Are you considering applying for SBA 504 loan? Have you been wondering about the fees and costs that come with it? Look no further because this article will guide you through everything you need to know about SBA 504 loan fees.
Introduction
If you’re a small business owner who’s looking to expand, renovate, or purchase, an SBA 504 loan might be the perfect solution for you. It is a program that allows small businesses to access affordable loans with lower down payments and longer repayment terms.
However, like any other loan program, the SBA 504 loan also comes with fees and costs that you need to know about. In this article, we will explain in detail the fees involved in the SBA 504 loan program and provide you with the information needed to make an informed decision.
Who is this Article For?
This article is for small business owners who are interested in the SBA 504 loan program and want to know the details of the fees and costs associated with it.
What is the SBA 504 Loan Program?
The SBA 504 loan program is a long-term, fixed-rate loan program by the U.S. Small Business Administration (SBA) that provides financing for small businesses to acquire assets such as land, buildings, and equipment. The program offers very attractive rates and terms and helps small businesses preserve cash and working capital.
SBA 504 Loan Fees
The SBA 504 loan program has several fees involved that need to be paid by the borrower. The fees are as follows:
Fee |
Cost |
|---|---|
CDC Processing Fee |
2.5% of the SBA loan amount |
SBA Processing Fee |
0.5% to 3.5% of the SBA loan amount |
Appraisal Fee |
Typically $2,000 to $8,000+ depending on the property size and complexity |
Environmental Report Fee |
Typically $1,500 to $3,000+ depending on the property size and complexity |
Title Insurance |
Typically between $1,500 to $5,000+ depending on the property size and complexity |
Legal Fees |
Typically between $2,000 to $15,000+ depending on the transaction’s complexity |
SBA Guaranty Fee |
Depending on the size of the loan, the fee can range from 0.25% to 3.75% of the guaranteed portion of the loan. |
Note that the fees indicated above are estimates and could vary depending on the lender, state, and transaction’s complexity.
FAQs
1. How do I qualify for an SBA 504 loan?
To qualify for an SBA 504 loan, your business must meet the SBA’s definition of a small business, and the project must promote community development. Additionally, you must be able to prove that you have the ability to repay the loan.
2. What is the maximum loan amount for an SBA 504 loan?
The maximum loan amount for an SBA 504 loan is $5 million, and the SBA can guarantee up to 40% of the total loan amount.
3. Can I use an SBA 504 loan to refinance an existing loan?
Yes, you can use an SBA 504 loan to refinance an existing loan as long as it meets the SBA’s eligibility criteria.
4. How long does it take to get approved for an SBA 504 loan?
The approval process for an SBA 504 loan can take anywhere from 45 to 120 days, depending on the lender, complexity of the transaction, and other factors.
5. Can I pay off my SBA 504 loan early?
Yes, you can pay off your SBA 504 loan early without incurring any prepayment penalty.
6. What happens if I default on my SBA 504 loan?
If you default on your SBA 504 loan, the SBA may take legal action against you or your business to collect the outstanding debt.
7. Can I use an SBA 504 loan to start a new business?
No, you cannot use an SBA 504 loan to start a new business. However, if you’re purchasing an existing business, you may be eligible to use the loan program to finance the acquisition.
8. Can I use an SBA 504 loan to purchase inventory?
No, you cannot use an SBA 504 loan to purchase inventory or working capital.
9. How much down payment do I need to make for an SBA 504 loan?
You need to make a down payment of at least 10% of the total project cost for an SBA 504 loan.
10. How long is the repayment term for an SBA 504 loan?
The repayment term for an SBA 504 loan can be up to 25 years for real estate and up to 10 years for machinery and equipment.
11. What is the interest rate for an SBA 504 loan?
The interest rate for an SBA 504 loan is typically lower than market rates and is fixed for the duration of the loan term.
12. What collateral is required for an SBA 504 loan?
The collateral requirements for an SBA 504 loan are flexible, and the SBA will generally take a second lien position behind the bank or lender.
13. Can I apply for an SBA 504 loan if I have bad credit?
Your credit score is one of the factors that lenders consider when deciding whether to approve your SBA 504 loan application. While you don’t need excellent credit, a credit score below 650 could make it difficult to get approved.
Conclusion
In conclusion, the SBA 504 loan program can be a great option for small businesses looking to expand or purchase assets. However, it’s important to understand the fees and costs associated with the program before applying. By doing so, you can make an informed decision and avoid any surprises down the road.
So, if you’re a small business owner looking for financing, consider exploring the SBA 504 loan program. It could be just the solution you need to take your business to the next level!
Disclaimer
Please note that the fees and costs mentioned in this article are estimates and may vary depending on the lender, state, and complexity of the transaction. This article is for informational purposes only and should not be considered legal or financial advice. Before making any financial decisions, consult with a qualified professional who can provide tailored advice based on your specific situation.