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SBA 504 Loan Information

How does Southern Development Council make loans?


Southern Development Council, Inc. partners with lending institutions in order to provide financing through the SBA 504 Loan Program. The typical loan structure is a 50/40/10 split in which the lending institution finances 50% of the total project costs, SDC lends 40% of the total project costs through the SBA, and the remaining 10% is a required equity injection from the borrower. If a project is deemed "Special Purposes," an additional 5% equity injection is required making the structure a 50/35/15 split. Also, if the borrowing operating company is a newly formed entity (2 years or less) it is considered a "start up," in which an additional 5% equity injection is required with a 50/35/15 split. If a project is both special purposes and a start up, then it is a total of 10% additional equity injection required which makes the structure a 50/30/20 split. For recording of mortgages and/or UCC filings, the financial institution takes the first lien position and SDC/SBA takes the second lien position.

How can my 504 funds be used?

The project can be secured by fixed assets. Below are some examples of the eligible use of proceeds for the 504 Loan Program:

  • Purchase, construct, or improve owner occupied commercial and industrial buildings or business condos.

  • Purchase and install heavy machinery, equipment, furniture, or fixtures.

  • Refinance qualifying fixed asset debt.

  • Cover loan costs such as professional fees, interim interest, construction contingencies, closing costs and other soft costs.

The qualifying business must become the primary occupant of the property financed. Proceeds cannot be used for working capital, rolling stock, or costs unrelated to the project.

Construct a new building or make renovations to an existing building. 

Purchase an existing building

Refinance eligible debt

Purchase and Install Furniture,
Fixtures, and Equipment.

How much can I borrow?

Project sizes typically depend on what the project is for. We have seen total projects as low as $200,000 or as high as $20,000,000. Due to the structure of the 504 Product (ex. 50/40/10 Split), the CDC cannot exceed 40% of the total project. In the larger requests, the SBA debenture is capped at $5,000,000 for most borrower or $5,500,000 for certain manufacturers.

For certain energy projects, the borrower can receive up to $5,500,000 from the SBA debenture for up to three projects total not to exceed an overall SBA exposure of $16,500,000.

What fees are involved?

  • 1.5% Processing Fee: 1% of net loan amount or $2,500 (whichever is less) is due as a "Good Faith Deposit" to SDC before or by submission to SBA for approval and .5% of net loan amount that is collected once the loan has funded.

  • Bank Fees: Negotiated with bank.

  • Many closing cost and expenses can also be financed as part of the SBA loan.

What parts of the U.S. can SDC lend to with the 504 Program?

SDC services the entire state of Alabama, three counties in Mississippi, and the Florida Panhandle.


What is the 504 Process like?

The process begins with either the borrower or financial institution engaging with SDC or vice versa. Once a potential loan request is communicated from our Business Development Officers (BDOs) to the underwriting team, it is placed in an Initial Review in which an underwriter will check for Eligibility for the 504 program and general cash flow (See Eligibilty page for more information). Once it passes through the initial review stage it will move into underwriting in which a perfected package and credit memo is prepared for Executive Loan Committee review. If the loan is approved by the ELC, the underwriter and BDO will work with the borrower and bank to collect all remaining items needed for SBA and get the specific forms/documents signed (See Documentation section of Eligibility page for more information). Once all the necessary documents are signed and/or collected and reviewed, the perfected package is then submitted to SBA for their approval. Once a loan is approved by SBA an Authorization is provided and the loan moves into the closing phase. The closers then work diligently with the borrower, bank, and SDC Counsel to prepare for and schedule the loan closing. During this time, the bank will close their permanent financing for their portion of the project costs and will also close an interim loan for the SDC/SBA portion of the project costs. There may also be additional items requested by our closers depending on the project, but once the loans close, the closers work to get the SBA loan to funding. Funding is when the SBA loan is sold to a bond issue and the bank's interim loan is paid off. Then the borrower will have two separate permanent financing loans: the first mortgage with the bank and the second mortgage with SDC. The bank loan will be serviced by the bank and the SDC/SBA loan will be serviced by us.






Call today for a Loan Officer at 800.499.3034 


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