Loan Structures
The SBA 504 loan (aka the SmartChoice® Commercial Loan) can be confusing at first glance because it’s structured differently than ordinary commercial loans. There’s a reason for that, and it’s very beneficial for small business owners. Watch the video below to see Chris explain everything, and select “Learn More” to see more structure details on this page.
Chris Hurn, CEO & Cofounder of MCC, explains how our loans are structured.
| SBA 504 Project Costs (Example A): | |
|---|---|
| Acquisition of Real Estate | $800,000 |
| Renovations | $100,000 |
| Machinery | $50,000 |
| Soft and Closing Costs | $50,000 |
| Total Project Cost | $1,000,000 |
| SBA 504 Project Costs (Example B): | |
|---|---|
| Land | $250,000 |
| Construction | $600,000 |
| Soft Costs | $125,000 |
| Closing Costs | $25,000 |
| Total Project Cost | $1,000,000 |
| SBA 504 Loan Structure Example: | |
|---|---|
| 1st Mtg. (50%) | $500,000 |
| 2nd Mtg. (40%) | $400,000 |
| Equity | $100,000 |
| Total Project Cost | $1,000,000 |
50% of the Total Project CostConventional Loan at Market Rates |
|---|
|
40% of the Total Project CostBelow Market, Fixed Rate Bond with an SBA Guarantee |
|
10% Total Project CostEquity Injection/Down Payment |
*15% equity requirement on special use properties or start-up businesses; 20% for special use properties and start-up businesses. |
The Bottom Line: The SBA 504 loan (aka the SmartChoice® Commercial Loan) preserves capital and maximizes cash flow for small business owners. It really is the smart choice for small business owners who want to own their commercial real estate.
