SBA 504 Loans

SBA 504 LoansSix Bridges Capital Corporation (6BCC) is an Accredited Lender in the SBA 504 loan product. This accreditation enables us to process 504 loans more quickly and efficiently than many other Certified Development Companies.

The SBA 504 loan product supplies permanent long-term financing for the purchase of fixed assets such as commercial real estate and machinery and equipment of a capital nature, which are defined as assets that have a minimum useful life of ten years. Proceeds of 504 loans cannot be used for working capital.

There are three parts to a typical SBA 504 Loan, as follows:How Is The Loan Structured

  1. Conventional bank first mortgage loan of approximately 50% of the total fixed asset costs;
  2. SBA 504 second mortgage loan of approximately 40% of the total fixed asset costs; and,
  3. Borrower’s 10% contribution. If the fixed asset being purchased is special use real estate, a 15% contribution is required by the borrower, and if the property is special use and involves a start-up operation, a 20% contribution is required. Examples of special use properties include: motels, hotels, schools, swimming pools, bowling alleys, auto service centers, theaters, sports arenas, dormitories, cold storage plants, tennis clubs, golf courses, marinas, gasoline service/convenience stores, automatic car washes, hospitals, museums, clubhouses, hospitals, surgery centers, urgent care centers, nursing homes, funeral homes, wineries, dairy facilities, and most recreational properties.

Six Bridges Capital Corporation approves its portion of the fixed asset financing request and works with the first mortgage lender to approve its senior permanent loan as well as the interim construction loan, if necessary.

Details of an SBA 504 Loan

Loan Purpose

The SBA 504 Loan can permanently finance the purchase of real estate, construction or renovation of buildings, and purchase machinery, equipment, furniture, fixtures and project related soft costs. Refinancing of existing debt (limited to 50% of expansion project) may be included in the 504’s total project cost.

Loan Amounts

SBA 504 portion of the total fixed asset project costs cannot exceed:
$5,000,000 – subject to Job Creation Goals
$5,000,000 – subject to Public Policy Goals
$5,500,000 – small manufacturers
$5,500,000 – energy consumption reduction or renewable energy generation


The SBA 504 loan has a term of 20 years for commercial real estate and a term of 10 years for machinery and equipment, both fully amortizing.

Prepayment Penalty

Prepayment penalties will apply.

The SBA 504 twenty (20) year fixed rate loan has a 10 year prepayment penalty and the 504 ten (10) year fixed rate loan has a 5 year prepayment penalty. Both are required by SBA and are not negotiable. The 504 debenture interest rate sets the percentage of the prepayment penalty and is reduced by 10% each year for the first 10 years on a 20 year loan and reduced by 20% each year for the first 5 years on a 10 year loan.

Loan Fees

SBA Funding Fee 0.25% of the 504 loan amount
6BCC Processing Fee 1.5% of the 504 loan amount
Underwriter Fee 0.4% or 0.375% of the 504 loan amount (20 or 10 year loans)
Closing Costs (flat fee) $2,500

An ongoing guarantee fee equal to .625% of the principal balance of the SBA 504 Note calculated at five year intervals beginning with the first payment. This fee is included with the monthly SBA 504 payment.

An ongoing CSA Fee of .1% per year is charged and is included with the monthly SBA 504 payment.

An ongoing borrower fee of .749% per year will be charged and included with the monthly SBA 504 payment


A second lien position on the 504 project assets will be considered adequate when the applicant meets all of the following criteria:

  1. Strong, consistent cash flow that is sufficient to cover the debt;
  2. Demonstrated, proven management;
  3. The applicant business has been in operation for more than 2 years; and
  4. The proposed project is a logical extension of the applicant’s current operations.

If one or more of the above factors is not met, additional collateral and/or increased equity contribution may be required. Because leasehold improvements provide minimal collateral value, Six Bridges Capital Corporation must always consider requiring additional collateral in this situation.


All principals who own 20% or more of the business are required to provide a full guarantee. Principals and key managers owning less than 20% may be required to provide a guarantee on a case-by-case basis.

When necessary to secure a collateral position, SBA will require the guarantee of a non-owner spouse to the extent of the spouse’s interest in the collateral.

The guarantee of affiliated companies may be required based on the percentage of ownership of the affiliate and the borrower’s relationship with the affiliate.

Debt Service Requirements

SBA 504 Loans are for strong healthy companies that are able to demonstrate the ability to repay the loan through either

  1. Historical cash flow of 1.2:1;
  2. Global cash flow of 1.25:1; or
  3. Projected cash flow of 1.25:1 may also be considered.


Loans can generally be made to all for-profit small businesses except those that do not meet SBA 504 eligibility requirements. These are primarily small businesses engaged in lending, loan packaging, investments, pawn shops, passive real estate investments, life insurance companies, small businesses located in a foreign country or owned by illegal aliens, pyramid plan sales, gambling, businesses which restrict patronage or promote a religion, cooperatives, non-profits, or individuals of poor character or on probation or parole.

Other Considerations/Requirements

Cash/Equity/Asset Injection: Evidence must be provided by the applicant prior to any loan closing and disbursement.

Subordination/Standby Debt Agreements: Standby creditor must subordinate any lien rights in collateral securing a loan to the lender’s rights in the collateral and agree to take no action against applicant or any collateral securing the Standby Debt without lender’s consent.

Real Estate Appraisals: Required for all Real Estate purchased or used as collateral.

Equipment Appraisals: Required to substantiate the value of any used machinery and/or equipment.

Environmental Reports: Required for all Real Estate purchased or used as collateral.

Late Charge: A late charge (not to exceed $100.00) in the amount of five percent (5%) of the amount of any payment which is not made within ten (10) days of the date the payment is due will be collected from the Borrower.

Loan Proceeds: Six Bridges Capital Corporation must document that the borrower used the loan proceeds for the approved purposes.

Insurance: Property insurance (fire and theft, extended coverage and liability) will be required. All personal and real property shall be insured for replacement cost. Insurance coverage for improvements to real property must contain a Mortgagee Clause in favor of lender. Insurance coverage for personal property must contain a Lender’s Loss Payable Clause in favor of lender. Additionally, the policy must provide written notice at least 10 days prior of policy cancellation.

Life Insurance: The key principals of the operating company may be required to provide an assignment of life insurance in the amount of the loan.

Flood Insurance: Will be required if the property is located within a flood area.

Workers’ Compensation Insurance: Will be required in amounts meeting state law requirements.

Verification of Financial Information: Six Bridges Capital Corporation must verify the applicant’s last 3 years (unless applicant is a start-up business) of tax returns submitted to IRS via IRS Form 4506-T.

Lease Term: Lease(s), including options, on all business premises where collateral is located should be for as least as long as the term of the loan.

Assignment of Rents: A perfected assignment of all rents paid under a lease between an Eligible Passive Concern (Real Estate Holding Company) and the applicant Operating Company is required.

Landlord’s Waiver: Applicant must provide lender access to any leased premises and facilities where collateral is located with an executed Landlord’s Waiver.

New Construction: Evidence of compliance with the “National Earthquake Hazards Reduction Program Recommended Provisions for the Development of Seismic Regulations for New Buildings” (NEHRP) or a building code that has substantially equivalent provisions is required.

Do-it-yourself Construction or Installation of Machinery & Equipment: Except under special circumstances, will not be permitted.

Cost Overruns: Applicant must show ability to pay cost overruns, if any.

Lien Waivers: Applicant must provide lien waivers or releases from all materialmen, contractors, and subcontractors involved in any construction.


Existing Real Estate Improvements occupy at least 51% of the property.
New Construction occupy at least 60% of the property

Franchised Operations: All franchised operations not listed on the Franchise Registry must pass a legal review of the applicant’s Franchise Agreement and Franchisor’s Disclosure Statement.

Child Support: Certification from applicant that any required child support is no more than 60 days delinquent.

Current Taxes: Applicant must be current on all federal, state, and local taxes, including but not limited to income taxes, payroll taxes, real estate taxes, and sales taxes.

Good Faith Deposits: A Good Faith Deposit (see below schedule) shall be required and applied to Six Bridges Capital Corporation’s processing fee and other costs associated with credit investigation and underwriting. If approval is not obtained, the Good Faith Deposit shall be refunded (less the cost of credit verification, environmental screening, IRS filing verification and any other out of pocket expenses incurred by 6BCC).

  • $2,500    SBA 504 Debentures of $500,000 and less 
  • $3,500    SBA 504 Debentures of $500,001 to $999,000
  • $5,000    SBA 504 Debentures of $1,000,000 and over

Immigration Laws: Neither the Borrower nor Operating Company has been determined by the Secretary of Homeland Security or the Attorney General to have engaged in a pattern or practice of hiring an alien, recruiting an alien or referring an alien for a fee for employment in the United States, knowing that the person is an unauthorized alien.