This page is SBA 504, not SBA 7(a). SBA 504 is the U.S. Small Business Administration's owner-occupied commercial real estate program. SBA 7(a) is a separate guaranty. The structure is roughly 50% bank first mortgage , 40% SBA-guaranteed CDC second mortgage at long-dated fixed rate, and 10% borrower equity. Used for owner-occupied building purchase, construction, or substantial improvement.
What does SBA 504 execute well?
Owner-occupied commercial properties where the operating business uses 51%+ of the building (60%+ for new construction). Examples: medical office for a practice, light industrial for a manufacturer, professional building for a law firm. Maximum loan size around $5.5 million on the CDC piece, with no maximum on the bank first.
What are the limits?
Owner-occupancy requirement (51%+ of building used by operating business). Process timeline of 60 to 120 days from application to closing through a CDC and a bank. Personal guarantees from owners of 20%+ of the operating company. Job creation/retention requirements that the CDC documents.
Sources
- 504 loans · U.S. Small Business Administration · current