SBA 504

Fixed Asset Loans

The Small Business Administration (SBA) 504 Certified Development Company Loan Program was created in 1980 to promote small business expansion.  The program provides long-term, low down payment, competitively priced capital for healthy, growing businesses that have a high probability of enhancing  local employment in an area.  A CDC, typically a non-profit corporation, receives designation from the SBA to administer this economic development program.  The South Central Kansas Economic Development District, Inc. (SCKEDD) serves a 14-county region in South Central Kansas.   The Wichita Metropolitan Area is the heart of the region that includes Butler, Chautauqua, Cowley, Elk, Greenwood, Harper, Harvey, Kingman, Marion, McPherson, Reno, Rice, Sedgwick and Sumner Counties.  CDCs work with the SBA and private sector lenders to provide small business concerns access to scarce capital. 

 Typically, a 504 project includes a loan secured by a first lien from a private-sector lender that finances up to 50% of an eligible project’s cost, a secured second lien from a CDC (backed by a 100% guaranteed debenture) that funds up to 40% of the project’s cost and the small business is required to inject at least 10% of the eligible costs.  (New and limited purpose businesses may be required to inject additional equity.)

FOR QUESTIONS, PLEASE CALL SCKEDD’S 504 PROGRAM PROFESSIONALS.

 Eligibility

• Be an operating business
• Be organized for profit
• Be located within the United States
• Be a small business according to SBA standards
• Meet an economic development objective of the program
• Demonstrated the need for financing

1.       Credit not available elsewhere

2.        Limited Liquid Resources Test

 Projects Financed

• Land acquisition
• Building acquisition and improvements
• New Construction
• Machinery and Equipment purchases
• Professional and interim loan fees

 One full-time job must be created or retained for each $50,000 invested unless the project meets a public policy or the CDC overall 504 portfolio meets the one job per $50,000 invested threshold.

Loan Amount

• An eligible entity may borrow up to 40% of the project’s costs or a total SBA guaranteed portion of $1.5 million.
• If the project meets a Public Policy Goal the maximum guaranteed portion may increase to $2 million .  
• The minimum debenture/loan should be at least $25,000 (translates to a total project size of $62,500)

      NEW CATEGORY:  Small Manufacturers as defined by the SBA

• The total SBA guaranteed portion cannot exceed $ 4 million.

 Interest Rate

• Fixed rate indirectly based on prime and set when debentures are sold to the public.

 Repayment

• Fully amortized 10 or 20 year loans. 

 Collateral

• Generally, the project assets being financed are used as security.  504 loans are secured by a second lien on project assets (Land, Building, Machinery and Equipment).
• Participating private sector lenders are granted a first lien on project assets.
• Personal guarantees by and assignable key person life insurance on the owners of the business are required.

 The 504 Program is an under-utilized economic development program.  The program stimulates private sector investment, increases productivity, creates and retains jobs and increases an area’s local tax base.  The 504 program helps small businesses overcome the obstacles normally associated with traditional loan criteria.  The SBA’s involvement spreads the lending risk and thereby recruits private sector lenders to participate in projects that they would not otherwise be involved in.  

Download the loan application here.  Or fill out the application on-line at www.kacdc.com. 

For More Information Contact:

Sandra Ring, Program Manager
Email:  sandy@sckedd.org
316-262-7035
200 W. Douglas, Suite 710
Wichita, Kansas 67202