The second most popular type of SBA loan is the CDC/504 program. You should consider this program if you’re looking to acquire or improve a major fixed asset, such as land, real estate or equipment.
SBA CDC/504 programs are unique in the way they’re structured. A lender partners with a certified development company (CDC) — a specialized non-profit corporation — to finance a loan request. In this agreement, a lender funds 50% of the total project cost and the CDC funds 40%, with the borrower responsible for the remaining 10% as a down payment. The SBA backs only the CDC portion of the loan.
There is no maximum loan amount for this program, but the SBA does set a limit for what the CDC can contribute, and thus, what it’s willing to guarantee. That maximum is $5 million.
The interest rates on the lender-portion of the loan is negotiated between the lender and the borrower, and is subject to an interest rate cap. The rates on the CDC portion are based on the current 5- or 10-year Treasury rate.
Loan Amount
Unlimited
Interest Rate
Negotiable (third-party lender)/ 5- or 10-year Treasury + 0.38% – 0.48% (CDC)
Term
10 or 20 years
Time to Funding
60-180 days