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INSTRUCTIONS FOR USE OF SBA FORM 1505, 504CDC NOTE - sba

INSTRUCTIONS FOR USE OF SBA FORM 1505, 504CDC NOTE - sba-2025

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The document provides instructions for the mandatory use of the new SBA Form 1505, 504/CDC Note, effective November 15, 1998, for all SBA 504 loans. It outlines requirements such as no alterations to the text, necessary insertions of information, and specific guidelines for completing various sections of the form. Key details include filling out an information grid accurately, adhering to choice-of-law provisions, and ensuring consistency across related documents. The document emphasizes the importance of proper signatures and assignments.

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Click ‘Get Form’ to open it in the editor.
Begin by filling out the information grid at the top of the front page. Ensure that all details are consistent with the Authorization document.
Insert the SBA Loan Number and SBA Loan Name as specified in your Authorization. Follow the hierarchy for naming as outlined in the instructions.
Complete the Date field with the date you will sign the Note, and insert the Loan Amount in numbers only.
List all Borrower names without including any DBAs, ensuring they match those in the signature block.
If applicable, provide the legal name of the Operating Company. If there is no Operating Company, indicate N/A.
Fill in CDC Name and CDC number as required by your Servicing Agent.
Leave fields for Interest Rate, P & I Amount, and Monthly Payment blank; these will be completed by your Servicing Agent.
In paragraph 1, write out the amount of the Note in words to match your Loan Amount.
Create a signature block at the end of the Note with all necessary names and titles as per state law requirements.

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Got questions?

We have answers to the most popular questions from our customers. If you can't find an answer to your question, please contact us.

Can you pay off an SBA 504 loan early?

A: Yes. Again, because bonds are sold on the open market to fund the SBA 504 loans, there is a 10-year prepayment penalty associated with all 504 loans with a 20-year or a 25-year term and a 5-year prepayment penalty associated with all 504 loans with a 10-year term. Both are non-negotiable.

What is the prepayment penalty for SBA 504 debenture?

Yes, there are prepayment penalties associated with an SBA 504 loan. According to the SBA, the prepayment penalty begins at 3% of the loans value in the first year, and then drops with each consecutive year, eventually docHubing 0% in the 11th year (and all subsequent years).

What can a 504 loan not be used for?

A 504 loan cannot be used for: Working capital or inventory. Consolidating, repaying or refinancing debt that does not meet the definition of qualified debt under 13 CFR 120.882, paragraphs (e) and (g) Speculation or investment in rental real estate.

How do SBA debentures work?

Standard Debentures are loans issued to SBIC Licensees at face value requiring semi-annual payment of interest on outstanding leverage. SBA guarantees all principal and unpaid interest.

How does an SBA 504 debenture work?

A debenture is a debt instrument issued to raise money. In this case, the CDC gives the instrument to private lenders (large banks, insurance companies, pension funds, etc.) in exchange for 50% funding of the SBA 504 loan. The agreement outlines the loan amount, interest rate, and maturity date.

Is debenture the same as loan?

What is the difference between debenture and loan? The debenture itself is not the loan, but it is the security document that accompanies the lending. A loan without a debenture, or alternative form of security, is an unsecured loan which usually means the lender has no ability to take control of the companys assets.

Are SBA 504 loans subordinated?

A typical 504 loan has a 50/40/10 structure: a senior lender provides 50% of the total project cost; a Certified Development Company (CDC) provides 40% of the project cost through a subordinated loan; this is the SBA-guaranteed portion; and.