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From Amusement Parks to Wineries, the SBA 504 Loan Program Finances a Wide Variety of Specialty Properties

Nov 2015

The Small Business Administration (SBA) 504 Loan Program is most commonly known for financing traditional commercial real estate like office buildings, commercial condos and industrial spaces. However, an SBA 504 loan can be used to finance many different property types for small- and medium-sized businesses, including special assets (otherwise known as special purpose properties).

In fact, this asset class may be difficult to finance without the support of an SBA loan. Specialty properties that may require additional collateral or an additional down payment with a conventional loan are likely to qualify for more reasonable financing with an SBA 504 loan.

The only caveat of financing a special purpose property with a 504 loan is the 504 loan structure starts at 50/35/15% (instead of the traditional 50/40/10%). When financing a special purpose property, the 504 commercial lending partner's 1st mortgage must be at least 50% of the project, the SBA 2nd mortgage is limited to no more than 35% of the project and the borrower must inject a minimum of 15% down (20% if the project is both a start-up and a special purpose property).

Even with the increased borrower injection, SBA financing compares favorably to conventional terms, which often require down payments upwards of 30% to secure this type of special asset.

The SBA 504 Loan Program provides below-market, fixed interest rates with repayment terms up to 20 years. 504 loans provide up to $5 million for standard and public policy projects (aggregate limit) and up to $5.5 million per green initiative and small manufacturer projects. These are SBA 2nd mortgage loan portions only; there is no limit on overall project dollar size.

So what types of properties are considered “specialty”? Here is the SBA's full list:

• Amusement parks;

•Auto service centers (with pits and in ground lifts);

• Bowling alleys;

• Car washes;

• Cemeteries;

• Clubhouses;

• Cold storage facilities (where more than 50% of total square footage is equipped for refrigeration);

• Dormitories;

• Farms and dairy facilities;

• Funeral homes with crematoriums;

• Gas stations;

• Golf courses;

• Hospitals, surgery centers, urgent care centers and other specialty medical facilities;

• Hotels and motels and other lodging facilities;

• Marinas;

• Mines;

• Museums;

• Nursing homes, including assisted living facilities;

• Oil wells;

• Quarries, including gravel pits;

• Railroads;

• Sanitary landfills;

• Sports arenas;

• Swimming pools;

• Tennis clubs;

• Theaters; and

• Vineyards and wineries.

The SBA currently does not consider the following property types as “special” and therefore may qualify for as little as a 10% down payment:

• Art galleries;

• Breweries and distilleries;

• Child or adult day care facilities;

• Event centers;

• Film, radio and recording studios;

• Laundromats and dry cleaners;

• Parking lots;

• Preschools and Montessori schools;

• Self-storage facilities;

• Tow yards; and

• Wedding chapels.

For more information about SBA 504 loans in Florida,contact a Florida First Capital Loan Officeror email us atinfo@ffcfc.com. Phone: 850.681.3601 or toll-free at 888.320.5504.