Structuring an SBA 504 Loan Project with NEDCO: A Detailed Breakdown

SBA 504 loans offer a strategic financing solution for businesses, typically comprising a tripartite structure where 50% of the finance comes from the participating commercial lender, 40% from NEDCO as the Certified Development Company (CDC), and the remaining 10% from the business borrower itself. For instance, let’s consider a $2,200,000 real estate project for an existing business. Here is how the loan structure might look like:

ParticipantLoan AmountPercentage of ProjectLoan TermInterest RateCollateral
Commercial Lender$1,100,00050%Min. 10 YearsMarket Rate1st Mortgage
NEDCO$880,00040%20 YearsFixed Rate2nd Mortgage
Business Borrower$220,00010%*Equity
*Note: Start-up businesses OR projects involving a Special Purpose building require a 15% equity contribution from the borrower. However, if it is a start-up business AND a Special Purpose building, the borrower’s equity contribution rises to 20%.

The SBA 504 loan offered by NEDCO is more than just a financing tool; it’s a catalyst for business growth. Here are some ways this loan program can empower businesses:

  • Financing up to 90% of the project cost enables businesses to preserve their working capital for further expansion.
  • Borrowers have the liberty to choose their first mortgage lender based on favorable terms and interest rates.
  • SBA loan fees are incorporated into the 504 loan itself, effectively reducing the initial cash outlay.
  • A fixed interest rate on the SBA loan for the entire loan term (10 or 20 years) provides predictable repayment plans.

NEDCO is dedicated to helping lenders navigate the complexities of the SBA 504 Loan Program. We invite you to contact us to schedule a complimentary Lender Training seminar for your Commercial Lending Department. In this seminar, we will discuss the SBA 504 Loan Program in detail, share insights on recent program changes, and illustrate the considerable advantages it can offer to lenders and their small business customers.

In partnering with NEDCO, lenders not only receive a high level of support and guidance but also join us in our mission to fuel the growth of small businesses. We provide a unique combination of lending expertise, understanding of the small business landscape, and commitment to supporting lenders in serving their clients better.
AdobeStock_593030038-1 Structuring an SBA 504 Loan Project with NEDCO: A Detailed Breakdown