What is an SBA 504 Loan? Step-by-Step Typical 504 Structure What is an SBA 7(a) Loan?
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Comparison of SBA 504 and 7(a) Loan Programs

Issue 504 Loan Program 7(a) Loan Program
Purpose of loan Fixed assets such as owner-occupied Any business purpose real estate and heavy equipment; no refinancing or working capital Any business purpose
Goal of program Job creation and retention; economic development Capital access - access to capital for businesses that would not qualify elsewhere
Rates and Terms Bank loan: Variable or fixed; must be at least half as long as term of CDC loan

CDC loan: Fixed rate, 10- or 20-year maturity
Variable or fixed; term of up to 25 years depending on use of proceeds
Maximum project amount Bank loan size is unlimited; generally used for projects of $3.75 million to $12 million;
$14 million for manufacturing
Maximum $5 million guaranteed amount which bank funds
Fees Bank loan: Application fee and construction loan fee (if applicable) vary by bank

CDC loan: Upfront fees of approximately 1.5 percent which are usually financed but as of today (Dec 2010) temporarily waived
Upfront guarantee fee of approximately 3% on guaranteed portion;
ongoing fee of 54.5 basis points paid by lender
As of today (Dec 2010) temporarily waived
Bank lien position Bank has exclusive first lien Bank holds the first lien; with typical 75% guarantee, the lender receives 75% of any proceeds from a liquidation and SBA receives 25%
Loan-to-Value Bank loan: Typically 50%

CDC loan: Maximum of 40%
Maximum of 90%
Qualification Business net worth not to exceed $15 million; average net profit for 2 consecutive years not to exceed $5 million after taxes Depending on the type of business, annual sales of less than $5 million or manufacturing firm of less than 500 employees
Prepayment penalties CDC loan: Penalty is 10% of one year's interest in the first year,9% next year declining 0% for 10th year Low; no penalty for up to 20% prepayment in first 3 years
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