SBA 504 Loans

A Small Business  Loan for Expanding Operations.

The SBA 504 loan program may be the solution for the small business seeking to expand its operations.

First National Bank of Northfield provides 50 percent of the project costs and partners with a Certified Development Company (CDC) which finances 40 percent of the project costs. The CDC loan is 100 percent guaranteed by the SBA. The borrower contributes the remaining 10 percent of the project costs. Proceeds may be used for land, buildings or equipment.

Contact one of First National’s experienced business bankers to see if you qualify.


Lower Down Payment Business owner pays only 10% down, borrowing up to 90% of the total financing need. Some loans may require a larger down payment.
No Balloon Payment Loan is paid off at the end of the amortization period.
SBA Fixed Rate The rate on the SBA portion of the loan is fixed for the entire term, making cash flow management easier for the business owner.
Finance Project Costs All project costs can be financed, including land, building and construction costs and soft costs such as title insurance, legal fees, appraisal, environmental and bridge loan fees. Closing costs may also be financed.
Projected Income Consideration SBA lenders consider projected income of a business in addition to historical cash flows. This is particularly advantageous for startup and growing business.

504 Sample Project

Use of Funds Land and Building
Soft Costs and Contingency
Total Use of Funds
Source of Funds 50% First Mortgage
40% 504 Loan – Second Mortgage
10% Owner’s Equity Injection
Total Source of Funds

SBA 504 Term Loan Information

Eligibility For-profit businesses.
Including affiliates, tangible net worth not in excess of $15 million.
Net profit after tax averaging less than $2.5 million for the previous two years.
Not for businesses engaged in speculation or investment in rental real estate.
Meets job creation and/or retention goals as determined by the SBA 504 loan amount. (One job created for every $65,000 in SBA loan funds or $100,000 for small manufacturers.)
Loan Size Minimum total project size of $125,000 with no maximum project size.
SBA 504 portion has a minimum of $50,000 and a maximum of $5.5 million.
Use of Proceeds Land
Building purchase, construction or renovation.
Equipment (minimum useful life of 100 years).
Financing 50% financed by First National Bank of Northfield.
40% SBA loan through Certified Development Company.
10% borrower equity injection. (Increased equity injection may be required on some projects.)
Collateral First National holds first mortgage on real estate, and/or secured interest in equipment and machinery being financed.
SBA holds second mortgage on real estate, or second secured interest in equipment and machinery being financed.
Underwriting Requirements Personal guaranties by all owners of 20% or more.
Hazard insurance.
Loan Terms First National Bank of Northfield loan: minimum 10 years on real estate, 7 years on machinery and equipment.
SBA loan: 10 or 20 years.
Interest Rates First National Bank of Northfield loan – negotiated between borrower and bank.
SBA loan – below market fixed interest rate for the entire term of the loan. Loan rate set when debenture is sold.
SBA Fees SBA loan – approximately 3% of the SBA loan and may be financed with the loan.
Application Materials View the application and materials checklist

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