Q. Can I use SBA 504 financing to purchase an existing business?

A. 504 loan can be used to finance real estate and equipment but not inventory or working capital.

Q. Would my business qualify for a 10% down payment?

A. Most established businesses do qualify for 90% financing. Larger down payments are required for projects involving a new business (less than 2 years old) and/or "special-use" real estate or if the appraisal has a shortfall.

Q. What are the fees associated with a 504 loan?

A. Loan fees are 2.65% of that part of the financing provided by Capital Matrix. Other fees associated with the loan consist of legal review ($650-$1,000), title insurance, and typical real estate closing costs. These fees can all be financed.

Q. Are there any prepayment penalties?

A. There are pre-payment penalties if the loan is paid off during the first half of the contract. The penalty is based on the interest rate and the amount borrowed; it declines every six months.

Q. Do I need to provide a business plan and projections as part of my application?

A. Typically, established businesses do not have to provide a business plan. New businesses will need to prepare a business plan and 2 years of projections as part of their loan application. A feasibility study may be required pending the project.

Q. Can I get an SBA 504 loan to build storage units?

A. Mini-warehouses and storage units are now eligible for SBA financing.

Q. I want to purchase a building that has an existing tenant in part of the building. Can I get 504 financing?

A. SBA requires that your business occupy at least 51% of the building in order to be eligible.

Q. I am planning to construct a new building. The building will be larger than what my business needs, and I am intending to rent out part. Can I get 504 financing?

A. SBA loan programs are for owner-users, not for investors. However, the SBA recognizes that growing businesses need to plan for their future needs. For eligibility, the SBA requires that your business occupy at least 60% initially, "more" space by year 3, and 80% of the space within 10 years.

Q. What is the term of an SBA 504 loan?

A. SBA 504 loans are either 10, 20, or 25-year, fully-amortized loans. Typically, real estate is financed over 20 or 25 years and equipment (with a 10 year economic life) is financed for 10 years. If your project includes real estate and equipment, the term can typically be 20 or 25 years.

Q. How long does it take to get approval for a 504 loan?

A. Capital Matrix works closely with your lender to avoid duplication of effort and time. Once we receive a complete application, Capital Matrix can usually have a loan internally approved within 10-15 days. Approval from the SBA usually takes an additional 15-20 days.

Q. When is the interest rate set on my loan?

A. Capital Matrix will prepare loan closing documents. Once you have signed those documents and they have been through required legal reviews, your loan will become part of the financing pool to be funded with the next monthly debenture sale. Rates are set monthly the week prior to the debenture funding. Once the rate is set, the interest rate on your loan is fixed for the life of the loan. It takes 45 days after the loan closing for your loan to fund.