SBA 504 & 7(a) Requirements

Eligible businesses:

  • Business is for-profit and located in the United States

  • Business is valued at less than $20 million and the business has an after tax profit of less than $6.5 million a year over the average of two years

  • Owner will occupy 51% or more of commercial real estate that is being renovated or purchased

  • Owner will occupy 60% or more of commercial real estate that is being built

  • Individuals that own 20% or more of the company are willing to act as personal guarantors

  • Business has a demonstrated need for credit

Ineligible Businesses:

Ineligible businesses include those engaged in illegal activities, gambling, speculation, multi-sales distribution, loan packaging, investment or lending or where the owner is on parole.

SBA 504 Eligible Use of Proceeds

  • Buy, build, or renovate owner-occupied commercial real estate

  • Purchase machinery or equipment

  • Debt refinance (see 504 Debt Refi Guide here)

  • Professional fees and interim financing costs can be included in total project financing

Typical loan structure

The typical loan structure is financed 50% by a bank (or credit union), 40% by B:Side and 10% by the borrower. However, this structure can vary if:

  • The business is a startup OR purchasing a special purpose property (borrower contribution increases to 15% and B:Side Capital’s portion is reduced to 35%)

  • The business is a startup AND special purpose property (borrower contribution increases to 20% and B:Side Capital’s portion is reduce to 30%)

 

SBA 7(a) Eligible Use of Proceeds

  • Finance startup expenses

  • Finance working capital

  • Purchase an existing business

  • Buy, build or renovate commercial real estate

  • Purchase machinery or equipment

  • Business debt refinance

  • Include professional fees

Typical Loan Structure

  • The SBA 7(a) loan program is financed 100% by a lender where the SBA typically provides a 75-85% guarantee.

  • The loan can provide up to 100% project financing. 

  • Equity Injection requirements are mostly determined by the lender, except in cases of most business acquisitions, 10% will be required.

 
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