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Who should not apply for a CDC/504 Loan?

504 loans cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing, this program tends to exclude most service businesses that need to purchase land or equipment. The 504 loan program does not apply to the following as well:

  • Not-for-profit businesses, organizations or religions
  • Financial Services (insurance, loan packaging, banks, finance companies)
  • Real Estate Investment or speculative businesses
  • Businesses located in a foreign country or owned by aliens
  • Government owned entities, political or lobby activities
  • Illegal Businesses, pyramid plan, multi-level marketing (MLM), cooperatives, sexual nature
  • Persons of Poor Character (poor credit or convicted felons or on probation)
  • Person or business previously defaulted on a Federal loan

What are the CDC/504 Loan requirements?

  • Approximately 10% capital contribution from the owner(s) (existing businesses 3/yrs+)
    • 20% capital contribution for start-ups or businesses under 3 years
  • Approximately 50% of total funds will come from a bank or private lender
    • Loan is usually secured by 1st mortgage and personal guarantee
  • Approximately 40% of the funds will come an SBA loan
    • Loan is usually secured by 2nd mortgage and personal guarantee
  • Pledge that at least one job is to created or retained for every $50,000 from CDC contribution
    • A complete, comprehensive business plan should show this
  • Show evidence of an existing cash flow sufficient to repay the additional debt, secured by collateral
    • A qualified CPA can prepare the financials
  • Pay processing and legal fees
    • Can use a Designated Attorney who is knowledgeable with CDC 504 Loans.
  • Personal Credit Score: 600+ FICO/Beacon
    • Not a requirement, but suggested by lenders