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 and equipment. Essential Capital works with the SBA and private-sector lenders to provide financing to businesses. Eligible businesses must be operated for profit and have a tangible net worth of not more than $15 million and net profits of $5 million or less.
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, and ten percent is contributed by the borrowing business as owners equity.
| $4,000,000 Project | |
| ABC Bank | $2,000,000 |
| Essential Capital | $1,600,000 |
| Borrowing Business | $400,000 |
In most cases the maximum Essential Capital 504 loan is $5 million. And In general, a business must create or retain one job for every $65,000 provided by the 504 loan.
The maximum Essential Capital 504 loan for eligible manufacturing projects is $5.5 million. In order to qualify for a $5.5 million 504 loan the project needs to be 1) an eligible manufacturing project, 2) projects incorporating energy saving technologies for sustainable design, 3) projects that generate renewal energy like solar, wind or geothermal, 4) small businesses wishing to purchase, construct or retro-fit facilities incorporating energy saving technologies that result in a 10% increase in energy consumption.
Proceeds from 504 loans must be used for fixed asset projects such as: purchasing land and improvements, including existing buildings, major renovations and/or additions to existing buildings; marine facility acquisition, including fishing vessels and commercial boats; or purchasing long-term machinery equipment.
Franchises work too. The 504 loan program can be an excellent financing option for franchisees. If the franchise system is eligible for the 504 loan program, and is listed with the Franchise Registry, the loan process through SBA may be expedited.
Costs incurred for architects fees, engineers, attorneys, environmental studies, land preparation, loan fees, etc. can be paid for with the proceeds of a 504 loan.