Central City Alliance

Financing Growth With the SBA 504 Program

Sep 27, 2002

By Douglas H. Adams, Vice President, Comerica Bank

Expanding a business often presents unique challenges to the business owner. While the owner may need to purchase equipment or real estate, he or she may have limited funds available because the firm's equity must be conserved for other projects. In other instances, the owner may need to repay the loan over a longer period of time than is possible through conventional financing. An option to consider in these situations is the Small Business Administration (SBA) 504 program.

SBA 504 loans are available through banks, and community development corporations (CDCs). The loans can be used to finance the purchase of machinery and equipment or real estate. For established businesses, typically 50 percent of the financed amount is provided through a bank, 40 percent through the development corporation and 10 percent through the owner's equity.

Loan terms from banks and the CDCs vary.
Bank loan terms for equipment and machinery are at least seven years; for the development organization, the loan terms are 10 years. For real estate transactions, bank loan terms are at least 10 years and the development organization's terms are 20 years.

Wholesaling, retailing and manufacturing firms must meet certain sales volume and employment base standards to be eligible for the SBA 504 program. The SBA will not guarantee loans to non-profit organizations, real estate investment firms, financial institutions, private recreational facilities, and gambling or other speculative facilities.

Comerica Bank, headquartered in Detroit, is the nation?’s 3rd largest SBA lender, and the nation?’s #1 bank in the category of business loans as a percent of total assets. For more information on SBA lending or other banking needs for your business, contact
Douglas Adams at 313-222-5277.