SBA 504 Current Rates

As of Jan. 2025

10-year

6.519%

20-year

6.395%

20-year “refi”

6.425%

25-year

6.325%

25-year “refi”

6.354%

SBA 504 Loan Program

The SBA 504 loan program is designed to provide long-term, below-market, fixed-rate second lien funding for expanding businesses. The program is normally used in conjunction with conventional bank financing to provide up to a total of 90% project cost financing. Funds are available through the Greater Syracuse Business Development Corporation (GSBDC) for projects in New York State.

Eligible Projects

Owner occupied projects should create or retain jobs or meet a community or national objective. The acquisition of land, buildings, machinery and equipment, building expansion and new construction qualify for funding. Under some circumstances leasehold improvements may be eligible. Most related soft costs are eligible, such as surveying, engineering, appraisals, environmental audits, architectural, some legal expenses, accounting and construction period interest.

Eligible Businesses

The business concern must be creditworthy and eligible as a small business as defined by the U.S. Small Business Administration (SBA). Generally, a business is “small” if it and its affiliates have a tangible net worth under $15,000,000 and does not have average net income over $5,000,000 during the last two years. Most types of for-profit businesses are eligible except for investment and finance companies. Owners of 20% or more of the business will be required to guarantee.

Loan Limits

Normally 40% of the project cost can be covered, up to a maximum SBA 504 loan amount of $5,000,000; or $5,500,000 per project if the borrower is a manufacturer in NAICS Sectors 31, 32 or 33 or meets certian SBA public policy energy goals.

In all cases 10% must be injected as equity by the business concern or principals. A typical project can range in size from $200,000 up to $13,750,000 and consists of a financial institution lending 50% in a first lien position, GSBDC providing 40% in a second position and the business concern or principals injecting 10% equity.

Exceptions to the above are as follows: When an applicant is either a start-up business (defined as 2 years old or less) or the collateral is special purpose/limited use, the minimum equity is 15%, or 20% if both a start-up and of limited use. In these situations, the financing structure would be either 50/35/15 or 50/30/20.

Term

Ten years – Machinery and Equipment
Twenty or Twenty-five years – Real Property

Interest Rate

Interest rates are fixed and established at the time of SBA 504 loan funding. The rate (inclusive of all servicing fees) to the borrower is based on five or ten year treasury notes depending upon the loan term.

Lien Position

The SBA 504 loan program is normally a second mortgage or security interest in real estate and/or machinery and equipment. Personal guarantees and key person life insurance are required.

Prepayment

Prepayment is only allowed in full. A prepayment penalty will apply during the first half of the loan term. However, SBA 504 loans can be assumed by an eligible small business.

Fees

Typically, fees consist of 2.66% of the SBA 504 loan amount. These fees in addition to the GSBDC legal fees are financed 100% and added to the 504 note. A $2,500 legal closing fee will be required at the time of SBA approval.

Application Process

    1. Business decides to acquire or expand via real estate and/or machinery and equipment acquisition.
    2. Business contacts GSBDC to outline project and determine eligibility.
    3. GSBDC provides a list of required information for complete application.
    4. After the application is prepared (including bank commitment), the GSBDC Loan Committee reviews with principals present. Upon Loan Committee approval, the GSBDC Board of Directors will review within days. Upon Board approval, the loan application is submitted to the SBA. Approval from SBA will usually take about one week.
    5. After written loan authorization is received from SBA, a project is usually started with interim financing from the primary lender. After project completion, a closing is scheduled and the permanent financing is provided.

Other

SBA 504 mortgages through GSBDC are exempt from mortgage taxes. Therefore, a savings of generally 1% of the SBA 504 loan amount is provided.

Seller financed mortgages are allowed if subordinate to the GSBDC/SBA 504 loan.

On new construction, up to 20% of the building may be leased to another tenant permanently and up to 40% on a temporary basis.

If purchasing an existing building, the applicant must occupy 51% of the space. The balance may be leased, as long as no proceeds of the 504 loan are used to remodel or convert the rental space.

Environmental and appraisal reports will be required for all realty projects.

More FAQs

Certified Development Companies are local public/private partnerships organized as non-profit community based corporations that provide 504 financing to local small companies. They are “Certified” by the Small Business Administration to offer 504 loans to eligible small businesses.

They market, package, process, close and service 504 loans as well as offer other economic development programs in their areas of operation. GSBDC can fund projects in Upstate New York.

In most cases the first mortgage/first lien lender is a bank. The typical structure of a 504 loan is as follows:

Source of Funds Project Financing %
First Mortgage/First Lien Lender 50%
SBA/Certified Development Company 40%
Small Business Concern (SBC) 10%*

*the SBC’s contribution will increase to 15% if the project involves a new business and/or special purpose property; 20% if it involved both a new business and special purpose property.

  • Purchase of land
  • Purchase or construction of an owner-occupied building
  • Modernization, renovation, restoration of a building
  • Acquisition of machinery and equipment with at least a useful life of ten years
  • Soft costs associated with the project (appraisals, environmental studies, construction period interest, closing costs, etc.)

Yes! Debt refinancing is permitted with or without a business expansion. The debt refinanced must not exceed 100% of the cost of the expansion and must meet other refinance criteria.

504 Projects typically range in size from $200,000 to $13,750,000 with the 504 loans ranging from a minimum of $25,000 to a maximum of $5,000,000; or $5,500,000 per project if the borrower is a manufacturer in NAICs sectors 31, 32 or 33 or if there is at least 10% reduction in borrower’s energy consumption or the project generates renewable energy or renewable fuels, such as biodiesel or ethanol production.

A business must be for-profit and have less than 500 employees. Its net worth must not exceed $15.0 million and its average net income after taxes for the preceding 2 years must not exceed $5 million. Eligible businesses must be corporations, partnerships or proprietorships with a “sound business” purpose.

Anyone who owns 20% or more of the operating small business or the real estate must personally guarantee the loan.

Yes. Anyone can own the realty. The ownership of the realty does not have to match the ownership of the operating company. Many small business owners (for liability, tax or estate planning purposes) choose to have the building owned by someone other than themselves or the operating company.

The first mortgage lender must provide at least a ten-year term when the SBA 504 loan is for 20 years and a seven-year term if the SBA 504 loan is for 10 years. The interest rate and terms on the first mortgage/first lien are negotiated between the Bank and the Borrower.

The rates are fixed and established at the SBA 504 closing. The 504 loans are pooled nationwide and sold to major institutional investors once each month.

Once GSBDC has received all the necessary items on the checklist, a Loan Committee meeting is scheduled with the Borrower present. If all is satisfactory, the Loan Committee recommends approval to the GSBDC Board of Directors within days. Upon Board approval, the application is forwarded to the SBA who will review it in 3 to 5 business days.

Both are SBA guaranteed loans. The 504 loan is a low down payment, fixed-rate, long-term loan to assist a growing business to acquire a larger facility or more equipment. While the 7(a) loan can also be used to finance those costs, the down payment is generally higher and the interest rate typically floats at a higher rate. Hence, the total cost of a 7(a) loan to the company can be significantly higher than the cost of a 504 loan.

For every $65,000 of SBA 504 funds, 1 full-time permanent job must be created or retained within 2 years. If a company meets one of SBA’s public policy goals and GSBDC has a sufficient loan to job ratio, this requirement may be reduced. If the borrower is a manufacturer in NAICs sectors 31, 32, or 33, the job creation requirement is one job per $100,000 of SBA 504 assistance.

It depends on the type and complexity of the loan. GSBDC can work with you to ensure you have all the necessary items for a review of your loan request.

Call us! We’ll work with you on the initial intake to go over your needs in relation to the type of loan that would be applicable to you.

Yes, every business should have a business plan. A business plan is required by any business lender. For assistance in preparing your business plan, please see  onondagasbdc.org.

All loans require some equity injection. The amount will depend upon the financing request, available collateral, strength of the credit and financing program.