The Section 504 Loan Program, under Title V of the Small Business Investment Act of 1958, was authorized by Congress in 1980 to assist communities in creating jobs and expanding the tax base at the local level by stimulating small business investment in plant and equipment.  Under this program, long term loans for fixed assets can be make to eligible small businesses through Development Companies designated by the US Small Business Administration.

The Region D Development Corporation, Inc (RDDC) is a Certified Development Company for this program, and as such, it can assist small business concerns operating in Alleghany, Ashe, Avery, Mitchell, Watauga, Wilkes, and Yancey Counties in securing financing under this program.  Staff services in loan application review and processing are provided by the RDDC.

Eligible small business concerns may borrow up to $1,000,000 under the 504 loan program to finance fixed assets, including land, buildings, new construction, renovation, machinery and equipment, and leasehold improvements.  These assets must have a useful life of at least 10 years.  The 504 share of the total project cannot exceed 40% of the eligible project cost.  A minimum of 10% of the financing for the project must be provided by the small business and the remaining 50% from a commercial lender.

Operating for profit businesses in the seven-county area served by the RDDC with a net worth of less than $6 million and an average of after tax profits in the last two years of less than $2 million.

Non-profit corporations, unregulated media, financial institutions, real estate companies, and developer/landlord projects.

Up to $1,000,000, but not more than 40% of eligible project costs.   Balance of project funds are provided from private sector lenders and/or public agencies; typically, 50% of the project, and the final 10% for the small business.

Loan proceeds must be used only for financing fixed asses purchases, including land, building, new construction, renovation, machinery and equipment, and leasehold improvements.  These assets must have a minimum useful life of 10 years.

The 504 load program cannot be used to finance working capital, equity loans, construction financing and debt refinancing.

Loan Maturities are 10 or 20 years, based on the useful life of the assets financed.

Fixed rate for the life of the loan.  Rates are generally 1% above the treasury market rates of the same maturity as the loan.

The loan is secured by a lien on the assets financed with the loan proceeds.  Personal guarantees are required and life insurance is strongly encouraged.

One job for every $35,000 of SBA dollars loaned.

Initial fees of 2 3/4% (10 year loans) or 2 7/8% (20 year loans) are based on and included in the loan amount.  This includes the RDDC processing fee, reserve, a funding fee, and underwriting fee.  Annual service fees of 1 3/4% are included in the monthly payments based on the declining outstanding debenture balance determined at five-year intervals.  Legal fees related to the loan application, processing, and closing are paid by the borrower.

Approximately 30 days from the submission of all required information.

To receive further information to apply for assistance under the 504 Loan Program, call,  write, or e-mail:

Region D Development Corporation, Inc
468 New Marked Blvd
Boone, NC 28607
Phone (828) 265-5437
Fax (828) 265-5439
E-mail rherndon@regiond.org

How It Works:

Bank Loan (50%)--Under the SBA 504 program, your commercial lender is asked to lend 50% of the total eligible project cost, the first lien position.  The bank may charge market rates, and the bank's terms must be at least 7 years for machinery and equipment purchases, and at least 10 years for real estate.

Plus SBA 504 Loan (Up to another 40%)--You will then apply to the SBA to lend up to an additional 40% of the project costs, not to exceed $1,000,000.  The SBA will take a second deed of trust or lien position, and most of the risk.  The SBA portion can have a term of 10 or 20 years, and is financed at a fixed rate.

Plus Equity--The borrower must provide the remaining equity (minimum of 10% of eligible project cost).