504 Corporation

The 504 Corporation is a nonprofit organization certified by the U.S. Small Business Administration (SBA) to provide financial assistance to small businesses. As an SBA certified development company, the 504 Corporation works with the SBA and lenders to deliver the 504 Loan Program to small businesses. The staff also assists businesses with local, state, and federal financing programs and provides general business assistance.

Through the SBA 504 Loan Program, the 504 Corporation provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.

Typically, a private lender provides 50% of the project financing, and 40% is funded by a debenture guaranteed by the SBA. The remaining 10% is equity provided by the borrower. The extent of the SBA’s participation is usually $1,000,000, although $1.3 million may be available under certain circumstance.

SBA 504 Loan Program

Eligibility
To be eligible, the business must be operated for-profit, have a tangible net worth of less than $7 million, and have an average net income that is less than $2.5 million after taxes for the preceding two years.

Requirements

• Loans must be used for fixed asset projects such as purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; construction of new facilities or modernizing, renovating, or converting existing facilities; or purchasing long-term machinery and equipment.
• Funds cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.
• One job must be created for every $35,000 received.

Rates/Terms

• Interest rates are pegged to an increment above the current market rate for 5-year and 10-year U.S. Treasury issues.
• Terms of 10 or 20 years are available.
• Fees typically total 3% of the debenture.

Contact
Dwayne Lee Director of Business Development Rochester Office 220 South Broadway, Suite 100 Rochester, MN 55904
Phone: 507.288.6442 Fax: 507.282.8960

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