SBA 504 Loan at Cathay Bank

The SBA 504 Loan program, available through Cathay Bank in partnership with certified development companies (CDCs), is designed to help small businesses acquire long-term, fixed-rate financing for major fixed assets that promote business growth and job creation. This financing solution is focused on owner-occupied commercial real estate and long-lived equipment, offering predictable payments and attractive down payment requirements that preserve working capital.

Key Benefits

• Low down payment requirements that help preserve cash flow for operations and growth.
• Long-term fixed-rate financing for a portion of the project, which reduces interest-rate risk and makes budgeting easier.
• Competitive senior loan terms from Cathay Bank to finance the balance of the project.
• Financing tailored to acquisition, construction, renovation, and certain types of equipment purchases.
• Structured to support business expansion and job creation in eligible communities.

Typical Uses of Proceeds

SBA 504 financing is generally intended for substantial fixed-asset investments. Typical eligible uses include:

• Acquisition of owner-occupied commercial real estate (land and buildings).
• Construction of new facilities or substantial renovation of existing structures.
• Purchase of heavy machinery and long-term equipment integral to business operations.
• Site improvements and infrastructure directly related to the project.
• In some cases, refinancing certain qualified existing indebtedness related to fixed assets.

How the SBA 504 Structure Works

The SBA 504 program uses a three-party financing structure to optimize capital efficiency:

1. A senior loan from a private lender (Cathay Bank) typically covers up to approximately 50% of the total project cost. This portion may be structured as a fixed- or variable-rate loan depending on circumstances and borrower needs.
2. A subordinated, long-term, fixed-rate loan is provided by a Certified Development Company (CDC) and guaranteed by the SBA, typically covering up to about 40% of the project cost. This CDC portion is known for its long amortization and stable rates.
3. The borrower contributes the remaining equity, often around 10%, although the required down payment can vary depending on the borrower’s profile, the purpose of the loan, and certain project types.

Eligibility Overview

Eligibility criteria focus on business size, use of proceeds, and owner occupancy. General eligibility features include:

• Businesses must meet SBA size standards and be for-profit operations.
• The financed property typically must be owner-occupied (a minimum percentage of the property must be used by the borrower depending on the project type).
• Eligible industries include many types of commercial enterprises, while some industries are restricted by SBA rules.
• Borrowers need to demonstrate the ability to repay, sound business purpose, and adequate credit history.

Application Process

Applying for an SBA 504 loan through Cathay Bank involves several coordinated steps between the borrower, the bank, and the CDC:

• Initial consultation and prequalification to determine project viability and program fit.
• Preparation of required documentation, including business financial statements, tax returns, projections, and details about the proposed project.
• Submission of the loan application to Cathay Bank; the bank completes underwriting for its portion and coordinates with a CDC for the SBA-backed portion.
• CDC and SBA review and approval of the 504 portion; final loan structuring and closing once approvals are in place.
• Project draw and disbursement managed according to the loan documents and project milestones.

Documentation You Will Typically Need

While exact document requirements vary by situation, expect to provide:

• Business and personal tax returns for multiple years.
• Profit and loss statements and balance sheets.
• Business plan or executive summary describing the project and expected impact.
• Projections demonstrating repayment ability.
• Personal financial statements and resumes of principal owners.
• Project cost breakdown, purchase agreements, construction contracts, and appraisals as applicable.

Advantages Compared to Conventional Financing

The SBA 504 program offers several advantages over conventional loans for qualifying projects:

• Lower borrower equity requirements make larger projects more attainable.
• CDC/SBA-funded portion offers long-term, fixed-rate financing that reduces interest-rate exposure.
• Predictable amortization schedules support long-term planning and asset-liability matching.
• Preservation of working capital and liquidity for day-to-day operations and growth initiatives.

Common Questions

Who is eligible for an SBA 504 Loan?

Generally, small for-profit businesses meeting SBA size standards and occupying a required portion of the financed property are eligible. Specific eligibility is determined during the application and underwriting process.

What types of properties qualify?

Owner-occupied commercial real estate, new construction, and major renovations are typical qualifying projects. Certain types of special-use properties and industries may have additional requirements.

How long does approval take?

Timelines vary based on project complexity, completeness of documentation, and coordination with the CDC and SBA. Borrowers should plan for several weeks to a few months from initial application to closing.

Why Choose Cathay Bank for SBA 504 Financing

Cathay Bank combines local market knowledge with experience in small-business lending to guide borrowers through the SBA 504 process. The bank works closely with CDC partners to structure financing that aligns with long-term business goals and helps owners invest in productive assets with manageable equity requirements. Borrowers can expect personalized attention and support through underwriting, documentation, and closing.

Final Notes

SBA 504 financing is a powerful tool for business owners seeking long-term, fixed-rate capital for real estate and equipment investments. Eligibility, terms, and program specifics are governed by SBA regulations and CDC policies, and each application is evaluated on its own merits. Prospective borrowers are encouraged to discuss project details with Cathay Bank to determine fit and next steps.

Address Bank: Los Angeles, California, US, USA
Bank: Cathay Bank
Headquarters: Los Angeles
Products: Loans & Credit
Type: SBA 504 Loan