SBA 504 Program

To help small businesses save on financing cost, the SBA 504 program is a long-term, fixed-rate financing tool designed to provide attractive financing options for small businesses in need of expansion and/or purchases. Terms are up to 25 years.

Graco Mortgage provides the SBA 504 Loan Program through its associated partners. Graco Mortgage provides financing through out the country for the small to medium businesses to provide attractive financing options for businesses in need of expansion and/or acquisitions of long term assets such as real estate and long-life equipment.

Maximum Loan Amount:  $5,500,000

Use the SBA 504 Loan Program to Refinacne Commercial Morgage and Eligible Business Debt.

Small business owners and bankers can now take advantage of the SBA's permant change to the 504 Loan Program allowing for the refinance of eligible business debt. This is an essential tool to lower monthly debt obligations and access equity in commecial real estate.

This SBA program provides small businesses with competitive, full term, fixed interest rate refinancing with repayment terms of 25 years for up to 90% of the appraised value of commercial real estate property. In addition, and only via this program, can an SBA 504 loan be used to refinance eligible business operating expeneses (cash out option).

Applicant Benefits

  • Borrowers can refinance certain eligible business operating expenses (e.g. salaries, rent, utilities, inventory), however a maximum 85% loan-to-value (LTV) aplies and the business operating expenses portion of the project may not exceed 25% of the value of the eligible fixed asset(s) securing the qualified debt.
  • 504 refinancing costs may be included in the loan.
  • The applicant's equity contribution may be satisfied by its equity in the eligible fixed asset (the 504 project) serving as collateral for the refinancing project or by equity in any other fixed assets that re acceptable as collateral.

Lender Benefits

  • Increase  loan production
  • Reduce risk - typical exposure is 50% of the total SBA 504 loan.
  • Reduce the clients equity requirement - typically 10% of equity in eligible collateral
  • Mitigage loan limits to any one client

Basic Eligibility Guidelines

  • Two or more commercial loans can be refinaced
  • The  loan to be refinanced must be at least 24 months old and in good standing for the last 12 months
  • The business must hacve been in operation for all of the two-year period ending on the date of appication, as evidenced by the financial statements submitted at the time of appication. (some exceptions may apply)
  • An appraisal is not required to submit a refinance application, but will be a condition for funding
  • Business must occupy at least 51% of the premises at the time of the appication submission.

Equity Requirements

Business must pay 10% to 20% of project costs

  • If business over 2 years old and general purpose real estate:             10%
  • If business over 2 years old and special purpose* real estate:             15%
  • If business less than 2 years old and general purpose* real estate:    15%
  • If business less than 2 years old and special purpose real estate:       20%

        * as defined by SBA

Use of Proceeds

  • Purchase major fixed assets such as land, buildings, improvements, long term equipment, construction and renovation
  • Soft costs such as architect and engineering fees, interim interest, envirionmental studies, equipment setup and delivery, and certain legal fees related to the loan
  • NOT ELIGIBLE: General working capital, accounts receivable, inventory, franchise fees and vehicles

Interest Rates

  • Generally slightly above long-term Tresury Rate
  • Based on current market at time of funding for 5 and 10 year Treasury issues plus and increment above the Treasury Rate
  • The debenture rate


  • For-profit business
  • Tangilble net worth not in excess of $15,000,000 and average after tax net profit cannot exceed $5,000,000 for the previous two years
  • Job creation or retention requirement: One full-time equivalent job created or retained for each $65,000 of Debenture amount unless a small manufacturer, then 1 job per $100,000


  • 10 years on equipment
  • 20-25 years on real estate

Sample Project

ABC Enterprises has been leasing a 10,000 square foot building for 5 years. A comparably sized building on the same block has just gone on the market for $1,000,000. ABC's owner Jimmy Jones, wants to make an offer on the building, but he is uncertain if he can come up with the 25% ($250,000) down payment that would be required with conventional financing. His banker has the solution, an SBA 504 loan. Here is how it works. The bank will finance the $500,000 first mortgage for 50% of the cost, and Graco Mortgage will finance a $400,000 second mortgage SBA 504 loan for 40% of the cost. Therefore, Mr Jones down paymenht will only be $100,000, allowing him to conserve hi working capital and expand his business. Note that these percentages are subject to change.

                                                   Lender/Borrower                   Project Costs                     Percentage of Project Cost

                                                  First Mortgage                        $500,000                           50%

                                                 SBA Second Mortgage            $400,000                           40%

                                                 Borrower Equity                       $100,000                           10%

                                                 Total Project                            $1,000,000                         100%