SBA 504 Loan Calculator
The SBA 504 loan program provides long-term, fixed-rate financing for small businesses to purchase real estate or equipment. This program combines a conventional bank loan, an SBA debenture, and owner equity to finance up to 90% of the project cost with favorable terms and rates.
- SBA 504 Loan Structure: Calculate the three-part financing structure
- Payment Analysis: Compare monthly payments and total costs
- Refinance Analysis: Evaluate refinancing existing SBA 504 loans
SBA 504 Loan Structure Calculator
Use this calculator for SBA 504 loans which provide financing for commercial real estate, equipment purchases, and business expansion projects.
Results:
| Owner Equity Required | $100,000.00 |
| Bank Loan Amount | $500,000.00 |
| SBA Debenture Amount | $400,000.00 |
| Bank Monthly Payment | $5,945.80 |
| SBA Monthly Payment | $2,779.20 |
| Total Monthly Payment | $8,725.00 |
| Total Interest (Combined) | $567,248.00 |
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| View Payment Schedule | |
SBA 504 Payment Analysis
Results:
| SBA 504 Monthly Payment | $6,125.50 |
| Comparison Monthly Payment | $7,551.00 |
| Monthly Savings | $1,425.50 |
| SBA 504 Total Interest | $425,320.00 |
| Comparison Total Interest | $684,180.00 |
| Total Interest Savings | $258,860.00 |
| Cash Flow Improvement | $17,106.00/year |
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| View Payment Comparison | |
SBA 504 Refinance Analysis
Analyze the benefits of refinancing an existing SBA 504 loan or converting conventional financing to SBA 504.
Results:
| Current Monthly Payment | $7,125.25 |
| New SBA 504 Payment | $5,250.00 |
| Monthly Savings | $1,875.25 |
| Annual Cash Flow Savings | $22,503.00 |
| Total Interest Savings | $187,530.00 |
| Break-even Period | 8.0 months |
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| View Refinance Analysis | |
Understanding SBA 504 Loans
The SBA 504 loan program is designed to help small businesses purchase real estate and equipment with favorable terms and lower down payments. The program combines three sources of financing: a conventional bank loan, an SBA debenture, and owner equity to create an attractive financing package.
| Financing Component | Typical Percentage | Terms | Rate Type |
|---|---|---|---|
| Bank Loan | 50% | 10 years | Variable or Fixed |
| SBA Debenture | 40% | 10 or 20 years | Fixed Rate |
| Owner Equity | 10% | N/A | No Interest |
| Special Purpose | 15% equity | Varies | Fixed Rate |
SBA 504 Loan Structure Benefits
The three-part financing structure of SBA 504 loans provides significant advantages over conventional commercial financing:
Key Advantages
| Benefit | SBA 504 | Conventional | Advantage |
|---|---|---|---|
| Down Payment | 10% | 20-30% | Lower cash requirement |
| Interest Rate | Below market | Market rate | Lower cost of capital |
| Loan Term | Up to 20 years | 5-10 years | Lower monthly payments |
| Prepayment | No penalty after 10 years | Often penalties | Flexibility |
Eligible Uses for SBA 504 Loans
SBA 504 loans can be used for specific business purposes that promote job creation and economic development:
Real Estate Uses
- Owner-Occupied Buildings: Purchase or construction of facilities for business use
- Land Purchase: Acquisition of land for business expansion
- Building Improvements: Renovations and improvements to existing facilities
- New Construction: Building new facilities for business operations
Equipment and Machinery
- Manufacturing Equipment: Machinery for production and manufacturing
- Technology Systems: Computer systems and software (with limitations)
- Vehicles: Commercial vehicles and specialized equipment
- Furniture and Fixtures: Office furniture and business fixtures
SBA 504 Payment Analysis
Comparing SBA 504 financing to conventional alternatives often reveals significant cost savings and improved cash flow:
| Comparison Factor | Impact | Typical Savings |
|---|---|---|
| Monthly Payment | Lower due to longer terms | 15-25% reduction |
| Total Interest | Lower rates offset longer terms | 10-20% savings |
| Cash Flow | Improved monthly cash flow | $1,000-5,000/month |
| Tax Benefits | Interest deductibility | Varies by tax bracket |
SBA 504 Refinancing Options
Existing SBA 504 borrowers may have refinancing opportunities under certain conditions:
Refinancing Scenarios
| Scenario | Requirements | Benefits |
|---|---|---|
| Rate Reduction | Significant rate decrease | Lower monthly payments |
| Debt Consolidation | Multiple loans to combine | Simplified payments |
| Cash-Out Refinance | Increased property value | Access to equity |
| Term Extension | Need for lower payments | Improved cash flow |
SBA 504 Qualification Requirements
To qualify for SBA 504 financing, businesses must meet specific criteria related to size, use, and ownership:
Business Requirements
- Small Business Size: Must meet SBA size standards for industry
- For-Profit: Must be a for-profit business entity
- Owner-Occupied: Must occupy at least 51% of the property
- Job Creation: Must create or retain jobs (1 job per $75,000)
- Net Worth: Owners must have net worth under $15 million
- Income: Average net income under $5 million after taxes
SBA 504 Fees and Costs
SBA 504 loans involve various fees that should be factored into the total cost analysis:
| Fee Type | Amount | When Paid | Purpose |
|---|---|---|---|
| SBA Processing Fee | 0.5% of debenture | At closing | SBA administration |
| CDC Processing Fee | 1.5-2.5% of debenture | At closing | CDC services |
| Bank Origination | 1-2% of bank loan | At closing | Bank processing |
| Third Party Costs | $5,000-15,000 | At closing | Appraisal, legal, etc. |
SBA 504 vs Other Financing Options
Understanding how SBA 504 loans compare to other financing options helps businesses make informed decisions:
| Loan Type | Down Payment | Term | Rate | Best For |
|---|---|---|---|---|
| SBA 504 | 10% | 10-20 years | Below market | Real estate & equipment |
| SBA 7(a) | 10-15% | Up to 25 years | Prime + margin | Working capital & equipment |
| Conventional | 20-30% | 5-15 years | Market rate | Established businesses |
| USDA B&I | 10-20% | Up to 30 years | Below market | Rural businesses |