The SBA's 504 loan program helps business owners with owner-occupied real estate and equipment loans. The structure and operation for 504 loans are different from their counterpart's, the 7(a).
For one thing, the loans are made available through community-based partners of the SBA called Certified Development Companies. These CDCs are nonprofits that the SBA regulates and certifies. Nationwide, there are more than 260 CDCs, each with a geographic area that it covers.
The 504 loans are structured so that the SBA (through the CDC) provides 40 percent of a project's total costs. A participating lender accounts for 50 percent, while the borrower must contribute 10 percent of the project's cost. The participating lender, usually a bank, will hold the first lien position, while the CDC has the second lien on the 504 loan, which is for 20 or 25 years at a fixed rate.
Does this sound good to you? It should. Not only do you get 90 percent financing, but there are extended loan amortizations and no balloon payments on the CDC loan. Rates are at historic lows, and if you get a 504 loan before September 30th, the government is waving the CDC fees, and your first three months of payments will be made, up to $9,000 a month.