Structure, Eligibility & Program Parameters
CTCIC works with the SBA to provide up to 40% of the total project cost. The participating lender, called the “Third Party Lender”, normally finances 50% of the cost on a permanent basis. The borrower typically puts down as little as 10% of the total project cost. The Third Party Lender also advances the CTCIC 504 portion of the transaction on an interim basis until the CTCIC 504 loan is funded.
| Source of Funds | Project Cost | % | Interest Rate |
|---|---|---|---|
| Third Party Lender | $800,000 | 50% | Fixed or Variable |
| CTCIC/SBA | $640,000 | 40% | Fixed |
| Small Business Borrower | $160,000 | 10%* | |
| Total | $1,600,000 | ||
| *Start-up AND/OR Special Purpose Building may require a higher percentage of equity. Costs do not include fees. |
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Loan proceeds can NOT be used for working capital, mortgage broker fees, business inventory or rolling stock (i.e. vehicles).
Basic Eligibility
- Most for-profit small businesses qualify.
- To qualify as “owner-occupied” a small business must occupy at least 51% of the project property if it is an existing building. The occupancy requirement goes up to 60% for newly constructed buildings (within 3 years occupancy must increase to 80%). Two or more unrelated small businesses can receive a CTCIC 504 loan if they combine to meet occupancy requirements.
- Start-up businesses (less than two years old) are eligible, but require and additional 5% equity injection.
- A business can obtain more than one loan from the SBA, as long as the total outstanding balances do not exceed the maximum loan amount.
CTCIC 504 Project Size
- A CTCIC 504 Project size is virtually unlimited. The 50-40-10 structure is the most common. With the increased loan limitsthe maximum, non-manufacturing project size under the 50-40-10 structure would be approximately $12.2 million. That said, a CTCIC 504 Loan can be a smaller percentage of the financing package. (Example: In a $32 Million 504 Project the Third Party Lender would provide $24 Million in financing together with $4.8 Million from CTCIC 504 financing and $3.2 Million from Borrower equity to create a 75-15-10 structure)
New Maximum CTCIC 504 Loan Amounts
- “Standard” CTCIC 504 Loans are capped at $5 Million.
- CTCIC 504 Loans to manufacturing industries within the NAICS sectors of 31, 32 and 33, are capped at $5.5 Million.
- The CTCIC 504 Loan amount cannot be greater than 40% of the project cost and cannot exceed the Third Party Lender’s portion of the loan.
New Size Standards Mean More Businesses Qualify as “Small”
- To Qualify as “small” your borrower must have less then $15 Million in net worth and have averaged less than $5 Million in net income over the past 2 years. This is a significant increase that opens the door for substantial businesses to take full advantage of the larger loan limits.
The quickest and easiest way to determine if your client’s project meets program eligibility requirements is to contact us today.
CTCIC is the #1 SBA 504 Lender in Connecticut and one of the fastest growing SBA 504 Lenders of its size in the country.
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