SBA 504 Loan FAQ

What is a 504 loan?

A 504 loan is a type of business loan backed by the U.S. Small Business Administration (SBA) that helps small businesses finance major fixed assets, usually real estate or long-term equipment.

The U.S. Small Business Administration established the 504 loan to help businesses purchase owner-occupied commercial real estate and equipment while retaining working capital. The SBA 504 loan puts financing within reach for small businesses through low down payments and long-term, low, fixed interest rates. It also reduces the risk to lenders through a shared financing structure.

Can I refinance a current loan through a 504 Loan?

Yes, through a 504 loan we can help refinance SBA loans and commercial loans.

What is the advantage of a 504 loan?

• Low Down Payment
  Only 10% down in most cases (vs. 20–30% with conventional loans). Startups or special-purpose properties may require 15–20%.
• Long-Term, Fixed Rates
  CDC/SBA portion is fixed for 10, 20, or 25 years. Protects from rising interest rates.
• Preserves Working Capital
  Since businesses put less down, more cash is able to be kept in the business for operations, payroll, or growth.
• Supports Business Growth
  Allows businesses to buy their own building, expand facilities, or invest in big equipment—rather than renting or relying on short-term financing.
• Stable Payments
  Fixed monthly payments (on the SBA portion) make it easier to budget long-term.
• Job Creation Incentive
  The program is designed to encourage economic development, so borrowers benefit from attractive terms if they help create or retain jobs.

What can be financed under 504?

The 504 loan will finance the fixed assets of a business. Traditionally, fixed assets are commercial real estate property or equipment that has an economic life of 10 years or longer.

What does a 504 loan cost?

All of the fees of the SBA loan are financed as part of your loan. As the borrower, your out-of-pocket costs will come from the participating lender and the costs of a title company (if the project involves real estate).

Since a lender is also involved, does that mean there will be two loans?

Yes, once a loan is approved and closed there will be two loans which include two separate payments. There will be a loan from the third-party lender and one from SBA/Cen Cal Business Finance Group.

City of Fresno Revolving Loan Program

What is City of Fresno Revolving Loan Program?

Business loans for inventory, working capital, equipment, and leasehold improvements, with minimum loan amounts of $10,000 and maximums of $100,000, in cooperation with a third-party lender.

What is the advantage of using the City of Fresno Revolving Loan Program vs. conventional financing?

The City of Fresno Revolving Loan Program is not a substitute for conventional financing. We encourage small business owners to obtain conventional financing when possible.

If you have a business that is located in Fresno’s Empowerment or Enterprise Zones the City of Fresno’s Revolving Loan Program will give you special consideration and assistance in the financing of real estate, working capital and equipment purchases. Loans are offered with a fixed rate of interest and with extended maturities.

What is a third party lender and how will I find one?

A third party lender is a bank or a lending institution. Cen Cal works with many banks and non-bank lenders and will help you locate the one that best suits the financing of your business.

Does that mean that I have two loans?

Yes, once your loan is complete you will have to make payments to the third party lender and the Cen Cal Business Finance Group.

Who do I apply to first?

You should make application to the Cen Cal Business Finance Group first. We will determine your eligibility, help with any additional paperwork required, and if approved will locate a participating third party lender if needed.

What will this loan cost me?

There is no cost to making an application. Upon approval and the funding of your loan, you will be charged 1.5% of the loan amount plus $500 for processing. These fees can be financed as part of your loan.

You will also be charged a loan fee, which can vary, by the third party lender. Each third party lender has different fees. You will also be charged for any extraordinary costs such as appraisals and filing documents like a deed of trust.

Are there any other conditions that must be met?

Yes. In addition to being located in Fresno Empowerment or Enterprise Zones, you should be able to predict the number of jobs that will be created as a result of receiving this loan. While there is no penalty for not meeting the projected job creation, the prediction should be a reasonable goal.