SBA 504 Loan

Flexibility, low equity requirement, long term amortization, and speed to closing.

This program is for the purchase of fixed assets such as commercial real estate, machinery and equipment of a capital nature, which are defined as assets that have a minimum useful life of 10 years. Proceeds cannot be used for working capital.

There are three parts to a typical SBA 504 loan:

• CapitalSource Small Business Lending conventional first mortgage loan of approximately 50% of the purchase price of the assets;
• SBA fixed-rate debenture/second mortgage loan of approximately 40% of the purchase price of the assets;
• The borrower contributes the remaining 10%. If the property is special-use real estate, a 15% contribution is required by the borrower; if the property is a special-use and start-up operation, a 20% contribution is required. Special-use properties are properties that can only be used for the purpose for which they were built.

In providing a 504 loan, CapitalSource Small Business Lending works with your local certified development corporation (CDC). CapitalSource Small Business Lending approves our portion of the financing request, and the CDC works with the SBA to approve the SBA portion of the request.

Loan Details

Loan Purpose

• Commercial real estate purchase, including equipment or other fixed assets.

Loan Amount

• Up to $12,000,000 split into 2 loans:
  • CapitalSource SBL first mortgage: Up to $7,000,000.
  • SBA 504 debenture second mortgage: Up to $5,000,000.

Time to Close

• Closing within 45–60 days of signed commitment letter.

Loan To Value

• Up to 90%.

Interest Rate

• Competitive rates available:
  • CapitalSource provides competitive rates.
  • SBA 504 debenture second mortgage is a 20-year fixed rate that is normally below market rates.

Term

• Up  to 25 years with no balloons or calls—fully amortizing over the life of the loan.
  • CapitalSource Small Business Lending has a loan term up to 25 years.
  • SBA 504 debenture second mortgage has a loan term up to 20 years.

Prepayment Penalty

• Prepayment penalties will apply.

Fees

• CapitalSource Small Business Lending generally requires a 1% loan fee on both the 1st and 2nd loans.
• SBA 504 debenture second mortgage has a one-time SBA loan guarantee fee based on loan size.

Collateral

• First lien and second lien on all assets being financed.

Recourse

• Personal guarantees for all individuals owning 20% or more. Corporate guarantees of affiliated companies may be required. 

Debt Service Requirements

• Projected debt service coverage of 1.25:1 times.

Industries

• All-for profit businesses that meet SBA eligibility requirement.