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Vermont 504 Loan ProgramThe Vermont 504 Corporation, with SBA's approval, makes SBA 504 loans to eligible and qualified borrowers. To fund these loans, the SBA guarantees debentures which are sold to private investors. The proceeds of the debenture are subsequently loaned to the borrower. SBA 504 loans are made in conjunction with a “third party lender” (i.e. a Bank) that normally provides financing for 50% of the Project. Vermont 504 Corporation’s SBA 504 loan lends up to 40% of the Project amount in a lien position that is junior to the third party lender, leaving as little as a 10% equity requirement from the Borrower. See “Loan Amounts” below.
Eligible Borrowers
- Organized as a for-profit business;
- Business net worth cannot exceed $7.5 million;
- Average net profit after taxes cannot exceed $2.5 million for previous two years;
- Located in or planning to locate in the United States;
- Owner-user of the project being financed (51% occupancy minimum if existing building; 60% occupancy if new construction). Two or more unrelated small businesses may receive a 504 loan to buy or construct a building as long as they, together, will occupy at least 51% an existing building or 60% of new construction.
Eligible Uses of Proceeds
- Real estate acquisition, construction, rehabilitation or expansion;
- Purchase and installation of machinery and equipment;
- Associated soft costs - related loan fees including title searches & insurance, attorneys' fees, appraisals, environmental reports, architect fees, permits, surveys, points on bridge loans, a small amount of furniture and fixtures;
- Proceeds may not be used for working capital, inventory, or the refinancing of existing debt (certain exceptions apply).
Loan Rates and Terms
- Rates on SBA 504 loans are set monthly and are based on the current market rate of ten and twenty year U.S. Treasury bonds (plus an increment). The rate is fixed at closing for the life of the loan. Ten and twenty year terms are available. See current rates.
- The SBA 504 loan is funded after a Project is completed and interim (bridge) financing must be arranged. Vermont 504 Staff may be able to assist with this if requested.
Loan Amounts
- The maximum non-manufacturing SBA 504 loan is $2 million ($1.5 million in Burlington);
- Certain small manufacturers are eligible for up to $4 million in SBA 504 financing;
- The minimum SBA 504 loan is $50,000. Staff at Vermont 504 Corporation will evaluate the needs of your business to determine if other another VEDA program may be more suitable for your project;
- The minimum down payment (equity) required of the Borrower is 10%-20%;
- Vermont 504 Corporation Staff will help you determine the size of your required equity contribution.
Fee Structure
- Vermont 504 Corporation charges a one-time CDC processing fee of 1.0% of the SBA debenture. This, along with other fees required by the SBA, are rolled into the SBA 504 loan, thereby reducing out-of-pocket expenses;
- CDC legal fees paid by the Borrower related to loan closing are generally $1,500; these are also financed into the SBA 504 loan;
- Ongoing servicing fees approximating 1.1% are added to the monthly payments on the SBA 504 loan. Every five years these fees are recalculated and your monthly payments are reduced;
- Prepayment penalties, which are reduced yearly and eliminated halfway through the loan term, apply to all SBA 504 loans.
Application Process
- Applications are available from the VEDA office in Montpelier, or can be downloaded from VEDA's website by clicking here;
- Once received, applications will be evaluated promptly by Vermont 504 Corporation Staff. The Vermont 504 Loan Committee meets weekly to review the loan requests;
- SBA approval is then generally obtained in 3-7 business days.
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