504 Business Loans

504 Business Loans are ideal for small businesses because they partner with community banks to bring much needed funding for growth and refinancing. The program provides low interest business financing and long-term, secure rates. The flexible lending requirements and strong financial partnership allows businesses to grow, refinance and preserve working capital.

Structure of 504 Business Loans

Graph of 504 Business LoansThe structure of 504 business loans makes it unique among all of the small business loans available to business borrowers. Three parties are usually involved:

50% a private sector participant (usually a bank)

will typically provide 50% of the financing for an eligible project and offer a 10 year term.

40% SomerCor 504, Inc.

will typically provide 40% of the required financing on an eligible project (this is the 504 Loan Program share). This is fully guaranteed by the Small Business Administration (SBA). SomerCor takes a second mortgage on the project assets, with a fixed rate, 20-year term.

10% the business itself

will contribute a minimum of 10% of the required financing as an equity injection. With an expansion or renovation project it is possible to count existing equity in project land or equity in an existing facility as part, or all, of the required equity contribution. In projects involving a “start-up” business (less than 2 years old), or, in projects with property that has a specialized, single-purpose use (for example, as gas station), the minimum equity contribution must be 15% and the maximum 504 loan program portion is 35%. If the project involves both a startup business AND a specialized, single purpose use property, the minimum equity contribution from the business entity must be 20% and the maximum 504 Loan Program portion is 30%.

Example Small Business Loan

The following is an example for a $1,000,000 loan (ie. Project Costs = Building $750,000 + Land $200,000 + Soft Cost $50,000)

Conventional Loan 504 Loan
Bank portion $750,000 $500,000
504 portion $400,000
Borrower Contribution $250,000 $100,000
Total $1,000,000 $1,000,000

Features of 504 Business Loans

  • Long term, fixed rate financing

    Smaller businesses gain access to previously inaccessible public capital market and secure long term, fixed rate financing for expansion projects.

  • Low 10% down payment

    This helps businesses preserve working capital for continued growth.

  • 20 year fixed rate

    The interest rate on SomerCor’s portion is an attractive 20-year fixed rate.

  • Project finance options

    Businesses can finance all project related furniture, fixtures and equipment, plus many soft costs, such as appraisals, title searches, and architectural fees.

  • Suitable loan terms

    The term of SomerCor’s business loan more closely matches the life of the assets being acquired or improved.

  • Fully assumable loan

    504 business loans are fully assumable. If, during the life of the loan, you decide to sell the project property, SomerCor’s portion of the loan can stay with the property, as long as the buyer qualifies under program guidelines.

  • Efficient Process

    The 504 business loan process is efficient and straightforward.

  • Guaranteed

    The funds are 100% guaranteed by the U.S. Small Business Administration.

Contact Us

Chicago Main Office
601 South LaSalle, Suite 510, Chicago, IL 60605 map
P: (312) 360 3300   F: (312) 757 4370   Email

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