• What are the main advantages of a 504 loan?
  • low down-payment requirements
    long repayment terms (20 years)
    projected income is considered, not just historical cash flows
    collateral may be less critical in loan qualification decisions.
  • How is a 504 loan deal structured?
  • Most 504-financed purchases are for office, retail or industrial buildings. SBA-504, fixed-rate loans finance 40 percent of the total purchase. A bank or other lender provides 50 percent and the business owner contributes a 10 percent down payment.
  • How long does it take to get a 504 loan done?
  • Straight purchases usually require no more than 90 days. If construction is involved, this can extend the process. Construction and tenant improvements are typically financed via a bridge loan. The permanent 504 loan takes out the bridge loan.
  • What are the fees involved and how does prepayment work?
  • The fees for a 504 loan, which are financed in the loan, are approximately 2.125%. There’s also a fee for legal review. Fees are negotiated for the 50% bank loan accompanying the 504 loan. Weighted average fees for both loans are 1.5%.
  • Can soft costs be included in a 504 loan?
  • Yes, “soft costs” (e.g. appraisals, environmental, construction interest, closing costs) also can be financed in the 504 loan, allowing the small business to preserve working capital.
  • Why are different rates quoted for SBA 504 loans?
  • We quote the industry standard effective rate as published by the National Association of Development Companies on a monthly basis. This rate represents the average rate the small business borrower pays over the twenty year period of the loan. Since rates are reset every five years a borrower may pay four unique interest rates over the 20 year term of the loan. These rates are averaged to provide the effective rate. Be sure to verify that the rate you are being quoted is the “effective rate” as recognized by the 504 industry.
  • What is the maximum loan you can do with a 504?
  • SBA-504 loans can finance up to 40% of the total loan amount or $5 million. For manufacturing businesses, 504 loans can finance up to $5.5 million.
  • How big can the company be?
  • The business net worth must be less than $15 million. After-tax net profit must be $5 million or less, on average, for the prior two years.
  • How much space does the business have to occupy?
  • The business must occupy 51% of an existing building purchases, 60% of a newly constructed facility.
  • What kind of equipment can be financed with a 504 loan?
  • Long-term machinery and equipment with a useful life greater than 10 years (e.g., a printing press).
  • Can home equity lines of credit be used for the borrower down payment?
  • If equity is borrowed and secured by another asset, must demonstrate repayment of the loan for the equity contribution from sources other than the cash flow of the business (salary of owner does not qualify).

SBA 7(a) Loan FAQ

  • How do I apply for a SBA 7(a) loan?
  • By Phone: Keldon Moldre – (801) 214-6150 or Jason Charles – (801) 214-6151.
    By Email: Keldon Moldre (keldon@horizon-west.com) or Jason Charles (jason@horizon-west.com)
  • How do I know if my business is eligible for a SBA loan?
  • Existing and on-going for-profit businesses.
    A business cannot have a tangible net worth that exceeds $15 million and have an average net income greater than $5 million over the past two years.
  • How does the financing work?
  • A bank or other lender will provide the financing for your 7(a) loan and the SBA will provide an 85% guarantee to the bank or other lender on loans of $ 150,000 or less; or a 75% guarantee on loans from $150,001 to $5 million.
  • Is collateral required for a SBA 7(a) loan?
  • Yes, the bank or other lender will take a secured interest business assets and/or a mortgage on real estate.
  • What happens after I apply?
  • The loan application will go to a specialized credit team to determine if you qualify under pre-determined credit standards, as well as, SBA eligibility guidelines.
  • How quickly can I get my SBA 7(a) account?
  • It depends on your planned use of loan proceeds and the program used. We will process your application as quickly as possible.
  • What will be the interest rate on my account?
  • Your rate can be either fixed or variable and will be determined based on a business and personal credit evaluation.
    For terms less than 7 years, the rate can be up to NY Prime + 2.25% and for terms greater than 7 years, the rate can be up to NY Prime + 2.75%.
  • What is my minimum payment?
  • Your minimum payment for a term loan will be principal and the interest accrued in a given month of activity plus any past due amount.
  • How can I use my SBA 7(a) account?
  • The proceeds of a SBA 7(a) loan can be used for most business purposes. These may include buying real estate, construction, renovation or leasehold improvements; buying furniture, fixtures, machinery, and equipment; buying inventory; and working capital.The proceeds of a SBA loan cannot be used to:
    Buy real estate if you have issued a forward commitment to the builder/developer, or where the real estate will be held primarily for investment purposes.
    Make payments to other owners or pay delinquent withholding taxes.
    Pay existing debt, unless it can be shown that the refinancing will benefit the small business and that the need to refinance is not indicative of imprudent management. (Proceeds can never be used to reduce your exposure in the loans being refinanced.)


  • What are the borrowers benefits?
  • Government guarantee usually at 80% helps banks to lend in rural areas,
    lower down payment, up to a 30-year term, fully amortizing (no balloon), flexibility to finance land, building, equipment, permanent working capital and to a limited extent crops, in-state authority, can be used for investor properties, non-profits, combined with SBA loans, no maximum net worth.
  • What is the programs history?
  • Established in the 70’s to help lenders to fill the lending gap in rural areas. The program has evolved and had its biggest year ever in 2009.
  • How does it work?
  • A lender must approve the loan, the USDA offers a guarantee to the lender. USDA is national, delivered on a State basis: see USDA.gov
  • Why have USDA loans been seen as difficult?
  • Bank policy and processing conforms to SBA policy, not USDA policy and most loan officers have only done a few, if any. As a result, many viable USDA loan requests can languish or fail without thorough knowledge of USDA policy and start-to-finish coordination. Our innovative process identifies, manages and resolves issues for consistent results.
  • What are the benefits for Lenders?
  • Serve customers better and attract new ones while reducing risk with an 80% Federal Guarantee. Retain and attract deposits while generating significant new fee income.
  • What is the average loan size?
  • About $1.0 million, loans can go up to $25 million.
  • What businesses / properties qualify?
  • Owner-occupied, investor and non-profits. Many types of businesses qualify: see our Success Stories page.
  • What are the eligibility requirements?
  • A rural location and minimum tangible net worth: other requirements apply. We resolve eligibility issues.
  • Does the USDA do loans for energy generation?
  • Yes, through the REAP program, Rural Energy for America Program, and the B&I loan program.