Owner's Equity 10%; SBA 504 Loan 40%; Conventional Bank Loan 50%Many businesses encounter problems when seeking for long-term financing, especially when looking for fixed interest rates.  Other issues could be that they cannot match the required equity amount required of a lender for conventional loan terms.  Collateral may not meet the loan-to-value requirement of the participating lender as well.  Recognizing this, the U.S. Small Business Administration (SBA) offers the 504 Loan Program which gives businesses a financing alternative. Capital Access Corporation-Kentucky administers the 504 Loan Program.

Capital Access Corporation-Kentucky does not compete with a bank but does partner with one in order to be able to provide long term, fixed rate loans.  Typical financing with the "504" program includes:


Higher equity requirements exist for start-up or leveraged companies in specialized industries.

How the Program Works

Each 504 loan package has three elements:

1. Capital Access Corporation-Kentucky lends up to 40 percent of the total fixed asset financing need, to a maximum of $5,000,000.  This amount can be increased to $5,500,000 for manufacturing concerns.

2. A private lender, usually a bank, lends up to 50 percent of the project's total cost.

3. The business provides a minimum of 10 percent of the necessary funds.

The interest rate on Capital Access Corporation-Kentucky's loan is fixed and generally a little above the rate of long-term Treasury Bonds. The loan maturity is 10 or 20 years. The interest rate on the companion bank loan is negotiated by the borrower and typically is floating.

This combination of fixed and floating interest rate financing provides an effective hedge against unfavorable interest rate fluctuations. If rates increase, the borrower has locked in the relatively low Capital Access Corporation-Kentucky rate on up to 40 percent of the financing. If rates decrease, the borrower floats downward with the bank's loan.

General Loan Structure

Through the 504 loan program, we can provide up to 40% of the eligible project costs. The borrower provides an equity injection of at least 10% and a private lender provides up to 50% of the project costs.

Typical Project Funding for a "504" loan structure.

Source & Use
Land $100,000
Building 800,000
Equipment 50,000
Professional fees 50,000
Total $1,000,000

SBA 504 - loan structure
Bank loan $500,000  (50%)
SBA 400,000  (40%)
Equity 100,000  (10%)
Total $1,000,000  (100%)