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What is the SBA 504 construction loan structure?

SBA 504 loans can finance new construction As low as 10% down for total project financing, including the purchase of land with ground-up construction or the purchase of an existing building with renovations. All costs associated with construction or renovations can be included in the loan (no break-out required).

What are the cash flow requirements for SBA 504?

The required debt service coverage ratio (DSCR) for an SBA 504 loan is typically 1.2:1 or higher. This means that your income must be 1.2 times higher than your total debt service, meaning that your cash flow is positive and you should have no issues repaying the loan.

Are SBA 504 loans secured?

The CDCs loan is secured by a second lien for up to 40 percent of the projects cost and is backed by a 100 percent SBA-guaranteed debenture. The borrower contributes equity of at least 10 percent of the projects cost.

What documents are needed for an SBA 504 loan?

We have included the most commonly required documents below. Business tax returns for the previous three years. Personal tax returns for the previous three years. Personal history statement. Personal financial statement. Personal budget analysis. Business financial statements for the previous three years.

What is the maximum SBA 504 loan amount?

Maximum SBA loan amount: Loans are generally capped at $5 million. Certain eligible energy-efficient or manufacturing projects may qualify for more than one 504 loan up to $5.5 million each. Interest rate: Below-market interest rates are fixed for the life of the loan.

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What is the difference between an SBA 504 and 7a loan?

SBA 504 loans are used to finance real estate purchases or renovations. SBA 7(a) loans can provide businesses with working capital. If you need a loan for anything other than a real estate or equipment purchase, an SBA 7(a) loan is your best bet.

What is the upfront fee for SBA 504?

The Upfront SBA Guarantee Fee will remain at 0.50% (50 basis points) for both regular 504 Loans and debt refinance without expansion 504 loans approved in FY 2022. (Note: this is not the bank fee, which remains at 0.50% (50 basis points) and is paid on the first mortgage amount.)

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