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SBA 504 FAQs

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What is a Certified Development Company (CDC)?

Certified Development Companies (CDCs) are nonprofit corporations certified and regulated by the U.S. Small Business Administration (SBA), which work with participating lenders to provide financing to businesses under the SBA 504 program. Coastal is also an SBA Community Advantage 7A lender, for situations when a guarantee is needed to reach your goal.

Why should I consider an SBA 504 loan?
  • Low down payment
  • 10-, 20-, 25-year fixed interest rate
  • Low interest rate
  • Helps preserve your working capital
What is the 504 turnaround time?

Quick approval turnaround times subject to receipt of all required borrower documentation. Like most commercial real estate loans, approvals are issued subject to appraisals and environmentals.

Who is ineligible for a SBA 504 loan?

Nonprofits, individuals arrested in the last six months, cannabis businesses, and non 51% owner-occupied properties, among others.

How much can I borrow?

Typical 504 loan size ranges from $100,000 to $5.5 million, although larger transactions can be assembled.

Who services a 504 Loan?

Loans are locally underwritten, approved by Coastal and the SBA, and serviced locally.

A 504 loan cannot be used for:
  • Working capital or inventory
  • Speculation or investment real estate
  • Cannabis-related businesses
What 504 fees are involved?

504 fees are approximately 2.65% of the 504 loan. These fees are added to the loan amount and amortized over the loan. They are not out of pocket. As with any commercial loan, there are also closing costs. Note that the bank providing the 50% first mortgage loan also pays the SBA ½% of their loan amount. Often, this is passed along to the borrower.

Is there a 504 pre-payment penalty?

There is a declining pre-payment penalty based on the loan amount. Per a formula, the pre-payment penalty declines over the first 10 years of the loan. The loan can be assumed by the new owner of the real estate, which can eliminate the pre-payment penalty.

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