How are 504 projects structured?
SBA 504 loans are generally financed like this: 50% = Bank — 1st Mortgage 40% = 504 Loan — 2nd Mortgage 10% = Owner Cash —– 100% In 504 projects, a conventional loan usually provides 50% of the project. This may be a bank or other institutional lender. Bay Area Development Company typically provides up to 40% of the project cost (the 504 loan) and the buyer typically provides a 10% down payment. 504 loans make up a maximum of 40% of a project, or $2,000,000 for most projects, and up to $4,000,000 for manufacturing companies. Projects from $500,000 to as much as $20 million are viable 504 candidates. 504 loans are take-out or permanent financing. As a result, the bank providing the 1st mortgage loan also provides interim financing for projects including remodeling or construction, or a short term bridge loan to facilitate a quick close for building purchase projects. The 504 loan provides funds to pay off the interim or construction financing.
