Below you will find additional resources to help move things along. If you have any questions on any of these terms, please consult the SBA 504 staff.

Fees Associated with 504 Program

Processing Fees: The processing fees compensate each service provider in the 504 loan process, which includes the CDC, SBA, underwriters and fiscal agents. Processing fees are one-time-only fees and are less than 3% of the 504 loan. Processing fees can be added to the amount borrowed.

Guaranty and Servicing Fees: A guaranty fee, servicing fee and central servicing agent fee are added to the note rate. They are paid over the life of the loan and are automatically added to the monthly payment. (Your estimated quoted interest rate includes these fees.)

Closing Fees: The borrower is responsible for the costs associated with closing the 504 loan.

Bank Participation Fee: This is equal to ½ of 1% of any mortgages that are senior to the SBA guaranteed mortgage and is paid by the participating bank.

Legal Representation: The borrower must be represented by an attorney during the closing process. The CDC’s legal counsel prepares all the closing documents in participation with the borrower’s attorney.

Time Frame: Upon submission of a complete loan package to CAC-KY, please allow approximately 15 to 20 working days from the time CAC-KY receives the completed package to receive approval from the SBA. Please note that the SBA 504 loan is funded only after the project is completely finished. Usually the first mortgage lender provides financing during the interim period.

Interest Rate: After the project is completed the SBA disburses on its loan. The interest rate is determined at this time, and is fixed for the life of the SBA 504 loan. Interest rates are based on prevailing Treasury bond rates at the time of loan disbursement.

Environmental Impact Information: In most instances, this Environmental Questionnaire will suffice; however, on occasion, a Phase One environmental audit will be required on the subject property.

Prepayment: The bank loan can be prepaid according to terms negotiated between the bank and the borrower. The 504 Loan may be prepaid, but must be prepaid in full, and there is no penalty if prepayment occurs in the second half of the term (e.g., years 11-20 for a 20-year loan). During the first half of the term, the prepayment penalty declines over time, beginning at approximately one year’s interest (i.e., the penalty during the first year would be the borrower’s debenture rate on the note multiplied by the outstanding balance).

A substitution of collateral is another alternative to prepayment.

Collateral: Business collateral and personal guaranties are required. An assignment on the principals’ life insurance policy for the amount of the SBA loan is a required portion of the collateral package. Additional collateral is, at times, requested and may include personal assets.

Confidential Credit Report: Capital Access Corporation – KY will, at its expense, obtain a credit report on the applicant(s) and will comply with all provisions of the Fair Credit Reporting Act (15 USC 1681 et seq.), and will not disclose any part of any credit report to anyone except board members, staff and the SBA.

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