SBA 504 Loan
A small business lending program administered by the U.S. Small Business Administration that provides long-term, fixed-rate financing for owner-occupied commercial real estate. The SBA 504 structure involves a conventional first mortgage (50% of project cost), an SBA-backed second mortgage through a Certified Development Company (up to 40%), and a borrower equity contribution (10%). The program offers below-market fixed rates on the SBA portion with 20-25 year terms. Eligible properties must be at least 51% owner-occupied.
Related Terms
Senior Debt
The primary mortgage loan that has first priority claim on a property's cash flows and collateral. Senior debt sits at the top of the capital stack with the lowest risk and lowest cost of capital. Senior lenders are repaid before any subordinate financing or equity in case of default or sale.
Permanent Financing
Long-term debt (5-30 years) secured by stabilized commercial real estate, underwritten primarily on current cash flow. Permanent loans offer lower rates than transitional financing and are available from life companies, banks, agencies, and CMBS lenders. They are the typical "take-out" financing after construction or bridge loans.
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