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# SBA 504 Loan Program: Step-by-Step Procedural Guide

## Overview
The SBA 504 loan program is a small business financing option that provides long-term, fixed-rate financing for major fixed assets like real estate and equipment.

## Structure
- First Mortgage (50%): Conventional lender
- Second Mortgage (40%): CDC/SBA portion
- Down Payment (10%): Business owner
  - May increase to 15% for new businesses
  - May increase to 20% for special-use properties

## Step 1: Prequalification
1. Verify business eligibility:
   - For-profit business
   - Net worth under $15 million
   - Net income under $5 million after taxes
   - Owner must occupy 51%+ of property
   - Project must create/retain jobs or meet public policy goals

2. Gather required documentation:
   - Business financial statements (3 years)
   - Tax returns (3 years)
   - Business plan
   - Personal financial statement
   - Real estate information or equipment specifications
   - Project costs breakdown

## Step 2: Application Process
1. Identify and apply with a Certified Development Company (CDC)
   - CDC is a nonprofit organization certified by SBA
   - Will assist with application package
   - Helps structure the deal

2. Secure conventional lender for first mortgage
   - Usually a bank or credit union
   - Must provide minimum 50% of project cost
   - Conducts own underwriting process

3. Complete CDC/SBA application package:
   - SBA Form 1244
   - Business organization documents
   - Environmental studies
   - Real estate appraisal
   - Equipment appraisals (if applicable)
   - Construction plans (if applicable)

## Step 3: Underwriting
1. CDC Review
   - Analysis of business financials
   - Verification of job creation/retention
   - Project feasibility study
   - Credit analysis

2. SBA Review
   - Final approval authority
   - Reviews CDC recommendation
   - Issues authorization if approved

## Step 4: Closing Process
1. First Mortgage Closing
   - Conventional lender closes their portion
   - Funds held in escrow

2. CDC/SBA Debenture Closing
   - CDC prepares closing documents
   - SBA reviews and approves
   - Debenture sale scheduled

3. Funding
   - Debenture sold to investors
   - Funds disbursed
   - Project completed

## Step 5: Post-Closing Requirements
1. Ongoing Reporting
   - Annual financial statements
   - Tax returns
   - Insurance certificates
   - Job creation verification

2. Compliance Monitoring
   - CDC annual inspections
   - Occupancy requirements
   - Job creation/retention verification
   - Insurance maintenance

## Timeline Expectations
- Prequalification: 1-2 weeks
- Application preparation: 2-4 weeks
- CDC/SBA approval: 4-6 weeks
- Closing process: 4-6 weeks
- Total typical timeline: 3-4 months

## Key Requirements Throughout Process
- Maintain good communication with CDC and lender
- Respond promptly to information requests
- Meet all deadlines for document submission
- Keep detailed records of all transactions
- Maintain required insurance coverage
- Comply with all SBA regulations and requirements