The SBA 504 loan is a government-backed financing program specifically designed to help small businesses purchase or improve owner-occupied commercial real estate and major fixed assets.
How It Works:
An SBA 504 loan is structured as a partnership between three parties:
- RMO (lender): Provides 50% of the project cost through a first-position mortgage.
- Certified Development Company (CDC): Provides up to 40% of the project cost through a second-position SBA-guaranteed debenture at a below-market fixed rate.
- Borrower: Contributes as little as 10% as a down payment.
Eligible Uses:
- Purchasing existing commercial real estate
- Constructing new facilities
- Renovating or improving existing commercial property
- Purchasing heavy machinery or long-life equipment
Key Benefits:
- Down payments as low as 10% (compared to 20–30% for conventional loans)
- Below-market fixed rate on the SBA portion (locked for 10 or 20 years)
- Long repayment terms of 10, 20, or 25 years
- Preserves cash flow for business operations
Requirements: Your business must be a for-profit company, operate in the United States, have a tangible net worth under $15 million, and occupy at least 51% of the property (or 60% for new construction).
To learn if your project qualifies, schedule an appointment through MyRMO or by calling us to speak with an Expert.