# 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

  1. May increase to 15% for new businesses
  2. May increase to 20% for special-use properties

## Step 1: Prequalification 1. Verify business eligibility:

  1. For-profit business
  2. Net worth under $15 million
  3. Net income under $5 million after taxes
  4. Owner must occupy 51%+ of property
  5. Project must create/retain jobs or meet public policy goals

2. Gather required documentation:

  1. Business financial statements (3 years)
  2. Tax returns (3 years)
  3. Business plan
  4. Personal financial statement
  5. Real estate information or equipment specifications
  6. Project costs breakdown

## Step 2: Application Process 1. Identify and apply with a Certified Development Company (CDC)

  1. CDC is a nonprofit organization certified by SBA
  2. Will assist with application package
  3. Helps structure the deal

2. Secure conventional lender for first mortgage

  1. Usually a bank or credit union
  2. Must provide minimum 50% of project cost
  3. Conducts own underwriting process

3. Complete CDC/SBA application package:

  1. SBA Form 1244
  2. Business organization documents
  3. Environmental studies
  4. Real estate appraisal
  5. Equipment appraisals (if applicable)
  6. Construction plans (if applicable)

## Step 3: Underwriting 1. CDC Review

  1. Analysis of business financials
  2. Verification of job creation/retention
  3. Project feasibility study
  4. Credit analysis

2. SBA Review

  1. Final approval authority
  2. Reviews CDC recommendation
  3. Issues authorization if approved

## Step 4: Closing Process 1. First Mortgage Closing

  1. Conventional lender closes their portion
  2. Funds held in escrow

2. CDC/SBA Debenture Closing

  1. CDC prepares closing documents
  2. SBA reviews and approves
  3. Debenture sale scheduled

3. Funding

  1. Debenture sold to investors
  2. Funds disbursed
  3. Project completed

## Step 5: Post-Closing Requirements 1. Ongoing Reporting

  1. Annual financial statements
  2. Tax returns
  3. Insurance certificates
  4. Job creation verification

2. Compliance Monitoring

  1. CDC annual inspections
  2. Occupancy requirements
  3. Job creation/retention verification
  4. 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