Under a 504 Loan
Typically, a 504 loan from a Certified Development Company (CDC) requires some financial contribution from the small business before the CDC will provide funding. Contributions to a CDC loan are typically structured as follows:
In addition to this 10 percent to 30 percent capital contribution, the borrower is also required meet the general criteria for SBA loan guarantees, and to:
The bank, or private lender's, portion of the loan bears the interest
rate set by the lender. The SBA's portion of the loan contribution has
interest rates based on the current market rate for five- and 10-year
U.S. Treasury issues, plus an increment above the Treasury rate, based
on market conditions. Maturities of 10 and 20 years are available.
Repayments are made in monthly, level-debt installments. Collateral may
include a mortgage on the land and the building being financed; liens on
machinery, equipment and fixtures, and lease assignments. Private sector
lenders are secured by a first lien on the project. The SBA is secured
by a second lien.