| Small Business |
| Small Biz | : | Criteria | : | Not Eligible | : | Collateral | : | Special Notes | : | Fees & Payments | : | FAQs | : | Maximum Debenture | : | Time Line |
Eligible Uses of an SBA 504 Loan:
Loan funds may NOT be used for working capital, mortgage broker fees, bridge loans during the construction period, business inventory, rolling stock (i.e. trucks) or refinancing of existing debt of the business.
Other Eligibility Criteria
- Owners must be US citizens or registered aliens with green card.
- Owners can not be convicted felons currently on probation
- Any one who owns 20% or more of the operatng company must personally guarantee(unsecured general guarantee)
- Liquid assets of the principals are taken into account in determining eligibility. Too much liquid assets owned by a principal could disqualify the loan because it will be deemed that the project could be financed by the principal without SBA 504 assistance.
A Small Business is Not Eligible if it is:
- A not-for-profit (exception for sheltered workshops)
- Engaged in lending; a passive holder of real estate and/or personal property; a life insurance company – however an insurance agency is eligible)
- Located in a foreign country or owned by aliens who do not have legal permanent resident status
- Has restriction on patronage
- Is a government-owned entity (exception for Native American tribes)
- Engaged in promoting religion
- Consumer and marketing cooperatives (producer cooperatives are eligible)
- Engaged in loan packaging
- Equity interest by lender, CDC or associates in applicant concern
- Provides prurient sexual material
- Has previously defaulted on a federal loan
- Engaged in political or lobbying activities
- Speculative businesses
Collateral
The CDC takes a subordinate (second mortgage) to secure its 40% portion of the financing, and the CDC takes a security interest in assets financed. Key Man life insurance is generally not required unless there is no succession of management. Other assets of the business or principals are generally not required. (unless the company is a startup or the credit is unusually risky or the asset being financed is considered a single purpose asset or doesn't appraise high enough).