504 Bridge Loan Program Provides Interim Phase Second Mortgage Financing for Commercial Lending Partners.

Under the Small Business Administration (SBA) 504 Loan Program, commercial lending partners (e.g., banks, credit unions, non bank lenders) partner with a certified development company (Florida First Capital) to provide small business owners with up to 90% financing for the purchase of owner-occupied commercial real estate and/or fixed machinery and equipment.

Typically, 504 loan is structured whereby a commercial lending partner finances 50% of the project and holds the first mortgage.  Florida First Capital/SBA finances 40% of the deal and holds the second mortgage.  The borrower provides a 10% down payment.

One of the most critical stages for a commercial lending partner in an SBA 504 loan project is the interim phase between the commercial lending partner’s closing and the permanent takeout of the second mortgage by the SBA, during which time the commercial lending partner is at risk on the second mortgage.

The 504 Bridge Loan Program available through Florida First Capital addresses this exposure and timing difference by providing commercial lending partners with bridge loan funds to cover all or part of the second mortgage during the interim period of the project until the permanent SBA second mortgage takeout occurs.

504 Bridge Loan Basics

  • 504 bridge loan sizes range from $250,000 (recommended minimum) to $5 million (legal maximum). Generally, the total project limit is $20 million. (The $20 million restriction applies to the principal amount of the loan directly supported by the State Small Business Credit Initiative (SSBCI), plus all other loans for the same loan purpose that close on or about the same date.)
  • The initial term is six (6) months with automatic extensions with pricing adjustments after 1 year.
  • Bridge loan funds may be used for interim project financing of the second mortgage of authorized SBA 504 loan projects, including straight acquisitions, renovations or build-out projects, ground-up construction and/or fixed heavy duty machinery and equipment purchases.

Frequently Asked Questions