SBA 504 Loan

rdf:langString SBA 504 Loan

rdf:langString The U.S. Small Business Administration's SBA 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets, which usually means real estate, buildings and machinery, at below market rates. The program is so named because it was originally created by Section 504 of the Small Business Investment Act of 1958. Section 504 was subsequently codified at 15 U.S.C. § 697a. As part of its mission to promote the development of businesses, the SBA offers a number of different loan programs tailored to specific capital needs of growing businesses. The 504 program works by distributing the loan among three parties. The business owner puts a minimum of 10%, a conventional lender (typically a bank) puts up 50%, and a so-called Certified Development Company (CDC) puts up the remaining 40%. Certified Development Companies are established under the SBA 504 program as non-profit corporations set up to support economic growth in their local areas. There are a few hundred such CDCs nationwide. The maximum amount of the loan is $5 million ($5 million for meeting SBA-defined policy goals, and $5.5 million for manufacturers and some energy-related policy goals), and if the borrower defaults, the private sector lender is paid off first, reducing the risk to the lender and encouraging loans.