SBA 504 Loan Program

As your local U.S. Small Business Administration (SBA) Certified Development Company, Dakota BUSINESS Finance works with local banks to provide loans to small businesses to construct, purchase, renovate a building or install leasehold improvements, or to purchase a building or purchase long-term machinery and equipment. Typically, the banks will provide 50 percent of the financing; SBA/Dakota BUSINESS Finance will provide 40 percent of the financing; and the small business owner will contribute the remaining 10 percent in the form of an equity or cash injection.

SBA/Dakota BUSINESS Finance's portion of the project is a direct loan from SBA, which sells the loans as bonds (or debentures) to investors on a monthly basis.  Loan participants must be for-profit businesses and meet standards set by SBA.

Structure:

  • Lender takes a 1st lien on the project property
  • SBA takes a 2nd subordinate lien on the project property
  • For expansion projects, a borrower may be able to pledge existing equity in land/building as the down payment
  • Minimum of 10% down payment required
  • Start-up businesses require an additional 5% equity injection
  • "Single-purpose" buildings require an additional 5% equity injection

Example Project Structure

Bank Loan (50%)

SBA Loan (40%)

Borrower Cash or Equity (10%)

 

$500,000

$400,000

$100,000

 Total   $1,000,000