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#2 ¨³¸ ®¥ ¬²¤¸ %¢®®¬¨¢ $¤µ¤«®¯¬¤³ 0±®©¤¢³ &¨ ¢¨¦ 4®®«² SMALL BUSINESS ADMINISTRATION 504 LOANS (page 1/2) The SBA 504 Loan Program aims to provide long-term, below-market, subordinated financing. This program is widely used by the small business sector. Important elements of the program include the following: Program Purpose: To provide long-term, below-market, subordinated financing through the 504 Loan Program for established small businesses to expand their operations. Financing: Private Lender Development Company/SBA Typically 50% of project costs Up to 40% of project costs, between $50,000 and $4,000,000 (up to $4.5 million in certain situations) Interest Rates: Negotiated with borrower Below market, fixed for the term of the loan Loan Terms: Minimum of 10 years for real 20 years for real estate; estate; minimum of 7 years for 10 years for machinery and equipment M & E Collateral: First lien on real estate and Second lien on real estate and equipment equipment Fees: Negotiated separately with Fees of about 3% of the SBA 504 amount, borrower debenture. Eligible Businesses: Existing, for-profit, million and net profits after taxes averaging less than $5 million. Eligible Costs: Land acquisition, construction or rehabilitation of a building, development costs, and acquisition of long-lived machinery and equipment. Job Creation Development corporation must maintain a portfolio averaging at least one new Requirements: job for every $65,000 of SBA 504 funds. 504 Funding The development corporation issues debentures bought by private, institutional Mechanism: purchasers. These debentures carry a 100% guaranteed payback from the U.S. Small Business Administration. The Corporation lends the proceeds from its debenture sales to authorized small businesses.