504 Facts

The last five years taught us a lot.  The downturn in our economy led to both an increase in the number of struggling businesses and foreclosures and a decrease in property values.  The market was tough to say the least.

Now, imagine if there was a way to loan with more certainty, stability and security.  You can with the 504 Loan Program.  The 504 Loan Program is fixed rate financing for capital expenditures and can finance up to forty percent of a project's fixed assets (the first mortgage loan has no max, the second mortgage 504 cannot exceed $5 million and, in some cases, %5.5 million).  Healthy businesses may qualify for the 504 Loan Program if their expansion plans call for the purchase and use of real estate and/or equipment.

Using the 504, borrowers are certain of their interest rate on about 1/2 of their project, thereby eliminating the risk involved when a five year balloon comes due...and we all know there's no way of knowing where rates or property values will be in five years.

Lenders benefit too by being secure in the knowledge they've cut their risk in half.  Given the benefits, why wouldn't you consider the 504 for every commercial real estate deal? 

504 Case Study

Industrial Purchase with Build Out

Uses:
Building Purchase $4,000,000
Renovations/Equipment $2,750,000
Interest Reserve $50,000
Soft Costs $50,000
Total $6,850,000

Bank Conventional Structure           504 Structure
Bank.......75%.....$5,137,500                Bank..................50%.....$3,425,000
Equity.....25%.....$1,712,500                Growth Corp.....40%.....$2,740,000
Est. 75% advance on cost                    Equity................10%.....$685,000

Total Cash Outlay                              Total Cash Outlay
$1,712,500                                            $685,000

TOTAL CASH OUTLAY SAVINGS = $1,027,500

Download the 504 Fact Sheets