At MADCO, we specialize in SBA 504 loans, offering businesses a robust solution for acquiring or refinancing major assets. SBA 504 loans provide long-term, fixed-rate financing ideal for real estate, equipment, and infrastructure projects. With MADCO, navigating the SBA 504 loan program is streamlined, ensuring businesses benefit from low down payments and favorable terms. Our expert team guides you through the entire process, from eligibility assessment to final approval and funding. Choose MADCO for your SBA 504 loans needs and secure sustainable growth and stability for your business. Contact us today at (405) 424-5181 or via email at VBOWEN@MADCO.NET and JTAYLOR@MADCO.NET to learn more about how SBA 504 loans can benefit your business.

Under the 504 program, qualifying businesses can receive second mortgage financing for up to 40 percent of a project's cost or a maximum loan amount of $5,000,000. Small manufacturers (primary NAICS code in Sections 31, 32, and 33 and all production facilities located in the US) are now eligible to receive a maximum 504 loan of $5,500,000.

A traditional loan package features 40 percent financing through the SBA 504 program, 50 percent financing through a private lender, and an investment of 10 percent from the small business itself. [The small business investment may increase to 15-20 percent for start-ups, single-purpose real estate, or higher-risk industries]. This blended loan featuring joint private sector financing and SBA 504 financing offers several advantages. First, up to 40 percent of the total loan is fixed at a rate typically near or below the market rate for a term of 10 or 20 years. Additionally, MADCO takes a second mortgage position. Therefore, private lenders are often more willing to provide financing since their 50 percent investment is secured by 100 percent of the assets. Through the SBA 504 program, the borrower is offered a long-term, fixed rate, and private lenders are offered greater collateral for their investment/risk.

SBA 504 loans may be used to finance the cost of fixed assets such as land, buildings, new construction, machinery and equipment, renovations, leasehold improvements, and associated soft costs such as title insurance, legal, appraisal, environmental, and bridge loan fees. SBA 504 loan closing costs may be financed.

SBA 504 is a community lending program designed to improve the locality and promote job creation. Each 504 project must meet at least one of the following three economic development objectives:

1. Creation and/or retention of one job per every $65,000 borrowed from the CDC under the SBA 504 loan program. Jobs must be created within two years of the completion of the project. (Small manufacturers must create, preserve or retain one job for every $100,000 guaranteed by SBA.)

OR

2. Improvement of the economy of the locality

OR

3. One of the following public policy goals:

• Revitalize a business community with a written revitalization plan
• Expand exports
• Expand minority business development (owned 51% or more by a minority business person)
• Change necessitated by federal budget cutbacks
• Change required by mandated standard regarding health, safety, and the environment
• Increase productivity and competitiveness (retooling, robotics, or modernization)
• Expand woman-owned business development
• Expand veteran-owned business development

Businesses must have a tangible net worth of less than $15 million and average net profits after taxes of less than $5.0 million during the past two fiscal years or meet other SBA size standards. The business must be organized as a for-profit business. Types of businesses eligible include retail, service, wholesale, or manufacturing.

Non-qualifying businesses include passive income and real estate companies, developer/landlord deals, financial institutions, unregulated media, and not-for-profit businesses.

Principals (owners) must be U.S. citizens or registered aliens with green cards. INS verification of non-U.S. citizen status is required. Owners cannot be convicted felons currently on probation. Anyone who owns 20 percent or more of the operating company must personally guarantee the note.

The maturity on any 504 loan is either 10, 20, or 25 years, depending on the useful life of the assets. If a 504 loan has a maturity of 20 years, the participating lender's portion of the debt is required to have a maturity of at least 10 years. If the 504 loan has a maturity of 10 years, the participating lender's portion of the debt must have a maturity of at least 7 years.

The rate on the SBA portion is set when the CDC sells the bond (debenture) to fund your loan. The rate is then fixed for the term of the loan. 504 loans are amortized securities. For a historical reference on debenture pricing, you may contact the MADCO office. When the loan closes, your monthly payment will include servicing fees based on the declining balance of the SBA 504 loan: 0.625% to CDC; 0.368% to SBA; and 0.100% to the central servicing agent.

The fees on the SBA 504 loan portion are approximately 2.75 percent. All of the fees on the 504 loan are added to the loan amount so that you can amortize their cost over the term of the loan.

Special Notes

There is a prepayment penalty for the first half of the loan term on the SBA 504 loan. Payments on the SBA 504 loan are made by ACH debit to the borrowers designated checking account on the first of each month after the loan closes. Payments on the 504 loan are separate from your payments on the 50 percent first mortgage loan.

Low down payment. In most cases, just 10 percent. Let's preserve your cash for your working capital. .

Fixed rate on the SBA 504 portion. You don't have to worry about the prime lending rate going up. You can plan because you know the amount of your mortgage payments for the next 20 years.

Long term. SBA 504 loans are for 10 or 20 years. Because the CDC/SBA is in a second lien position, the bank or other lender doing the 50 percent first mortgage loan is willing to lend over the long term. Longer terms make your monthly payments lower.

Low interest rate. Even with all the fees and closing costs included in the rate, it is still a low rate for a subordinate mortgage loan, particularly for small businesses. The blended rate between the bank portion and the SBA 504 portion makes the project affordable to the borrower.

The 504 program encourages banks and other lenders to make loans in the first position on reasonable terms, helps them retain growing customers, and provides Community Redevelopment Act credit.

Although the loan process is neither lengthy nor complicated, the borrower or small business concern (SBC) will be required to provide documentation to enable the MADCO Board of Directors to evaluate the credit worthiness of the loan application

The SBA 504 program may be the financing solution you're looking for. All required forms are available at the office of Metro Area Development Corporation, 1144 NW 50th Street, Oklahoma City, OK 73118.