504 SBA/CDC Loan; What Is It Exactly?
Manhattan Merchant Services works very closely with the CDC, as well as our 1st Position Partner Lenders, along with the small business borrower in order to help process, approve, close and service the SBA 504 loan. Funding is provided by the CDC issuing a 10- or 20-year debenture bond that is sold to investors on Wall Street giving entrepreneurs access to capital at low, fixed interest rates – usually only available to large corporations. And debenture bonds are especially attractive to investors since they are backed by the SBA and fully guaranteed by the U.S. Treasury.
The loan is a partnership between a Certified Development Company (CDC), the Small Business Administration and a lender. CDCs are economic development organizations that have been certified by the SBA to make loans under the Certified Development Company Economic Development Loan Program through an SBA 504 loan.
Working with a lender, the CDC provides up to 40% of the financing for commercial real estate purchase and new construction with an SBA 504 loan. A lender must partner with the CDC and typically provides 50% of the financing, while the entrepreneur ends up paying as little as 10% down.
The CDC works closely with the small business borrower to process, approve, close and service the SBA 504 loan. Funding is provided by the CDC issuing a 10- or 20-year debenture bond that is sold to investors on Wall Street giving entrepreneurs access to capital at low, fixed interest rates – usually only available to large corporations. And debenture bonds are especially attractive to investors since they are backed by the SBA and fully guaranteed by the U.S. Treasury.
There is no limit to the total project cost, however, a CDC can lend you up to 40% of the project cost with a dollar cap of $1,500,000 depending on the type of project. CDCs can exceed $1,500,000 and go as high as$2,000,000 of SBA 504 financing for public policy or community development projects* and up to $4,000,000for eligible manufacturing projects and for projects that incorporate energy saving technologies for sustainable design.
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