
An SBA 504 loan provides financial support to small businesses in need of fixed assets. Loans are typically structured 50-40-10, with a bank providing 50% of the loan, a Certified Development Company providing 40%, and the borrower providing a 10% down payment.
To qualify for the SBA 504 loan, a business must first operate as a for-profit company in the US. Additionally, potential borrowers must have a tangible net worth of less than $15 million and an average net income of less than $5 million.

Call our loan experts today at 513-631-8292 to find the right solution for your needs

Ready to get started on your new real estate project? Download Applications

Talk to one of our loan experts today to find the right solution for your needs

Or give one of our expert loan officers a call at 513-631-8292 for more info.

“Alloy walked me through the SBA 504 loan process every step of the way, which I really needed since I had never purchased commercial real estate before. They also helped me out with a tricky leased land situation that helped pave the way for future commercial real estate purchases.”
Steve Dorgan
President, Wray Precision, SBA 504 Loan Borrower

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