Lenders unfamiliar with the SBA 504 loan process may hesitate to offer these loans, assuming they are complex or time-consuming. However, with Statewide CDC as your partner, the process is streamlined and efficient, allowing lenders to seamlessly integrate SBA 504 loans into their financing options while expanding their borrower base.
This step-by-step guide will help lenders understand the SBA 504 loan process and see how Statewide CDC simplifies approvals and funding, ensuring a smooth experience for both lenders and borrowers.
Understanding the SBA 504 Loan Process
The SBA 504 loan is designed to help small businesses secure long-term, fixed-rate financing for commercial real estate and equipment. Here’s a structured breakdown of how lenders can participate in the process with the support of Statewide CDC.
Step 1: Identifying Eligible Borrowers
Before moving forward with an SBA 504 loan, lenders must determine whether the borrower meets SBA eligibility requirements. Key qualifications include:
- The business must be a for-profit entity operating in the U.S.
- The company must meet SBA size standards, which typically include a tangible net worth of less than $20 million and an average net income under $6.5 million.
- The borrower must plan to occupy at least 51% of the property being financed (or 60% for new construction projects).
Lenders should assess the borrower’s financial health, business history, and intended use of funds to ensure they align with SBA 504 guidelines.
Step 2: Partnering with Statewide CDC for Prequalification
Once a potential borrower is identified, the next step is prequalification. Statewide CDC works closely with lenders to simplify this process:
- Submit a prequalification request with basic financial information and project details.
- Fast turnaround: Our team reviews financials and eligibility within 24 hours, giving lenders a quick assessment of borrower viability.
- Expert guidance: We provide recommendations on structuring the loan for optimal approval success.
By working with Statewide CDC early in the process, lenders can confidently move forward, knowing that their borrower meets SBA 504 requirements.
Step 3: Structuring the SBA 504 Loan
Once prequalified, the loan is structured in a three-part financing arrangement that minimizes lender risk while maximizing borrower affordability:
- Lender Participation (50%) – The lending institution provides the first lien loan, covering 50% of the project cost.
- SBA-Backed CDC Portion (40%) – Statewide CDC facilitates the SBA 504 loan, funding 40% of the project cost at a long-term fixed interest rate.
- Borrower Equity Contribution (10%) – The business owner provides 10% equity as a down payment. This may increase to 15%–20% for startups or special-use properties.
This loan structure allows lenders to fund large-scale projects while mitigating risk, making SBA 504 loans an attractive option for banks and borrowers.
Step 4: SBA Approval, Underwriting, and Loan Closing
With the loan structured, the next phase involves securing SBA approval and completing underwriting. This step typically takes 45 to 60 days and runs concurrently with the lender’s approval process:
- SBA and lender processing happen simultaneously, expediting approvals.
- Statewide CDC handles SBA documentation and compliance, ensuring all regulatory requirements are met.
- Closing coordination: Our team works with all parties—including the borrower, lender, and SBA—to facilitate a smooth closing process.
By managing the SBA’s regulatory requirements and documentation, Statewide CDC ensures lenders can focus on their core business while offering an additional financing solution to their clients.
Why Lenders Choose Statewide CDC as Their SBA 504 Lending Partner
Partnering with an experienced CDC like Statewide CDC makes the SBA 504 loan process seamless for lenders. Here’s why financial institutions trust us:
- We manage the SBA process, so you don’t have to – Our team handles all SBA compliance, paperwork, and approval logistics, reducing the administrative burden on lenders.
- Fast Prequalifications and Efficient Closings – With 24-hour prequalification reviews and an organized closing process, we help lenders move deals forward quickly.
- End-to-End Support Through Underwriting and Funding – From structuring the loan to finalizing SBA approval, our team is with you every step of the way, ensuring a successful funding process.
By working with Statewide CDC, lenders can confidently offer SBA 504 loans without the complexity traditionally associated with SBA financing.
Ready to Offer SBA 504 Loans? Partner with Statewide CDC Today!
Expanding your lending portfolio with SBA 504 loans allows you to serve more businesses while reducing risk exposure. Statewide CDC is here to simplify the process, provide expert guidance, and support lenders every step of the way. Interested in offering SBA 504 loans? Contact Statewide CDC today to get started!
