FAQs

Certified Development Companies (CDCs) are nonprofit organizations that offer affordable financing to small businesses and are certified and regulated by the Small Business Administration (SBA). As SBA 504 lenders, CDCs facilitate the 504 Loan Program and other SBA programs from beginning to end. There are 230 CDCs nationwide, each covering a specific geographic area.

SBA 504 loans can be used to purchase land, buildings, and equipment, as well as various property improvements and energy upgrades. You can use the funds to buy, construct, or repurpose a building including any renovations necessary.

The maximum size of the SBA debenture per project is $5 million or $5.5 million for manufacturers or energy-efficient projects. However, there is no limit on the first mortgage or the total project size.

Yes, you can. There is no penalty if you pay off your SBA 504 loan at any time in the second half of the loan’s term. The prepayment penalty in the first half of the term begins at the debenture rate and declines by 10% annually, calculated at six-month intervals.

The SBA needs 5-7 days to review and approve your application. Once the SBA has issued an approval, you will receive an “Authorization for Debenture Guarantee” which outlines the terms of the 504 loan.

If you are selling the building, a qualified buyer can assume your loan for a $1,000 assumption fee. The pre-payment penalty does not apply in this instance.

The 504 Loan Program is a U.S. Small Business Administration (SBA) funded program that provides financing to small and mid-sized businesses for the purchase of equipment and commercial real estate.

Business owners can use 504 loans for land and building purchases, new construction or renovation, leasehold improvements and purchases of heavy machinery, equipment, and commercial vessels. They can also be used for soft costs such as title searches, attorney’s fees, appraisals, etc.

With low down payments and fixed, low, long-term interest rates, the 504 loan helps businesses retain working capital.

The 504 loan program serves a wide range of businesses. The business must be a for-profit enterprise with a tangible net worth not to exceed $15 million and a net profit after taxes of no more than $5 million during the previous two years. The loans are available to individual business owners or multiple owners partnering on a project.

A 504 loan can fund up to $5.5 million, depending on eligibility and the job creation, community development, and economic development goals met by the project.

Business Finance Group partners with lenders to provide up to 90% financing on a project. The partner lender typically provides 50% and Business Finance Group provides 40%. The borrower puts as little as 10% down, depending on the project.

For-profit corporations, partnerships, proprietorships, and businesses whose net worth does not exceed $15 million and after-tax profits (net) average less than $5 million during the previous two years

No, non-profit institutions are not eligible under the 504 program. Lending or investment firms, rental property held primarily for sale, or investment or speculation properties are also not eligible.

SBA will not accept a restricted appraisal, and at least two valuation methods are required. Appraisals must be addressed to include Business Finance Group and the U.S. Small Business Administration.

Appraisers must meet certain qualifications, and appraisals may need to meet specified industry standards.

For projects with substantial construction or renovation, a letter from an architect or appraiser is required to state that the project was substantially completed according to plans.

A record search risk assessment, transaction screen, or Phase 1 environmental report may be required.

Yes, but SBA allows small businesses to meet other economic development criteria if the job creation does not meet the standards.

Yes, the minimum project size is $125,000.

• • The loan must have been funded at least 2 years ago
  • 85% of the loan proceeds must have been used to acquire real estate or equipment
  • The property must be at least 51% owner-occupied
  • The loan cannot be a federally guaranteed loan (an SBA 7a, 504, first trust to a 504, or a USDA loan)

Yes! The lender must provide an inception to date payment history of the loan the lender must certify that it does not know of any default or indication of a pending default.

Additionally, the lender cannot sell the first trust into the secondary market.

For-profit corporations, partnerships, proprietorships, and businesses whose net worth does not exceed $15 million and after-tax profits (net) average less than $5 million during the previous two years

No, non-profit institutions are not eligible under the 504 program. Lending or investment firms, rental property held primarily for sale, or investment or speculation properties are also not eligible.

SBA will not accept a restricted appraisal, and at least two valuation methods are required. Appraisals must be addressed to include Business Finance Group and the U.S. Small Business Administration.

Appraisers must meet certain qualifications, and appraisals may need to meet specified industry standards.

For projects with substantial construction or renovation, a letter from an architect or appraiser is required to state that the project was substantially completed according to plans.

A record search risk assessment, transaction screen, or Phase 1 environmental report may be required.

Yes, but SBA allows small businesses to meet other economic development criteria if the job creation does not meet the standards.

Yes, the minimum project size is $125,000.

• • The loan must have been funded at least 2 years ago
  • 85% of the loan proceeds must have been used to acquire real estate or equipment
  • The property must be at least 51% owner-occupied
  • The loan cannot be a federally guaranteed loan (an SBA 7a, 504, first trust to a 504, or a USDA loan)

Yes! The lender must provide an inception to date payment history of the loan the lender must certify that it does not know of any default or indication of a pending default.

Additionally, the lender cannot sell the first trust into the secondary market.

The SBA Loan Authorization outlines the requirements for funding your loan. All documents requested by the CDC must be received and reviewed by the CDC’s closing attorney.

Once it has been determined that all the SBA requirements are met, BFG can submit your loan for funding.

The SBA requires evidence that your business is legally able to operate in the location purchased through the 504 Loan Program. This may be a license from either the city or county, as applicable to your area and type of business.

Borrowers must obtain adequate insurance coverage and maintain this coverage for the life of the Loan. Refer to section E.1 Insurance Requirements in your SBA Loan Authorization.

Common insurance requirements:

Real Estate Hazard Insurance coverage is required on all real estate that is collateral for the loan in the amount of the full replacement cost/insurable value referenced in the appraisal. If full replacement cost insurance is not available, coverage must be for maximum insurable value.

Personal Property Hazard Insurance coverage is required on all equipment, fixtures, or inventory that is collateral for the Loan in the amount of the full replacement cost/insurable value referenced in the appraisal. If full replacement cost insurance is not available, coverage must be for maximum insurable value.

Flood Insurance is required if any portion of the building that is collateral for the Loan is located in a special flood hazard area. If any equipment, fixtures, or inventory that is collateral for the loan (“personal property collateral”) is in a building any portion of which is located in a special flood hazard area, the borrower must obtain available flood insurance for the personal property collateral. Insurance coverage must be in amounts equal to the lesser of the insurable value of the property or the maximum limit of coverage available.

Life Insurance may be required by the SBA on key persons involved with ensuring the success of the company. Any amount of life insurance will be determined during the application process.

The SBA 504 Program will likely involve two settlements. SBA documents are signed once the project being financed is complete. Once loan documents have been prepared, they are typically sent to the Title Company for your signature. The Title Agent will contact you to schedule closing.

Because of the timing of the bond sale, your interest rate is not determined until the week of funding. Once that information is available, your Closing Officer will send you your rate and payment information.

The 504 loan fees consist of the guarantee fee, funding fee, processing or packaging fee, closing costs, and the underwriter’s fee. To see a breakdown for your loan, refer to section B. Project Financing in the SBA Loan Authorization. These fees are also outlined in your BFG Assistance Agreement. The only fees that can be paid upfront are the processing fee and the Closing costs.

Payments are due on the first business day of the month by automatic debit from your preferred bank account. Your first auto-debit will occur on the first business day of the month after your loan funds from the account you provided at closing. SBA requires payment to be set up as auto-debit. There are no exceptions.

We will need your active assistance to complete the process once your project is near completion.

• We will work with you and your bank partner to monitor the construction phase and finalize the 504 closing process once your project is complete.
• Your conditions outlined in the SBA 504 Loan Authorization must be met.
• Your construction lender must confirm BFG that construction is complete and all funds have been disbursed so that we can verify the final project costs.
• Notice of Completion must be filed. The timeliness of this filing is important because BFG must allow all mechanics liens to be cleared for your contractors or subcontractors.
• You must provide BFG with updated financial information to verify that your financial condition has not changed substantially since the time that you applied for your SBA loan.

Your construction lender will be monitoring the progress of your project. BFG will also be tracking the status of construction, estimated completion date, and the status of fund disbursement to the contractors in cooperation with your construction lender.

Yes, you may be eligible for another SBA 504 loan. BFG has numerous clients who have received two or more SBA 504 loans to finance new locations and expansions for their growing businesses. Please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. to find out if you are eligible for additional SBA 504 loan financing.

Loan payments are due every month on the first business day. The account cannot be debited on any other day of the month. Late fees will be applied if the loan payment is received after the 15th of the month.

Loan payments are processed by automatic debit/ACH (Automatic Clearing House). In the closing process with BFG, you filled out an authorization form and provided a voided check indicating the account from which your loan payments will be automatically debited.

Yes. A new ACH debit authorization form and a voided check are needed. Please email This email address is being protected from spambots. You need JavaScript enabled to view it. to receive a new ACH form. We must receive the new form and voided check by the 10th of the month for the new account to take effect the following month.

Wells Fargo Corporate Trust Services is the Central Servicing Agent (CSA) for all SBA 504 loans effective March 25, 2013. The CSA is responsible for processing loan payments and handling accounting for every SBA 504 loan nationwide.

Please note that Wells Fargo Corporate Trust Services does not provide any direct client services. All inquiries regarding your SBA loan should be directed to BFG and will be handled by our Servicing Department.

Yes. SBA 504 loans are funded differently than conventional bank loans and have unique payoff terms and requirements.

• Full prepayments are only accepted on the 3rd Thursday of each month.
• BFG must receive written notice 15 days in advance of the payoff date.
• Payoff funds must be made via wire transfer.
• Prepayment premiums may apply. There is a declining premium applied to prepayments that adjusts at six-month intervals. Once half of the term of your loan has passed, there are no prepayment premiums.

The prepayment process is highly structured. If you wish to pay off your outstanding balance and/or discuss the SBA 504 Loan prepayment process, contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at 1-800-305-0504.

If you are selling the building, a qualified buyer can assume your loan for a $1,000 assumption fee. The prepayment penalty does not apply in this instance.

The rate on the loan is determined approximately one week prior to the date the loan is funded and is based on current market conditions which can fluctuate. Typically they follow the trends of treasure rates. The loan is pooled with all of the other 504 loans funded in the same month and sold in the form of debentures.

Generally, your first trust deed loan from a bank or other lender has a higher interest rate than the SBA 504 loan. If you decide to refinance this first mortgage, BFG will subordinate your SBA loan to a straight refinance of your first trust deed loan. Cash-out may be allowed if the proceeds are used for building improvements.

No. SBA 504 Loan payments only cover the principal, interest, and fees of the loan. It is the borrower’s responsibility to pay property taxes. BFG does monitor each loan to ensure they are paid annually. If you have any questions regarding property taxes, please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it..

The two loans involved with the SBA 504 project are now totally separate and you do not need our approval to refinance the first mortgage. However, the new lender will probably make their financing contingent upon receiving a Subordination from the SBA. If you plan on refinancing the first mortgage, please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it..

If your business has been struggling and you need to discuss it with us, please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it..

You can check your current loan balance at any time by referencing the Authorization Schedule we provide to you after your loan is funded. To request another copy of the Amortization Schedule please send an email to This email address is being protected from spambots. You need JavaScript enabled to view it..

Note: The loan balance is not the same as the loan payoff amount.

Please send an email to This email address is being protected from spambots. You need JavaScript enabled to view it. and include your phone/fax numbers, email address, and website address.

Submitting annual financial statements and/or tax returns is part of your commitment to BFG for your SBA loan. We will send you a request for updated financials on an annual basis and ask that you submit them no later than three months after your fiscal year-end.

You may submit updated financials by one of the following:

• E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
• Secure file transfer site: https://businessfinancegroup.sharefile.com/filedrop Select “Servicing-Taxes, Financials & Insurance” from the recipient drop-down menu
• Recipient: Business Finance Group, 3930 Pender Drive, Suite 300, Fairfax, VA 22030 Attention: Servicing Department