Loan Programs
504 Loans
The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. Essential Capital works with the SBA and private-sector lenders to provide financing to businesses.
504 loan program eligible businesses are operated for profit and do not have a tangible net worth in excess of $7.5 million. The average net income must be equal to or less than $2.5 million after taxes for the preceding two years. Businesses speculating or investing in rental real estate are not eligible.
Fifty percent of a project's cost is generally funded with the proceeds of a senior lien loan from a private-sector lender. Forty percent of the project cost can be funded with the proceeds of a junior lien loan from Essential Capital, which is backed by a 100 percent SBA-guaranteed debenture. Ten percent is contributed by the borrowing business.
| $4,000,000 Project | |
| ABC Bank | $2,000,000 |
| Essential Capital | $1,600,000 |
| Borrowing Business | $400,000 |
The maximum Essential Capital 504 loan is $2 million when a project meets one of the following criteria:
Public policy goals include:
-Business district revitalization
-Expansion of exports
-Expansion of minority business development
-Rural development
-Increasing productivity and competitiveness
-Restructuring because of federally mandated standards or policies
If the project does not fulfill one of the above criteria the maximum Essential Capital 504 loan amount is $1.5 million.
Generally, a business must create or retain one job for every $50,000 provided by the 504 loan.
The maximum Essential Capital 504 loan for "Small Manufacturers" is $4.0 million. A Small Manufacturer is defined as a small business concern that has: Its primary business classified in sector 31, 32, or 33 of the North American Industrial Classification System.
In order to qualify for a $4 million 504 loan, the Small Manufacturer must 1) meet the definition of a Small Manufacturer described above, and 2) either (i) create or retain at least 1 job per $100,000 guaranteed by the SBA [Section 501(d)(1) of the Small Business Investment Act (SBI Act)], or (ii) improve the economy of the locality or achieve one or more public policy goals [sections 501(d)(2) or (3) of the SBI Act].
Proceeds from 504 loans must be used for fixed asset projects such as: purchasing land and improvements, including existing buildings, grading, street improvements, utilities, parking lots and landscaping; construction of new facilities, or modernizing, renovating or converting existing facilities; or purchasing long-term machinery and equipment.
Costs incurred for architects, engineers, attorneys, environmental studies, land preparation, loan fees, etc. can be paid for with the proceeds of a 504 loan.
View 504 Project Estimate Example