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About SBA 504 Loans


 Eligibility for SBA 504 Loans
  • Organized as a for-profit business.
  • Legal entity-corporation, partnership, sole proprietor, limited liability company.
  • Any type of legitimate business-manufacturing, wholesale, service, professional service or retail.
  • Located in or planning to locate in any area of the United States.
  • Small business - either: net worth under $15 million & net profits after taxes under $5 million or meet SBA's other size standards (by sales or number of employees depending on NAICS code).
  • Must use the loan proceeds for capital investment (land, building, leasehold improvements, renovation, construction, machinery & associated soft costs).
  • Lender must be willing to participate in the financing. The SBA 504 loan finances up to 40% of the total project cost and the other lender finances 50%. The business or its owner typically puts in 10%.  Economic development goals must be achieved through the project being financed.
  • Owner-user of the project being financed (51% occupancy if existing building; 60% occupancy if new construction). Two or more unrelated small businesses may receive a 504 loan to buy or construct a building as long as they, together, will occupy at least 51% an existing building or 60% of new construction.
Permitted Uses of 504 Loan Proceeds
  • Acquisition of vacant land for construction of a building
  • Acquisition of land and building
  • Leasehold improvements
  • Renovation of building; addition to building
  • Construction of a building
  • Acquisition of a commercial fishing vessel or party boat
  • Acquisition of heavy duty machinery & equipment (such as printing press)
  • Associated soft costs: attorneys fees; appraisals; environmental reports; architects; permits; surveys; installation of machinery; title insurance, points on bridge loans, small amount of furniture and fixtures, etc.
  • Not permitted are mortgage broker fees; points on permanent financing; moving expenses.
  • Refinancing is permitted to allow expanding small businesses to restructure qualified existing debt as part of new 504 loans.
Economic Development Requirements

SBA 504 is a community lending program designed to improve the locality. Eligibility requirements are either:

1) Job creation or retention (one job per every $65,000 borrowed from MCFC under SBA 504)
2) One of the following public policy goals to:
  • Revitalize a business district of a community with a written revitalization or development plan
  • Expand exports
  • Expansion of small businesses owned and controlled by women
  • Expansion of small businesses owned and controlled by veterans
  • Expansion of minority enterprise development
  • Aiding rural development
  • Increase productivity and competitiveness (retooling, robotics, or modernization)
  • Modernizing or upgrading facilities to meet health, safety and environmental requirements
  • Assisting businesses in or moving to areas affected by Federal budget reductions
  • Reduction of existing energy consumption by at least 10%
  • Increased use of sustainable designs
  • Plant, equipment and process upgrades of renewable energy
OR One of the following community development goals to:
  • Help to improve, diversify or stabilize the economy of the locality
  • Stimulate other business development in the community
  • Bring new income into the community
  • Assist manufacturing firms (one job per every $100,000)
  • Assist businesses in a labor surplus area
SBA 504 is not a real estate investment tool. It exists to help the community by helping a small business have an impact on the community-by creating jobs or in other ways benefiting the community.
Deal Structure -- Financing
Determine the total project cost (hard and soft costs). The bank or other financial institution finances 50% of the cost and takes a first mortgage (lien) position on the assets financed. GFDA/HPF, through the SBA 504, finances 40% of the project cost up to a cap and takes a second mortgage position. Applicant can inject as little as 10% equity.
Typical Project:
Acquisition of building
Soft costs
Bank - first mortgage
$500,000 permanent loan
SBA 504 - second mortgage
$400,000 permanent loan
Amount of 504 Loan

There is no limit to the total project cost, however, we can lend up to 40% of the project cost witha  dollar cap of $5,000,000 depending on the type of project.  In some cases, we can go as high as $5,500,000 for manufacturing projects and/or projects that incorporate energy saving technologies for sustainable design.
  • the project will help revitalize a business community with a written revitalization plan or
  • the project will help the company to expand its exporting or
  • the company is 51% or more minority, woman or veteran owned or
  • the business is located in a rural area or
  • the project will increase productivity and competitiveness by retooling, modernization or assistance in competing with imports or
  • the business was affected by federal budget cutbacks (such as defense downsizing)
  • we can also lend up to $4,000,000 for eligible manufacturing projects or if the project meets an energy public policy goal by reducing energy consumption by at least 10% or plant, equipment and process upgrades of renewable energy.
Rates and Terms

The rate on the SBA 504 portion is set when we sells the bond to fund the loan. The rate is then fixed for the loan term. 504 bonds are amortized securities. For comparable rates, look at treasury rates. The effective rate (APR) will include program fees and a loan loss subsidy.

Loans are ten or twenty years; self liquidating. In order for us to do a 20-year loan, the lender doing the 50% permanent first mortgage must have at least a ten year term. To do a ten-year loan, the 50% lender must have a term of at least 7 years

We take a subordinate (second mortgage) to secure its 40% portion of the financing, and a security interest in assets financed. Key Man life insurance is generally not required unless there is no succession of management. Other assets of the business or principals are generally not required.
 Application Process

We require the same documents as the lender:
  • 3 years of financial statements and federal tax returns on the company (if in existence for 3 years);
  • if there is no historical cash flow ability to service the proposed new debt, submit 2-3 years financial projections;
  • personal financial statement (assets and liabilities) on the owners of the company;
  • written history of the business, reasons for expansion, plans;
  • copy of contract of sale;
  • personal history statement of principals indicating citizenship status, etc.
Advantages of SBA 504 over Conventional Financing

Low down payment.
Just 10%*. Lets the borrower preserve cash for working capital.
*Note: Equity of 15-20% is required for start-ups and businesses with irregular profitability, lack of historical debt service ability, a short track record or for single purpose properties.
·     Fixed rate on the SBA 504 portion. For the term of the loan.
Long term.  504 loans are for 10 or 20 years.
Low interest rate. Even with all the fees and closing costs included in the rate, it is still a low rate for a subordinate mortgage loan, particularly for small business. The blended rate between the bank portion and our 504 portion makes the project affordable for business owners.
Banker Benefits. For the banker wishing to participate as the 50% lender, they get CRA credits; lend at a lower loan to value ratio; keep a growing customer happy; have lower risk because the SBA 504 loan is in second position behind them.
Community Benefits. The community gets the advantage of keeping or attracting a healthy, growing small business that will be creating jobs and doing other wonderful things in the community.
For more information please contact our Business Development Officer, Jeremiah Johnson on 406.771.9029 or via e-mail on
To help the government fight the funding of terrorism and money laundering activities, Federal law requires all Certified Development Companies to obtain, verify, and record information that identifies each person who applies for a 504 Loan.
What this means for you: When you apply for a 504 Loan, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
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Fax 406-454-2995
Physical Address
300 Central Ave. Suite 406
Great Falls, MT 59401
Mailing Address
PO Box 949
Great Falls, MT 59403